How Estate Planning Basics Made Me Homeless and How to Make Sure It Never Happens to You

My folks didn’t understand estate planning basics.

You might already know from reading my story that by the time I was a senior in high school, both my parents passed away.

But before they died, they had an estate plan. It was to ignore estate planning completely.  This is basically the plan that many people have.

In fairness to my parents, they were very young when they died. Nobody expects to go that early. Still, their lapse left me and my three siblings in a terrifying situation. As a result, our family basically disintegrated. We all went different ways. It was really a tragedy for us.

The Importance of Estate Planning

What I learned from my parents’ deaths is that whenever anyone dies, it’s always too early and people rarely expect it. That’s why estate planning is so important. I take this issue really personally.

The most basic idea of estate planning is that you need a mechanism to handle your affairs once you are no longer capable.  For our purposes, let’s drill that down further.  When you die, how are your assets going to be distributed?

If you don’t have any type of an estate plan in place, you die “intestate.”  That means you don’t leave any direction and probate takes over.  What is probate?  A terrible process that is expensive and eats up tons of time.  The courts and lawyers fight about who gets what.  Usually, the beneficiaries get hurt because the costs of this can be astronomical.

And even if you create a will, the will is subject to probate, so it’s not my favorite choice.  A great alternative is a living family trust.  This document can help you avoid probate.  The document itself spells out who gets what and when.  I strongly recommend that you consider getting a trust, but of course you should consult your own legal representative first.

Naming Beneficiaries to Your Retirement Accounts

The next issue is retirement accounts.  If you do it right, you name beneficiaries on your retirement accounts.  In this case, the trust or will or probate isn’t involved.  When you go, the money flows to the beneficiaries as directed by the beneficiary election you made.  In order to take full advantage, you must be familiar with IRA beneficiary rules.  They are pretty straightforward and easy to understand.  But for some reason, folks just don’t take the time to become familiar with them.

Believe it or not, that’s it.  When it comes to your estate plan basics, consider how you’re going to transfer assets when you die. This includes assets outside of your retirement accounts (use a trust, a will or nothing) and assets inside your retirement accounts (use the beneficiary forms).