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 and it cost me and my siblings huge.   You might already know from reading my story that by the time I was a senior in high school, both my parents passed away.  My brother and sisters and I were scattered to the wind and our family was destroyed.  Why did this happen?  Because my father and mother had no estate plan documentation. Few people do and it ticks me off to be blunt.  I just think it’s irresponsible.  Sorry.

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.  Please don’t expose your family to the same danger we faced.

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.  So it’s critical to understand that if other people rely on you, you owe it to them to do some planning – no matter how young you are.  And once you get aligned with that idea, the next principal to embrace is that you don’t know when you are going to die.  You really don’t.  It happens to people all the time Pilgrim. That being the case, doesn’t it make sense to have a plan for your family in case you drop dead today?  Of course it does.

Neal’s Notes:   Recent changes in the law may have made your estate planning a lot more simple.   Make sure you stay current Pilgrim!

Create Your  Plan

The most basic idea of estate planning is that you need a mechanism to handle your affairs once you are no longer capable. That includes appointing someone to handle your affairs if you are still around and distributing your assets once you aren’t.  For purposes of this post, let’s just discuss the topics of what happens to your assets after you die.

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 your estate is subject to probate. This is 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.

Even if you create a will, the will is subject to probate, so it’s not my favorite choice. A great alternative might be 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.  And if you do create a trust, make sure your assets are actually re-titled correctly to reflect this.

Naming Beneficiaries to Your Retirement Accounts

The next issue is retirement accounts. When you set up your beneficiaries correctly, the trust or will aren’t involved and you don’t have to worry about probate either. When you go, the money flows to the beneficiaries as directed by the beneficiary election you made. Just make sure you name the right beneficiaries.

Believe it or not, these are the basics when it comes to estate planning. Think about who is going to manage things if you can’t manage your own finances.  Next, plan 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).

Have you done any estate planning?  Why not?