Wow — there were a ton of responses to the recent letter to my wife post about estate planning if I were to suddenly die. I guess I’m not the only one feeling underprepared for that type of situation!
Researching this stuff a bit further, I wanted to share with you all what I’ve been learning. At the top of my list has been figuring out some type of formal will(s) for me and my wife. Surprisingly, it doesn’t seem as difficult as I expected.
**Also, because death is such a sad topic, I’m going to sporadically include pictures of Cooper as a puppy to lighten the mood. Everyone likes puppies, right!?**
This was taken the day we picked him up at the shelter in 2013. We lucked out big time finding this lil guy!
Defining All the Estate Planning Terms
First, here are some words that I had to google. You might know this stuff already but I thought I’d share anyway ‘cause I found it helpful!
- Probate: This is a legal process where a court decides how a deceased person’s estate is going to be administered. If there is a will, the court decides whether the will is valid. If there is no will, the court will follow intestacy laws. 👇
- Intestacy (or “intestate”): For people who die without a will, each U.S. state has a set of laws that determine who inherits the assets. Usually this is heirs, relatives, descendants, etc., but it can get pretty complex if there are step-children, in-laws, undocumented partnerships and stuff like that. Many people get screwed by sucky state laws, so having a will is 💯 better!
- Last Will & Testament: This is a legal document with the wishes of the deceased person. It lists how they want their property to be divided, and also *who* they want to help manage the distribution.
- “Living” Will: This is different from a will for when you die… A living will is for when you are still alive but are incapacitated or can’t handle your affairs. It’s also called an Advanced Healthcare Directive.
- Executor: Person (or people) chosen to carry out the transfer of assets. If there is a will, the executor is usually named already and they follow whatever the will says. If there is no will, the court appoints an executor (usually a relative), and they have to follow whatever the court deems is the correct transfer for the assets.
- Beneficiary: This is the person who will receive the benefit of stuff. They can be named inside the will, a trust, or with financial institutions directly designated within an account.
- Trust: This is kind of like a will, but it’s a more custom and hardcore legal document to pass assets between people. Having a trust can bypass probate, keep transfers private, and can have tax deferral/avoidance measures. **Note** A trust cannot decide who will be the guardian of children; only a will can name guardians for kids. Check out more will vs. trust stuff here.
- More estate glossary terms here
FYI: Many people choose to have *both* a will and a trust. Even though there’s a lot of overlap, one can provide a back-up for the other if something’s not executed properly.
Me and Coops, almost 9 years ago!
How to Avoid Probate
If possible, I’d like my wife to avoid probate court because it seems expensive and time-consuming. There are a couple of ways I can help do this:
- Listing beneficiaries directly at financial institutions: If I can pass assets directly to my wife legally through bank accounts, retirement accounts, etc., then she can take ownership without going through probate court. (I’ve already done this for our checking, savings accounts and retirement accounts.)
- Having joint ownership for assets and properties: For our duplex, other rentals and joint brokerage account, my wife is already a co-owner. Owning assets jointly means if one of us dies, the other survivor takes ownership and in most cases doesn’t have to go through probate.
- Getting a living trust: Having a trust can avoid probate… But, ALL assets need to be transferred into the name of the trust for this to be applicable. This seems like a real pain in the ass to do, and might be more applicable if we had kids.
All in all, I think the majority of our assets — and certainly the most valuable ones — are going to be easy to transfer without probate if one of us dies. I’m feeling MUCH BETTER knowing all this stuff.
**If you haven’t done this already, add it to your to-do list ASAP… Go through ALL your accounts/assets and call the bank/broker/county to make sure your designated beneficiaries are up to date. Only takes a few minutes, and could save a HUGE amount of time for your loved one if you die.**
Cooper and I took photos like this every couple weeks, but soon enough he couldn’t even fit on my lap anymore. :)
Writing a Will
My wife and I have already thought through the scenario if one of us dies, but what will happen if BOTH of us die at the same time? Weird to think about, but this is actually a very possible scenario being that we travel together and do almost everything together.
Having a basic will and testament would help whoever cleans up our financial mess and inherits our stuff. I certainly don’t want to leave it up to the government to decide!
The good news is, writing a will doesn’t seem as hard or as scary as I thought it’d be. In fact, we could even write one ourselves pretty easily.
In California, the basic requirements for having a legal will are:
a) be 18 or older
b) not be drunk/on drugs when it’s written
c) signed by a couple of witnesses
Although we could do it ourselves, given the size of our estate, it’s prolly a good idea to have some professional help. Also, it seems that estate planning software covers a handful of other scenarios if disaster strikes.
LegalZoom is one I’ve been looking into. For their basic bundle it looks like I can get:
- Last will and testament – for me
- Last will and testament – for wife
- Power of attorney – for me
- Power of attorney – for wife
- Living will – for me
- Living will – for wife
Bundle price for all these: $279
What I like about using professional software to prepare documents is they use all of the state-specific requirements and ask the right questions to produce a complete will. My biggest fear is that in a probate situation they might determine that a will is not valid, in which case I’ll have done all this work for nothing. So having professional help is nice.
As for a trust, I don’t think my wife and I really need one at this point. This might change as our family grows, but for now we’ll just start with getting basic wills.
Read this if you’re wondering if you should set up a trust.
Figuring out how mirrors work ;)
You’ll Need to Have Hard Conversations About Inheritance
Welp, here comes the hard part for us.
I was just about to start the LegalZoom process, but then it hit me… My wife and I still need to talk about who the heck inherits our mess if we die!
And this — I think — is the hardest part of anyone’s planning process. Filling out forms is easy. But actually sitting down and having tough conversations is what most people avoid.
Since my wife is still touchy and crying about the last letter I wrote, I’ll need to figure out a way to make this as unemotional and easy as possible. More to come on this!
Any of you done this already and have any tips?
Stay safe out there my friends,