1. Naming beneficiaries on your accounts is one of the most important steps in estate planning and it costs nothing. By using beneficiary designations properly, you can avoid probate of many of your financial assets, such as bank, brokerage, and retirement accounts. It is important to name primary and contingent beneficiaries on all life insurance policies, brokerage accounts, pension plans, annuities, and retirement accounts such as your IRA, 401k or 403b. In addition, payable on death beneficiaries can be added to bank accounts, certificates of deposit, and government savings bonds. Before adding beneficiary designations to your accounts, make sure you understand how to do it properly. Mistakes can be costly. For example, naming your estate as the beneficiary on an account will cause funds in that account to pass through probate. When setting up beneficiary designations on your IRA, consult your financial advisor for guidance on how to take maximum advantage of these tax deferred accounts. For more information, refer to our pages on Pay on Death Accounts and Life Insurance.
2. Trusts can provide numerous benefits, depending on your situation. For example, trusts can be used to: avoid probate; maintain control over how property is used; reduce estate, gift, and generation skipping transfer taxes; hold property for the benefit of minor beneficiaries; protect assets from creditors of a beneficiary; prevent a Medicaid recipient from losing eligibility for Medicaid benefits; provide a lifetime stream of income to a beneficiary; prevent a spendthrift beneficiary from spending through assets too quickly; or ensure family money stays in the family. Not everyone needs a trust as part of their estate plan. However, a trust may be the way to accomplish one or more of your estate planning goals. Discuss your situation with an estate planning lawyer to learn if you can benefit from including a trust in your estate plan. To explore different types of trusts, see our More About Trusts page.
3. If concerns about legal fees have prevented you from making an estate plan, there are many resources available to help you complete your estate plan at little or no cost. For example, if you want to make a living will to communicate your wishes regarding end of life medical care, you can obtain a living will form for free. For links to free living will forms by state, see our page on Medical Decisions Laws. If you want to make a last will and testament but cannot afford to hire an attorney, you may be able to receive legal assistance from a legal aid attorney if you meet the income eligibility requirements. Your employer may offer a prepaid legal services plan which allows you to speak with an attorney about will preparation at no charge. If you are a senior citizen, ask your local senior center about upcoming law clinics that may provide free legal services to seniors. Low cost books and software with forms and templates for making your own will, living trust, advance directives, and other estate planning documents are available on our Books and Software page.
4. Gifting is an important estate planning strategy many people fail to use because they do not have a professional advisor. Gifting assets in your estate to your children, grandchildren, and other heirs can accomplish a number of objectives. Most importantly, making inter vivos gifts during your lifetime allows you to reduce the size of your estate for estate tax purposes. By utilizing your annual gift tax exemption, you can make tax free gifts to your desired beneficiaries. In addition to the tax benefits, making these types of gifts allows you to see the donee enjoying the benefits during your lifetime. This can be especially fulfilling if the gift is used to pay for college, the purchase of a new home, medical care or travel. Finally, if you are concerned about protecting the inheritance of a particular beneficiary and making sure it is not taken by a greedy heir, gifting is a way to ensure specific property passes to the recipient of your choice. For more information, see our page on Gifts and Gifting.
5. Planning your estate is much easier when you have a written outline of the documents you need to prepare and the steps you need to complete. The estate planning guide our readers have chosen over and over is Plan Your Estate. This book is a comprehensive guide to estate planning written in plain English. It has received five star reviews and is even a favorite among estate planning attorneys. The author includes many examples to illustrate key points and writes in a way that is entertaining.
Plan Your Estate covers all the essential estate planning matters, such as wills, living trusts, probate, joint tenancy, pay on death accounts, retirement accounts, life insurance, advance directives, powers of attorney, last wishes, and funerals. But it also covers more complex topics such as estate taxes, marital bypass trusts, trusts for children, charitable trusts, and powers of appointment. While you need to hire a lawyer for help with more complex estate planning issues, this guide provides a brief overview of each topic so you will be knowledgeable when you speak with an attorney.