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