10 Estate Planning Myths That Could Cost You Thousands (Most People Get This Wrong)

Think you understand estate planning? You might be making costly mistakes without even realizing it.

In this episode of Aging, Healthcare, and Everything in Between, Stephanie Pogue sits down with estate planning attorney Court Smith to break down the 10 biggest misconceptions people have about wills, trusts, probate, and powers of attorney—and what you actually need to know.

From the truth about probate to why a will doesn’t avoid it, this conversation clears up the confusion that causes families unnecessary stress, delays, and expenses.

👉 In this episode, you’ll learn:
• Why probate isn’t what most people think it is
• The truth about wills vs. trusts (and which you really need)
• How to actually avoid probate the right way
• Why just having beneficiaries isn’t enough
• The most overlooked document that can create major problems
• Common mistakes that lead to family conflict and legal issues

Many people believe estate planning is only for the wealthy—but in reality, it’s for anyone who wants to protect their family and make things easier when it matters most.

If you want to avoid confusion, reduce costs, and make smarter decisions for your future, this is a must-watch.

https://smithtrusts.com/

#EstatePlanning #FinancialPlanning #RetirementPlanning #WillsAndTrusts #Probate #PersonalFinance #AgingWell #LegacyPlanning #WealthPlanning #FamilyPlanning #EndOfLifePlanning #MoneyTips #SmartPlanning #PodcastClips #adulting 

00:00 Podcast intro & guest introduction
00:30 Why estate planning misconceptions matter
01:05 Overview: 10 common estate planning myths
01:30 What probate actually is (and isn’t)
02:30 Myth #1: “Probate means the government takes your money”
03:40 Why people try to avoid probate
04:27 Myth #2: A will avoids probate
05:15 How to actually avoid probate (beneficiaries, TOD, POD)
06:50 Myth #3: You don’t need a will if everything has beneficiaries
08:15 Why a will is still important
09:50 Myth #4: You need a trust to avoid probate
11:30 Myth #5: A trust automatically avoids probate
12:58 Funding your trust properly
13:15 Myth #6: A trust is always better than a will
15:30 When you actually need a trust
16:03 Myth #7: Trusts help you qualify for Medicaid
17:38 Myth #8: Trusts protect your assets from creditors
18:52 Why powers of attorney are critical
19:15 Financial power of attorney explained
22:14 Risks of not having a power of attorney
22:38 Guardianship vs. power of attorney
23:30 Healthcare power of attorney explained
24:30 Common misconception about spouses making medical decisions
26:00 Healthcare directive (living will) explained
26:48 Myth #10: Estate planning is only for the rich
27:59 Key takeaways & summary
28:56 Final advice: start asking questions
29:20 Outro & how to connect

Watch the video version here: 

https://youtu.be/5chq0_MQH0U

Transcript

SPEAKER_02 0:10

Welcome back to Aging, Healthcare, and Everything in Between, where we talk about things that help families live well through their retirement years. And I'm your host, Stephanie Pogue. Today we are talking to Court Smith. He's an estate planning attorney and the owner of Smith Estates and Trusts. So thank you for coming on the show today.

SPEAKER_00 0:30

Thank you for having me.

SPEAKER_02 0:32

So first, I want to say I've talked to a lot of estate attorneys throughout the years, just in my profession and then also going through the process with my dad and my disabled sister. But when we were talking a few weeks ago, you had all kinds of ideas, misconceptions, concepts that I had never really heard before or thought about in detail. And so I thought, you know, today I think that's why we decided let's talk about the misconceptions around estate planning. All those maybe sometimes big things, but a lot of times the small things you don't think about that can be a huge hassle later.

