Here’s a myth: If I pass without a proper estate plan, the state will take my money. Estate attorney Elizabeth Westby says, “This is untrue, although you should have a proper estate plan, so your wishes are adhered to, if you do not the state will create one for you.” This is called dying intestate, or without a will or trust. This means the laws of the state determine who takes “per stirpes.”
As an example, in Arizona first position is your spouse, then your children. If there are no children then it goes back up to your parents, then siblings, etc. The only time your assets will escheat, or go to the state, is if there is no one in line to take them. While this is exceedingly rare, it can and has happened.
Here’s another myth: I have an LLC, so I am protected. Assuming the LLC was formed properly by filing the Articles of Organization with the corporation commission, which most times it is not when people do this themselves, having an LLC doesn’t necessarily do what it is intended to do. An LLC stands for Limited Liability Company and it is supposed to be able to limit your personal liability. But it can only operate properly if all the formalities are adhered to. Most folks think they can create an LLC online themselves, forget the meeting minutes, property articles of organization and bylaws, and just begin operating. The problem here is only if you adhere to all of the formalities under a properly formed LLC can you show or demonstrate that you have a distinct and separate entity from yourself. That is why we have clear bank accounts for the business and take proper payroll and record the right documents, have current and professionally prepared taxes.
Here’s another myth: The quitclaim deed is my friend when transferring property. It can be, but the quitclaim deed can also create huge issues for people in the future. This is such a common practice too, especially for people who want to keep a piece of property in their family for generations. The problem is the title can be clouded (liens, identity affidavits, etc.) and no one may be aware of this for decades until someone tries to get a mortgage or a loan and they cannot get the title commitment (insurance policy for the title) because there isn’t marketable title. These are just a few of the estate myths among consumers that can be costly and cause family dissension for generations. Elizabeth Westby, J.D. contributed to this press release.