Author Topic: mustachian estate planning - important steps everyone should read  (Read 987 times)

Valhalla

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I've been researching ways to do my estate planning, while saving money doing so.  FWIW I'm still very young, have no plans of dying for a long time, but experienced a death in the family that revealed how hard life can be if you don't have your estate in order, and how easy life can be if you have done some simple steps to set up your estate well before you even think about dying.

I've spoken to some top estate lawyers, done a bunch of research on my own, and bought legal self help books.  Here's my guide to estate planning, which are extremely simple and cheap (if your net worth is anywhere from $10k up to $5 million):

1. Make sure you have a will.  This is the most simple estate tool but it is a catch-all for anything that doesn't get addressed in the next few steps. However, with step 2 or step 3, we are going to try to avoid to relying on the will to settle your major assets.  The will is only a back-up, not a preferred way to handle your estate.  Even with a will, assets are locked in the estate for months or years, and costs lots of money to settle via the courts.  Messy, expensive, time consuming... you don't want that for your loved ones.

    1a. also have a medical power of attorney and/or living will, for your important medical decisions
    1b. have a general power of attorney in case you're in a coma in the hospital and you need someone to manage your finances, pay bills, etc., while you or your spouse is unable to.

2. Optional (can be a bit pricey) If your estate is worth more than $2 million (I know up above I say $5 million, but hear me out), it is probably worth a few thousand dollars to pay an estate lawyer to set up a revocable living trust to put your assets in, to make it easy to manage and shelter from probate).  If you have a net worth of $2 million or more, paying a lawyer to set up a revocable living trust is not much money, relative to your net worth.

3. If you choose not to pay for a revocable living trust (step 2), there are some steps you can do on the cheap to help your estate pass along to heirs without much cost or hassle, listed on the steps below (although I'd highly advise a tax attorney and CPA help if you approach the $5 million net worth, to manage estate taxes and complex estate issues).

   3a.  Vehicle beneficiary deeds - many states now allow you to complete and notorize an auto-mobile beneficiary deed, which when attached to the vehicle, and turned into the DMV upon your death, allow seamless transfer of the vehicle to your heirs.   Random vehicle beneficiary deed article for reference:  http://www.deconcinimcdonald.com/you-can-now-designate-a-beneficiary-for-the-title-to-your-vehicle/

   3b.  real estate beneficiary deeds - many states also allow you to complete, notorize, and record with the county your beneficiary designation for real estate.  These deeds allow the property to pass onto your heirs without probate, upon your death.  The cost to record these deeds vary between states, but it is very reasonable and far cheaper than a revocable living trust.   Random article on real estate beneficiary deeds:  https://www.americanbar.org/newsletter/publications/gp_solo_magazine_home/gp_solo_magazine_index/realestate_transferondeath.html

   3c.  Make sure you have beneficiary designations on all of your financial accounts - savings, checking, brokerage accounts, 401k, IRAs, etc.  Most people may not have beneficiary designations on savings / checking accounts...that means the money will be trapped in the estate, subject to a long probate process, if you have no joint account owner or beneficiary.  It takes minutes to go to the bank and assign a beneficiary to your bank accounts. Do it today, if you have not done it.
   
If you follow step 3, and have your automobiles handled, real estate handled, and financial accounts handled with beneficiaries, then only your real personal property is left for the estate to handle, such as clothes, furniture, jewelry, etc.  Those can be easily handled via a will and easily given to heirs even while probate happens. 

Without beneficiary deeds, vehicles, real estate, and money can be locked up in a deceased estate for months or even years, and costs thousands of dollars to litigate and settle via the courts.  Ask me how I know.  :(

Hope this post helps those of you who have not thought about this at all.  Step #3 is especially easy, cheap, and good for those who are not FI yet, as it will help manage and settle what ever material assets you may have that you don't want to set up a revocable living trust for, until you hit $2 million or more in net worth.

PS - this is a second post in a series of life management articles, where I share life tips on how to secure your financial future and protect your financial health. 

My first post is here:  Freezing your credit and a half dozen other tips to protect your identity
« Last Edit: February 13, 2018, 11:18:54 AM by Valhalla »
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Candace

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Re: mustachian estate planning - important steps everyone should read
« Reply #1 on: February 13, 2018, 12:26:56 PM »
Thanks for the great and timely summary list. I just called my credit union to make my husband my beneficiary on my accounts. They took some information (his SS#, birthdate, full name) and are going to email me documents to sign and get back to them. I should get notification when the process is complete.