SPEAKER_00 1:07

Ready? Yeah, I'd be happy to. Yeah. Well, thanks again for having me. Uh yeah, in my practice, I practice for 18 years and primarily I do estate planning. I also do probate and trust administration, but I've met with a lot of clients over the years and uh you you start to see a kind of a pattern of uh misconceptions that they come into the meeting with. And so when I talk to people about estate planning, especially in this kind of a context, it's easy to talk about it from a standpoint of misconceptions. Like basically, let's let's find out where we're wrong about things and and correct them. And um I think that's a good place to start. So I've got 10 of those for you today, and I'm I'm ready whenever you are. 10 misconceptions. Uh perfect. Where do you want to start? Well, I'll just start with wills and probate. I think that those are something that people are familiar with, but uh don't know exactly how that process works, and there are some very strong misconceptions in that in that area. And the first misconception that I hear all the time is that probate is where the government takes your money. You know, it's this idea that there's this organization called probate, and and they're they're there to take your state, your money. But that nothing can be further from the truth. So, what is probate? And probate refers to a division of every circuit court. So here I'm sitting in St. Charles County. Um, the courthouse is basically outside my window here. Inside that courthouse is a division called probate, just like you have a criminal division. And probate handles matters of decedents, so like estates, as well as guardianship matters. And so when you say the term probate, you're basically referring to a court process. Um, and so does the government take your money and probate? No. Yeah, maybe there's a small filing fee, but but really I think the the reason people try to avoid probate is because of the the cost from to pay the attorney, which is based on a percentage of the estate, um, the fact that it's a very public process uh and open to anyone to see. Uh, but uh but when you think about probate, it really is a it's it it it's a court process. It's it's nothing more than that.

SPEAKER_02 3:40

Yeah, I I hear what you're saying because a lot of people will say, I just I want to avoid probate. I don't know what that means necessarily, but I want to avoid it. Yeah, I get that.

SPEAKER_00 3:48

Yeah, it's a self-perpetuating thing that everyone wants to avoid it. And and yeah, and to be honest with you, someone who's practiced in probate and handled probably a thousand or more probate estates, it's it's really it gets a bad rap. It's really a nice, it's a very transparent process, but I do understand there's better ways to do it. Um, and that's what we'll be talking about today, too.

SPEAKER_02 4:12

Yes, we went through it with my dad, and it it was smooth enough, but it took a long time, you know, and fees add up, and we just want to get it done. So so does so how do we avoid probate or do we have to avoid probate? Tell me more.

SPEAKER_00 4:27

Well, uh yeah, my goal is always still to avoid probate, you know. Um, but so my second misconception is that a will, a last will and testament avoids probate. And my reaction to that is always a will does not avoid probate, a will is probate, meaning that the a will only has authority when it's been filed with the probate court after someone has died, and it only controls assets that are subject to probate. So the idea of a will avoiding probate couldn't be further from the truth. It is probate, and so that's that's the only place that that document has any any authority. Um, so how do you avoid probate these days? And the the primary way is by non-probate transfers, which is a fancy word that means things that we all know about. For example, beneficiary designations. These include transfer on death or TOD for cars. You may a lot of people are familiar with this, and if you're not, you should know that in the Missouri Department of Revenue at the DMV, you can add an individual as a beneficiary on your car. So that is an example of a non-probate transfer. Uh similarly, your bank accounts have POD payable on death designations. Uh, and those are also available on life insurance, IRAs, 401ks. Uh another non-probate transfer is when you own something as a joint owner. For example, a husband and wife may own a joint bank account when one pass spouse, when one spouse passes, that goes that that uh account goes directly to the other. So um, and in Missouri, we're very lucky to have what's called beneficiary deeds or also known as transfer on death deeds, and they allow us to put beneficiaries on our real estate as well. So those are examples, those that mechanic of non-probate transfers is the ticket to everything estate planning. And by having any of those, you avoid probate on that particular asset.

SPEAKER_02 6:51

Okay. When people say I don't need a will or a trust because I have beneficiaries on all of my IRAs and 401ks, my child is on my bank account. Um, I have TOD on all my cars. I don't need it. Is that true or is that a misconception?

