Planning Your Estate: Ten Things You Should Know
Still haven't finished your estate plan? Hopefully these tips will make it a little less intimidating.
Passing On Your Stuff
Everyone knows they should, but no one ever wants to do estate planning. Who wants to think about your ultimate demise? Knowing that some of your loved ones may dislike how you divvy things up can make for more anxiety.
Even doing the minimum, however, will relieve your guilt now and save the people you care about a lot of headaches (and perhaps a lot of money, too).
1. Writing a will is easy. Really, it is. All you need is a good do-it-yourself book or software program. Put down whom you want to inherit what, sign it in front of witnesses, and you’re done. It doesn’t need to be filed anywhere; just tuck it away in a safe place.
2. Cover your bases. Much of your valuable property—retirement accounts, life insurance proceeds, jointly owned real estate or cars—probably won’t pass through your will. Make sure you know who will inherit it.
3. About your retirement plan. Your spouse has an automatic legal right to inherit the money in your 401(k) plan (but can give it up in writing).
4. It’s your decision. You don’t have to leave anything to your children. You should at least list them in your will, though, so it’s clear that you didn’t inadvertently overlook any of them.
5. A common misconception. Recipients don’t pay income tax on money they inherit. (one exception: money in tax-deferred retirement plans.)
6. You sure hear a lot about taxes, though. Additionally, you don’t have to worry about federal estate tax unless you leave more money in your estate than 98% of the u.s. population does. If you think estate tax will be an issue for your family, see a lawyer—you can afford it.
7. Be specific. You can save your family a lot of hassle and argument if you specify whom you want to have items with special sentimental value. Sometimes the bitterest fights are over items that don’t seem valuable at all.
8. Smith & Sons? Jones & Daughters? If you own a business, make plans for what should happen to it after you’re gone.
9. What’s the difference? Most people don’t need a living trust (a substitute for a will that lets your family skip probate court after your death) until they are older or seriously ill. Until then, a simple will is enough.
10. Don’t forget the obvious (a lot of people do). None of your estate planning documents or insurance policies will do a damn bit of good if your family can’t find them after you’re gone.
This article was excerpted from Nolo's Little Legal Companion.