I think that if the worst happens to me, this is important for us. We got married later in life, about a year ago, and all our accounts are separate. I've made him a beneficiary on my investment accounts, but had never thought about the credit union accounts. I just FIRE'd last year and have about two or three years of expenses in my credit union account, meaning a large amount of cash. The house is mine only. Next, I will look into the real estate beneficiary thing, which sounds promising as well. Anything I can do to make the process easier on him is good in my book. If the TOD deed is cheap too, so much the better. My husband is a lawyer. My will is currently in work and I will talk to a different lawyer about that.

My husband is thrifty, but doesn't keep cash reserves like I do and doesn't have huge cash flow since he serves the underserved in his work. I pay all the household bills (mortgage, utilities etc.) He probably would struggle to pay the bills without dipping into his IRA if I died suddenly, since it sounds like the "normal" process can take quite a while. I would want him to have access to the credit union accounts immediately if I kick off, so he could remain liquid and not stress about money while my estate is settled.

My credit union is great. While I was writing this reply, the whole process was completed via electronic documents and electronic signature. That sure was easy. My ass never even left this chair.

Valhalla

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Re: mustachian estate planning - important steps everyone should read
« Reply #2 on: February 13, 2018, 12:50:12 PM »
You're welcome!! This stuff is so simple and easy, but so important.

The TOD is super easy.  It only costs a notary (get it done for free at your local bank), and the cost to file with your county (for real estate). The costs range from $15 to $50 for a 1 time filing fee. That's it!

The vehicle TODs cost nothing, except notary costs as well.  Keep it together with the vehicle title, and it's taken care of.

My relative's vehicles are still tied up in the estate, and are rotting literally on the drive way since we can't sell them.  If only we had a TOD form, we could sell it asap.  Very sad.
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Candace

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Re: mustachian estate planning - important steps everyone should read
« Reply #3 on: February 13, 2018, 01:03:10 PM »
You're welcome!! This stuff is so simple and easy, but so important.

The TOD is super easy.  It only costs a notary (get it done for free at your local bank), and the cost to file with your county (for real estate). The costs range from $15 to $50 for a 1 time filing fee. That's it!

The vehicle TODs cost nothing, except notary costs as well.  Keep it together with the vehicle title, and it's taken care of.

My relative's vehicles are still tied up in the estate, and are rotting literally on the drive way since we can't sell them.  If only we had a TOD form, we could sell it asap.  Very sad.

Valhalla,

Regarding the house TOD, I read the article you linked to as meaning there are different statutes in different states, so I would need to make sure the one I choose is appropriate to my state (Virginia). I'd also want to see if we can file it with the city. Since my husband is a lawyer, I figured I'd ask him about this when he gets home and we can go from there.

I'm not concerned with the vehicle TOD at this time since he has his own car and mine is a '98 Camry. No one will be fighting over it. That said, he could donate it to charity quicker if I do one, and it might be easy to do it at the same time as the house TOD. Any idea where we'd keep that or where it might get filed? With the will perhaps? I don't suppose the city keeps track of those like they might do with real estate property TODs.

Valhalla

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Re: mustachian estate planning - important steps everyone should read
« Reply #4 on: February 13, 2018, 01:11:45 PM »

Valhalla,

Regarding the house TOD, I read the article you linked to as meaning there are different statutes in different states, so I would need to make sure the one I choose is appropriate to my state (Virginia). I'd also want to see if we can file it with the city. Since my husband is a lawyer, I figured I'd ask him about this when he gets home and we can go from there.

I'm not concerned with the vehicle TOD at this time since he has his own car and mine is a '98 Camry. No one will be fighting over it. That said, he could donate it to charity quicker if I do one, and it might be easy to do it at the same time as the house TOD. Any idea where we'd keep that or where it might get filed? With the will perhaps? I don't suppose the city keeps track of those like they might do with real estate property TODs.
Typically the real estate is recorded at the county level, in the states I'm familiar with.  Check to see where your house deed is recorded (city, county, or state), and if they have legislation that supports TOD.  Some states have enacted legislation only recently (as in the last 5 years), some longer.  Here are the states that support TOD: https://www.thebalance.com/use-deeds-avoid-probate-3505250

If you're in one of those states, you're lucky and should be able to find the form online for your jurisdiction.  If you're not...then you will need to get a revocable living trust set up, unfortunately.

With vehicles, you can't even donate them (usually) without it passing through probate, as the car cannot be disposed of or transferred unless you have clean title that's transferable.  So it's a good idea to have TOD for cars even if they aren't worth much.  It doesn't cost anything to do a TOD on the vehicle, and it's one less headache for the beneficiary or your loved ones to deal with.
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expatartist

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Re: mustachian estate planning - important steps everyone should read
« Reply #5 on: February 13, 2018, 02:11:40 PM »
Great post, thanks for taking the time to share your research.

hred17

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Re: mustachian estate planning - important steps everyone should read
« Reply #6 on: February 13, 2018, 05:04:51 PM »
Posting to follow. Thank you for the information!