SPEAKER_00 7:09

That's a misconception, in my opinion. Yes, you may get away with it. I'll say that. But I would always recommend a will. You know, we'll talk about other things you may need, but in all cases, it's best to have a will. And even in a trust scenario, you still have a will. And the reason why is that something can always fall through the cracks. The best example of that is a tax refund. If you receive a tax refund, let's say it comes in the mail the day after you pass or a week after you pass, it says to John Doe, there is no way. Well, there may be some ways, but there is no easy way, appropriate way to get that check into a bank account that is already paid to a beneficiary. So that's a great example of something that even the best planner can't avoid. And so having a will that reflects your intent, whether that will leaves your assets to a trust or to the beneficiaries you want, is still very important.

SPEAKER_02 8:17

Okay, I could I could see that. We had um my mother-in-law was living in an assisted living facility and she already paid the rent for the following month and then passed away. Well, we couldn't get that check back because she had already, you know, we didn't, we weren't on her accounts and all that. So a will would have helped in that.

SPEAKER_00 8:33

Right. That's right. Gotcha. Yeah, and wills provide so you know when you have a properly drafted will, it benefits or improves the experience of probate in a way for a couple of big reasons. First of all, you are naming the person that you want to be your personal representative, which is in Missouri, that's the term you would think of as executor. But and so you first of all, you're you're avoiding a fight about who would be in charge by naming a succession of your personal representatives. Secondly, it allows you to waive bond. And bond is like the requirement that you have to you have to pay insurance to to administer an estate, the idea being that this individual doesn't run off with the money. So you waive bond because you trust your family, you trust whoever you've named, not to take the money to Vegas or whatever. Uh, and then the third benefit of a will is the ability to elect independent administration as opposed to supervised administration. Supervised is very difficult. Like that creates a lot of difficulties, requiring a lot more court approvals throughout. So wills have a lot of bells and whistles in them that make the probate process easier.

SPEAKER_02 9:50

I know I've spent a ton of time on wills here. What what what about trusts?

SPEAKER_00 9:55

Is that that's a great question. So you just led me to misconception number three, and that is that you have to have a trust to avoid probate. You know, we just talked about non-probate transfers and wills. So this misconception you should can infer is not true because you can all you can avoid probate in Missouri without having a trust. And we talked about why. We've got pods, to beneficiary deeds, and that's the key. So when your audience is googling matters of estate planning, be mindful that you may be getting answers from other states as well. For example, Illinois for the longest time never had beneficiary deeds or transfer on death deeds. So in Illinois, prior to some more recent statutes, you in order to avoid probate, you had to have a trust. Because you had to put the real estate in the trust before death to pass over probate. In Missouri, we you don't have that issue. So you can avoid probate in Missouri without a trust. Um and and that's not I'm I'm not saying that trusts are that that's a reason to avoid trust, but it is it is a fact that in Missouri there's there's no assets that you cannot put some kind of a beneficiary on.

SPEAKER_02 11:30

Yeah, that's good to know. A lot of people think they have to have a trust, but you don't necessarily okay.

SPEAKER_00 11:34

Right, right. Uh, and then another misconception, so I'll call this number four, is that having a trust uh means nothing will go to probate. You know, I it there's this idea out there that somehow if I sign a trust, it automatically brings in all of my assets just by virtue of signing a document. And I think bad bad estate planning attorneys or bad estate planning includes it embodies this misconception, and that is that you you've created a trust, but no one's telling you, okay, now that you have the trust, you need to fund the trust properly. And so you'll walk out with a fancy three-ring binder uh set and think you're fine. But a trust is not a magnet, it's not a vacuum. You can't walk into the bank and say, Oh, my dad had a trust, so this bank account should be part of it. No, you need to direct things into the trust properly by beneficiary designations or by lifetime transfer. So the other important thing to not feel that just by having a trust, you've avoided probate. That's not the thing that avoids probate, it's it's the non-probate transfers and other things we talked about.

unknown 12:58

Yes.

SPEAKER_02 12:58

So going to the attorney, and great, you have a trust set up. But if you don't go home and change the beneficiaries on all of your stuff, to either go to the trust or whoever else, it doesn't matter, right?

