11 Inheritance Myths That Could Cost Your Family Dearly

Thinking about death and inheritance is uncomfortable, but avoiding the topic can cost your family money, time, and peace of mind.

Here are some common inheritance myths, debunked, so you can sidestep costly mistakes.

The truth is more complicated. When someone passes away, debts don't disappear. They generally become the responsibility of the estate.

The executor of the estate is required to settle outstanding debts such as credit card bills and mortgages, with the heirs receiving any leftover proceeds.

If the estate lacks sufficient assets to settle the debts, some may go unpaid. However, surviving family members may be liable for joint accounts or, if applicable, community property rules.

A will is just one part of the picture. Even if it's updated and legally binding, your will still needs to be filed in court and go through probate, which can take years and cost thousands in administration fees.

In some instances, a will is not enforceable, and leaves a very public record of all your debts and assets. Some experts recommend a revocable living trust instead, as it can manage assets, keep affairs private, and provide loved ones with faster access to assets.

In the event of no will, states will apply their own laws of intestacy, and the state government will decide who gets what.

If you want to have your say and minimize estate tax liability, make sure to formally document your final wishes.

In some situations, joint ownership can simplify things. If you add your child to a bank account or property title, it can avoid probate.

However, this approach is risky. Joint assets are exposed to the co-owner's liabilities, such as creditors and divorce settlements, and can also trigger unintended tax consequences.

While you may not own any traditional assets, an estate plan is still a good idea. If you become incapacitated, without documents in place, your family cannot act on your behalf. In order to pay bills or make decisions about your medical care, your loved ones may need to go through the courts.

Estate plans can also include health care directives, a HIPAA release, and extend durable financial power of attorney to a family member.

Not wanting to disappoint anyone can wind up disappointing everyone. This conflict-avoidant approach can lead to lengthy court battles, diminishing the estate's value and tearing apart families.

Creating an estate plan now ensures your wishes are clear and removes the burden from loved ones. You can even record your intentions in a sealed letter to be read after your passing.

Many people draft a will at some point but never think to update it. An outdated will is almost as risky as none at all.

If you marry, divorce, remarry, or move out of state, these life events could render your will ineffective — so can having children, grandchildren, and acquiring or selling assets.

Be sure to review your will after any major life change, or at least every couple of years to ensure your beneficiary designations remain current.

This is a risky assumption, and procrastination is never a good idea, especially for matters as important as legacy and inheritance.

Begin now. Early planning gives you maximum control over how your estate is handled, and sets the expectation for regular revisions as circumstances change.

Creating an estate plan doesn't have to be complex or costly. Working with an attorney or financial planner adds expense, but failing to plan correctly often winds up costing your estate more money with added probate fees, legal disputes, and tax liability.

Professionals can tailor a strategy for your personal needs and budget.

Many families set up trusts to streamline asset management and minimize tax liability. While trusts can accomplish both, they also come with administration fees and oversight rules. Many more affordable and easier alternatives exist.

Jointly owned assets, life insurance, annuities, and retirement plans can avoid probate if at least one living beneficiary can inherit. Additionally, some estates allow for "transfer upon death" scenarios for bank accounts, real estate, and vehicles.

Retirement accounts commonly go to a beneficiary and avoid probate, but this doesn't mean everything will go smoothly. Failing to update designations can have negative consequences, like assets going to only two of three children, or everything going to an ex-spouse.

Make sure to coordinate retirement accounts with your broader estate plan.

Inheritance myths can lead to tax surprises, legal battles, and strained relationships. Creating and updating an estate plan protects your wishes.

Amid the planning, consider your giving intentions, too, so you can make all the right money moves. You can ensure your philanthropic legacy by setting up a donor-advised fund, pooled income fund, or other charitable giving instruments.