Author Topic: mustachian estate planning - important steps everyone should read  (Read 3303 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 »

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.

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.

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!

meteor

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Re: mustachian estate planning - important steps everyone should read
« Reply #7 on: November 29, 2018, 05:25:43 PM »
This is a great article!  My problem: What if I want to leave money to 5 people but I only have 2 accounts?  And account amounts change all the time. What if one account goes to down $5 and the other up to $500,000.  You would have to keep changing your will every year.  Your thoughts?

SquashingDebt

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Re: mustachian estate planning - important steps everyone should read
« Reply #8 on: November 29, 2018, 05:32:34 PM »
This is a great article!  My problem: What if I want to leave money to 5 people but I only have 2 accounts?  And account amounts change all the time. What if one account goes to down $5 and the other up to $500,000.  You would have to keep changing your will every year.  Your thoughts?

Most times I've seen forms for filling out beneficiaries, you can put multiple people down and then which percentage of the total each person gets.  You can also put a primary and a secondary beneficiary.

use2betrix

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Re: mustachian estate planning - important steps everyone should read
« Reply #9 on: November 29, 2018, 05:50:12 PM »
Good timing, I was just thinking about this today.

Question about wills: are they state specific at all? Do I need a lawyer to draft it up? We move yearly if not more, so I would want to make sure my will would be applicable nationwide.

For the most part, everything would go to my wife. Maybe 10% of my life insurance policy I’d like to go to my family.

My largest concern is if we both died. I want to make sure in that case it would go where I wanted.

LearnTo

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Re: mustachian estate planning - important steps everyone should read
« Reply #10 on: November 29, 2018, 07:16:12 PM »
This made me realize I need to update my accounts since my mother passed away, as my special needs brother would now be next of kin and inheriting even a small amount would endanger his SSI and MCaid I think.
I guess I would need to name my trust as beneficiary instead of him.

englishteacheralex

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Re: mustachian estate planning - important steps everyone should read
« Reply #11 on: November 29, 2018, 07:51:14 PM »
Off and bookmark

TomTX

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Re: mustachian estate planning - important steps everyone should read
« Reply #12 on: November 30, 2018, 05:56:39 AM »
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.

The executor can't liquidate them and keep the proceeds in the estate until probate is finished? That seems odd.

Livingthedream55

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Re: mustachian estate planning - important steps everyone should read
« Reply #13 on: November 30, 2018, 08:24:39 AM »
Very helpful - thank you!

I have my home in a realty trust and have my two children (both over 21) as beneficiaries on all my bank accounts, my IRA, my life insurance policy and my pension.

My only loose end is my car. It's the only thing which would trigger probate. Live in Massachusetts.

mbl

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Re: mustachian estate planning - important steps everyone should read
« Reply #14 on: November 30, 2018, 08:25:00 AM »
For those who are going to create a POA.
Make certain to submit this to whatever firm/custodian/advisory you have  for your
investments/retirement accounts/bank accounts et al.

Often, they require additional paper work be filled out as well as a review of the POA document
by their legal department.  Getting this done ahead of time can prevent any issues
if you're incapacitated and need to have your financial affairs dealt with in a timely manner.

This also applies to any revocable trust account you create a these entities.   Make certain that the
firm reviews your trust document and have them reiterate to you  who/what will be the beneficiary.
Sometimes the language of a living trust can be incomplete and create issues.

All of the above I have personally experienced in the past two years.

scottish

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Re: mustachian estate planning - important steps everyone should read
« Reply #15 on: November 30, 2018, 05:27:39 PM »
Up here in Canada you should make your spouse a joint owner on your non-registered investment accounts.    This way she can assume ownership on your death without having to deal with probate or capital gains taxes due to a deemed disposition.

Does this also apply in the US?

Dicey

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Re: mustachian estate planning - important steps everyone should read
« Reply #16 on: November 30, 2018, 10:41:48 PM »
PTFA = Posting To Find Again.

Catbert

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Re: mustachian estate planning - important steps everyone should read
« Reply #17 on: December 01, 2018, 11:25:30 AM »
Up here in Canada you should make your spouse a joint owner on your non-registered investment accounts.    This way she can assume ownership on your death without having to deal with probate or capital gains taxes due to a deemed disposition.

Does this also apply in the US?

Yes, most things can be owned jointly.  For many it the issue is "what if we both die?" or there is no spouse.

mschaus

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Re: mustachian estate planning - important steps everyone should read
« Reply #18 on: December 05, 2018, 09:17:46 AM »
A benefits hack for those interested in estate planning: My last two jobs have had “Hyatt Legal Services” as part of the benefits open enrollment for $20/month. I suspect it’s so cheap because no one uses it. Turns out that estate planning is something you can… plan. Sign up for Hyatt Legal for one year, set up your estate plan during that time, and your total outlay is $240. (Less if you switch to that insurance partway through the year due to a qualifying event!)

I met with a proper lawyer in a professional office who interviewed us for an hour to design the best estate plan for us. It was a great experience. Got a living revocable trust, the whole works, all included. There are aways opportunities to up-sell, but those weren’t appropriate for us.

partgypsy

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Re: mustachian estate planning - important steps everyone should read
« Reply #19 on: December 05, 2018, 10:14:52 AM »
posting also to bookmark

FI45RE

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Re: mustachian estate planning - important steps everyone should read
« Reply #20 on: December 06, 2018, 10:12:05 AM »
PTF

JustFixIt

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Re: mustachian estate planning - important steps everyone should read
« Reply #21 on: December 07, 2018, 09:06:12 PM »
Great thread, PTF as well.

Bateaux

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Re: mustachian estate planning - important steps everyone should read
« Reply #22 on: December 07, 2018, 10:14:53 PM »
I  have no minor children.   Let them fight for it.

OurTown

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Re: mustachian estate planning - important steps everyone should read
« Reply #23 on: December 11, 2018, 11:24:51 AM »
Fantastic post.  Should be a pinned somewhere. 

PhrugalPhan

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Re: mustachian estate planning - important steps everyone should read
« Reply #24 on: December 11, 2018, 11:47:11 AM »
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.
I just did a TOD on my house for my GF who is retiring this month and going to move in with me.  We did everything ourselves & got it notarized @ my credit union 4 free.  Cost $28 and 1 hour of personal leave at work to get it done.  She is a happy camper now.

robartsd

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Re: mustachian estate planning - important steps everyone should read
« Reply #25 on: December 11, 2018, 12:43:39 PM »
A little known secret is that you never actually NEED a lawyer and some legal documents don't need to be notarized. If you feel that your situation is simple enough and you understand the law well enough, you can write up your own legal documents. Different legal documents have different requirements for executing the document (witnessed, notarized, recorded, etc.).

I think I'd rather set up a revocable trust and have it own my real estate than record a new TOD deed every time I want to make a change. Either requires a notary to make changes, but you only have to record the transfer of real estate to the trust once.