SPEAKER_00 13:10

That's correct. That's very well characterized, yes. Okay.

SPEAKER_02 13:15

And then anything else about trust that we have to know?

SPEAKER_00 13:17

Yes, got a couple more for you. Um, the fifth misconception is that uh a trust is always superior to a will. You know, the first question a lot of clients will ask me is what's better, a will or a trust? Well, they're really completely distinct. It's not a one or the other. You know, you always need to have a will. Even if you have a trust, you will have a will which we call a pour-over will. And that is the idea that the will pours into the trust. Okay, so if something were to inadvertently go to probate, your will acts as a safety net to grab that asset and put it into the trust where you have your beneficiaries lined out. So but with that being said, so you a will is always a necessity for just a basic estate plan, in my opinion. Um, but do you always need a trust? And for me, the I say why my question to clients that we explore is why trust? A trust I describe as a Swiss Army knife. It's got all these cool tools that and you can do a lot of great things, but but identify the why. And there are a lot of whys. In fact, it's very it's not that often we don't find a why. And what are the the whys? The whys are do you have minor children or minor beneficiaries you need to trust so you can dictate ages of distribution? Um, do you have many beneficiaries? Because if you have four children, putting them on a beneficiary deed for the house is not a good idea. Too many cooks in the kitchen. Okay. Do you have a child or a beneficiary with special needs? Do you have uh a farm or or some kind of recreational property you want to hold for a generation? Um, these are all there's a lot of reasons why. But there are scenarios for individuals and couples where they let's say they have one or two children, a trust may not be necessary. Simple beneficiary designations and a beneficiary deed on the house may be adequate.

SPEAKER_02 15:30

Figuring out why you need the trust, but to determine if you even need one or not.

SPEAKER_00 15:34

Right. Yeah. And like I said, mostly, I mean, you know, you when you start to dig, there's a lot, you often will find a why. But and I enjoy when you don't find the why and you can do a more simple plan for somebody. You know, why, why overthink it? You know, it's alright.

SPEAKER_02 15:49

Yeah. Yes. So I hear a lot of estate, well, not a lot of estate planning attorneys, but there are a lot of attorneys out there who do Medicaid planning. And I know that involves a trust or a trust. What tell me more about that?

SPEAKER_00 16:03

Well, that's a great, great lead into my next misconception, and that is that you know having a trust somehow allows you to automatically get Mo Health Net benefits, which is Medicaid in Missouri. Somehow that by having a trust, those assets are not counted towards uh qualifying for Medicaid. And that that is a dangerous misconception. Most trusts and the trusts that I prepare for clients are revocable trusts. So while you are alive, for all tense and purposes, you still own the assets, even if they're in your trust. For example, you report them under your social security number. So by having those assets in your trust, it's impossible to go to the state of Missouri and say, look, I don't own these assets. You do own them. So the type of trusts that are employed by Elder Law and Medicaid attorneys are very specific, irrevocable trusts where you lose most, if not all, of your rights in the assets. So very distinguishable. And um I would recommend anyone that is interested in looking into those that they they find a reputable elder loan Medicaid attorney that specializes in that. But I will say, remember, you don't get something for nothing. So you if it was as easy as just putting an asset into a can and saying, oh, I don't own this anymore, we would all do it, and the Medicaid system would be on it, would would would be bankrupt.

SPEAKER_02 17:38

So there are two different types of well, there are a lot of different types of trust, but for this purpose, there are definitely two. And just having a regular revocable trust does not stop Medicaid. Correct. Does not get you okay.

SPEAKER_00 17:52

Along the same lines, my you know, a seventh misconception was would be about having a trust somehow avoids uh creditors being able to get at your assets. And it's the same analysis as Medicaid. If it's your trust, it's still your money, it's a revocable trust. It's different for your beneficiaries. They would have some protection, but not you yourself unless it's a very, very specific type of trust. And some would argue that there's that in Missouri there really are no true asset protection trusts that automatically protect you from creditors. So still have to drive safe, still have to, you know, negotiate with your neighbors, you know, in good faith if you have a remoteable trust. So yeah.

