Where There’s a Will…

Do you have a will? A lot of people avoid estate planning — as if not talking about death will somehow keep it from happening. Wrong! Moreover, the worst thing you can do to your heirs is die without an estate plan.

In recent posts I’ve mentioned my plans to retire in the next five to seven years. I’ll get a small pension from a previous employer plus Social Security. The bulk of my retirement income, however, will come from the money I’ve saved (including the match from my employer).

At this stage of the game, the balance in my retirement accounts is significant.   God willing, my life force and my account balance will zero out at the same time. If I die before the money runs out, I want a say in where the money goes.

I recently saw an attorney about the distribution of my assets when I die. My wishes are simple: split my estate between five heirs and minimize the work for me and for my survivors. Our discussion revolved around how best to meet my objectives.

After talking with the attorney, I decided to designate my estate as the beneficiary on my retirement accounts. Those funds and the  rest of my estate — my house, car, and stuff — will be divvied up  in the  will. I felt good about my informed decision.

I mentioned my decision to a coworker who teaches estate planninge. She said moving non-probated assets (such as retirement accounts) to my estate for probate was a really dumb decision. She wasn’t very nice about it, either.

For obvious reasons, I was concerned. My financial planner ran the numbers confirming my coworker was right. Naming my estate as beneficiary on my tax-deferred retirement accounts would result in a huge tax liability — almost fifty percent of the value of the estate.

In my attorney’s defense, I said convenience/simplicity was a higher priority than cost-effectiveness, since none of my beneficiaries is a dependent. Maybe she would have pointed out the pitfalls when we met again to review the first draft.

Or maybe not.

The process was a learning experience. Rather than my estate, my heirs are named beneficiaries on all my retirement accounts. What’s left — house, car, personal property — is divvied up in the will.

Just another of those “big things” on life’s to do list I can check off. Barring unexpected changes, the plan will hold up for the long haul. Now on to the next thing…