The short answer is no but before that, a bit about why everyone should have an estate plan in place.
Imagine you have little kids and something bad happens to both of you and you don’t have an estate plan, the state gets to decide who raises your kids and who gets your money. Estate planning is all about you documenting your wishes instead of letting the state decide for you.
A good friend of mine brought up Trust&Will where you can get your estate planning done for a decent price. Another option that you may consider is FreeWill. I have yet to try either of them, but the sites look legit, and I plan to use them the next time I update my plan. I do that every time there is a major life event which happens to be the case for me now.
These sites mainly offer two kinds of estate plans: a Will and a Revocable Living Trust. The choice between the two comes down to whether you want to bypass the probate process or not.
Probate is a legal process in which the court determines the validity of a Will and then executes the demands of the said Will. As long as you have done a decent job at naming beneficiaries for your assets, the probate process is in fact a good thing as in the rare off situations, it protects inheritors from potential conflicts of interest and malfeasance by the executor.
In fact, the most important job in the estate planning process is identifying a good executor who will faithfully carry out your wishes. The rest of the stuff is mere paperwork.
Back to avoiding probate, a Revocable Living Trust bypasses the probate process. This argument is what gets sold most times to steer people towards a Revocable Living Trust instead of a simple Will but you don’t need the added complication and cost that comes with a Trust if your sole goal is to avoid the probate process because…
- The beneficiary designations in your retirement accounts like IRAs and 401(k)s supersede everything else. The money in these accounts flow directly to your beneficiaries without much intervention from the system.
- Life insurance proceeds also flow to the assigned beneficiaries outside of the probate process.
- For the rest of your accounts, if you have Transfer-On-Death (TOD) designations in place, the assets will transfer over according to your wishes outside of the court system.
- Transfer of real assets like a home is usually the reason people opt for a Revocable Living Trust but even there, you can add a TOD deed to pass down your home to your beneficiaries without much court intervention.
And if you do opt for a Revocable Living Trust, you must make sure to fund that Trust by retitling the deed to your home and your other non-retirement assets to that Trust’s name. Not doing that defeats the purpose of creating the Trust.
And besides the decision to choose between a Trust or a Will, there are other equally important things that you need to prepare for. And they apply regardless of the option you choose.
- Advanced Healthcare Directive: A legal document that lets you specify your health care preferences in advance and choose someone to act for you in case you’re ever unable to communicate.
- HIPAA Authorization: Authorizes trusted individuals to receive your protected health information for specified purposes.
- Power of Attorney: This is a legal document that allows you to appoint someone to act on your behalf if you are unable to. The appointee will then be able to manage your personal, financial, and medical affairs if you are away or incapacitated.
I like to keep things simple, so I’d opt for a Will but if you do decide to do a Trust, make sure to follow through on funding that trust.
Thank you for your time.
Cover image credit – Pixabay