SPEAKER_02 18:38

So the trust is setting it up for when you pass away, but it's really not going to protect anything right now. Correct. At least for creditors. Well, that has all been really good information. What what's your next, what's another misconception that people have?

SPEAKER_00 18:52

Well, finally, I'd like to thank you. Finally, I'd like to talk about powers of attorney, which in my opinion, in a lot of cases, may be more important than any of the other documents we we've discussed. And that is because with powers of attorney, when you need them, it's too late to get it.

SPEAKER_01 19:15

Yes.

SPEAKER_00 19:16

And so my first misconception about powers of attorney is I don't need a financial power of attorney because I have my son or daughter on my bank account with me. Okay. A little bit of like self-help estate plan, which I I admit in some instances there are benefits to having someone else on your bank account. But there's also a lot of pitfalls to doing that. Um and one of those is that let's say you have three children, but you put one child on the bank account. When you pass, that bank account becomes that one child's account. They have ownership of it. That creates potential tension between the other children as to whether or not that was mom or dad's intent, or if there was something, you know, nefarious going on. So to be cautious about that. Uh, but there are many other reasons why you would need a financial power of attorney. And for example, well, a big example is the need to sell a home if you were incapacitated or your car. Um and simple things like the ability to cancel a utility or even speak to a utility company on behalf of your parent. Um you know, and and sometimes sometimes when a spouse loses their spouse, you have a situation where the surviving spouse never handled the books, never was able to balance the check. And having a financial power of attorney with a trusted child or a friend or relative on it can can act as so give someone official capacity to assist you with things like paying your bills or communicating with your financial advisor. Uh and I will note a financial powers of attorney, I typically draft them so that they are effective immediately. Healthcare powers of attorney, which we'll talk about in a minute, you have to be declared incapacitated by a doctor. For financial, that's an option on if you draft it that way. And I've always preferred drafting it as that's effective immediately. With my rationale being if you don't trust the person now, why would you trust them when you're incapacitated? Um, but also the reality is that no one ever becomes well, maybe some people do, but most time incapacity doesn't happen overnight, you know. A diminished capacity. It could be a slow process, and you may need gradual help with things. And so having a financial power of attorney that can do all of these, all of these different financial roles is very important.

SPEAKER_02 22:14

I could see that for sure. I get a lot of calls from kids who are trying to now take care of their parents, and maybe if they haven't had a long-term care plan set in place or something like that, and they're to the point now, well, I need to start cashing out IRAs for my parents or I need to sell the house. Again, even calling to cancel utilities, they would not be able to do or would be difficult to do without the financial power of attorney, right?

