Simple Estate Planning—Is that possible?

When starting your retirement planning, estate planning is a basic element.  Previously we pointed out estate planning it is not only for the wealthy.  We covered Health Care directives and Powers of Attorney. (See August entry “Estate Planning: It’s not just for the wealthy”)  But there are other ways to keep your estate planning simple.

Beneficiaries and other designations

Any financial account for which you can designate a beneficiary provides a way to pass on an inheritance without going through probate.  Retirement accounts and life insurance policies have beneficiaries.  There are payable on death, POD, designations for banking accounts.   Transfer on Death, TOD, are for investment accounts.  Some states (Minnesota included) even have Transfer on Death Deeds, TODD, for real estate.

However, you may want to consult an attorney to make sure you are not missing tax (estate, gift, etc.) or other consequences by trying to avoid a will or trust by using only these designations.  Using joint ownership with children is an area where you always want to check on the consequences of such a move.  You may be limited on what you can do with your assets without your children and their spouses’ consent, and your assets may be included in your children’s assets for the purpose of divorce or bankruptcy.  So what seems simple may become more complicated if you do not know the potential difficulties.

Also, a big consideration is to keep your beneficiary and other designations up to date.  Remember to update if there is a death, divorce, etc.  No one wants to be unpleasantly surprised because a beneficiary was not changed.

Wills and Trusts

A will gives directions for disposition of your property, but it still requires the probate process.  A trust avoids probate and, therefore, may save time, provides more privacy, but costs more than a simple will.  If you have property in more than one state, you definitely need to check if you can have a “simple” estate plan.

There are ways to simplify your estate planning, but remember to consult an attorney before making decisions which can affect your or your heirs’ tax or ownership situation.  Next stop, funeral planning.