SPEAKER_00 22:38

Correct. Absolutely. Remember, the alternative to powers of attorney is guardianship and conservatorship in the probate court. And these are very, these are very difficult situations, even in the best families, because we're talking about the petitioner, the child having an attorney. An attorney is appointed to represent the the parent who has diminished capacity. You have a court hearing. Any assets that are subject to a conservatorship are strictly controlled by the courts, requiring hearings and motions in order to use the money. And so that's why I believe that powers of attorney in a lot of cases are extremely important, if not more important than any other type of estate planning. If I was forced to, if a client said, I'm only going to do one of these documents you're recommending, it there's a good chance it may be one of the powers of attorney or both the powers of attorney. So and speaking of the other power of attorney, so powers you always distinguish healthcare and financial powers of attorney. I I've seen a few instances where those are smashed together in one document, but typically they're almost always separate. Um, and you can imagine there's a lot of good reasons why your bank doesn't need to know who's who's making your health care decisions, your doctor doesn't need to know who's making your financial decisions. Um but a common misconception about health care that I hear and is that I'm a married person. And so my spouse has the right to make medical decisions for me. That's not true in Missouri. There is no law that says that creates some kind of a hierarchy for who can make medical decisions for you. Now thankfully. That's so important to know. It is very and I've I I've had doctors as clients who thought the law was that a spouse had that right. So whether that's good or bad, I don't, I don't know. But but you could I will say this hospitals can be pretty um caring or you know, uh sensitive. Where they're they I don't ever get the impression they're ever trying to put up a wall um about making decisions. So, but the reality is when push comes to shove, there is no law that says I have the right to make medical decisions for my spouse or to know what's in their medical record, which is the HIPAA law, you know. Um and so it so with that being said, I everyone should have a healthcare power of attorney, naming those people in the order that they would like to have make those decisions for them. And uh very rare, I I always try to recommend to clients to keep things singular, you mean you name one person and then a backup and then maybe another backup. Of all the different types of documents, the one document that I think it's it's safer to name more than one at the top would be the health care power of attorney, you know, uh, where you might name your spouse and a child or two of your children. Um, but otherwise I would recommend that it stays singular in succession. Um but powers of attorney are very important. The healthcare power of attorney these days typically also contains a health care directive, which used to be known as a living will, and now it's kind of evolved into a healthcare directive. Um, and so make sure that you, whenever you're preparing one of these, that you have both parts of that um of that instrument. So healthcare power of attorney, who makes decision, healthcare directive, what you would allow to be withheld or withdrawn if you're in a persistent vegetative state.

SPEAKER_02 26:36

Okay, yeah, I didn't realize that there were two separate ones. Again, good information. Do you have uh is there 10? Those are a little last year. Yeah, that was number nine.

SPEAKER_00 26:48

Yeah, I got 10 for you. And this was actually number one. I I put it to the bottom because it's got some punch. But uh, so my my tenth misconception is that estate planning is for the rich. And that estate planning is any step that you take to control what happens upon your death or incapacity. You know, every little thing, putting a POD on a bank account, going to the Missouri Bar website and downloading their health care power of attorney and directive and having that executed, which is excellent, by the way. Um estate planning is not something to be intimidated about. Almost all of my clients comment on how easy the process is. You know, I would much rather do an estate plan than do a tax, do my my annual tax returns any day, you know, for anybody. And so um I would encourage anyone out there that doesn't have wills and powers of attorney or a trust, if needed, to contact a local estate planning attorney and uh give that peace of mind to yourself and to your loved ones.

SPEAKER_02 27:59

Okay, and so and I was taking notes as you were talking today too, because I thought it was really great information. What I got out of it is that everybody needs a will. Sometimes you need a trust, sometimes you don't. Everybody needs, especially as we get older, financial power of attorney, healthcare power of attorney, and a healthcare directive.

SPEAKER_01 28:19

Correct.

SPEAKER_02 28:19

Is that okay? And then put beneficiaries on everything that you possibly can, right? And look up beneficiary deeds, um, especially in Missouri for real estate.

SPEAKER_00 28:30

Right. But but be cautious if you have more than more than two beneficiaries, benefici, you know, beneficiary deeds can doesn't seem like it, but I can tell you that you know there's a lot of potential issues with that. So that's where a trust would become helpful.

SPEAKER_02 28:45

So yeah. Okay. And then yep, sometimes we need a trust. Is that a that kind of covers it, sums it up?

SPEAKER_00 28:54

Yeah, that covers it. Yeah.

SPEAKER_02 28:56

Well, thank you. I think that was incredibly good information. And I think for anyone listening, if you're not sure where you stand, you don't have to have all the answers today, but you do have to start asking the questions. So find a reputable elder care attorney or a state planning attorney in your area, and I'm sure that court would be able to help you, be happy to help you as well. Um, but I hope you enjoyed the information today and you found it helpful. And I look forward to our next episode. Thanks for listening to another edition of the Aging, Healthcare and Everything in Between podcast. Please share this podcast so that others can benefit from the content. Please also leave reviews as feedback is important to me. And if you have any suggestions for a future episode, email them to s.pogue at St. Louis Insurance Group.com. Thanks again for listening, and I look forward to bringing you more valuable content soon.