A Few Simple, Yet Effective Estate Planning Tricks

A Few Simple, Yet Effective Estate Planning Tricks

August 08, 2021
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Do you know what happens to your money when you die?  

Sure.  This isn’t the most pleasant eventuality to think about, but we’re all going to have to face it at some point.  We all die.  Some with a plan.  Some without a plan.  It can pay off big-time to have a plan.

Not everyone needs to create a trust or develop an elaborate estate plan because, frankly, not everyone has enough money to warrant it.  Regardless of your financial position, here are a few things that everyone can do to make life after death a little easier:

Look at each of your investment and bank accounts to ensure that your beneficiaries are listed in accordance with your current wishes.  Far too often, people forget to update their beneficiary designations as time passes.  You may not want your summer fling from 15 years ago to inherit everything you’ve worked so hard for, so it’s a good idea to double check that everything is up to date.  If you’ve done this recently, great job!  If not, it’s worth making sure they’re all reviewed. 

It’s important to remember that the beneficiaries designated on these accounts will almost always trump the direction of a trust or a will.  Typically, taxable investment account beneficiaries are designated using what the industry refers to as a “TOD” or “Transfer on Death” directive.  To update a TOD, you can request a form, fill it out, sign it, and submit it.  Retirement investment accounts (like IRA’s, Roth IRA’s, SEP IRA’s, SIMPLE plans, etc.) will have a beneficiary designation form that you can request when you’re ready to update it.  Bank accounts (checking and saving accounts) typically have a “POD” or “Payable on Death” directive.  The form filing process is the same as the TOD process mentioned above.

For those of you who might benefit from a more elaborate estate plan: Creating trusts, wills, conservatorships, health care directives, etc., might be an invaluable strategy to ensuring proper distribution of your assets after you’re gone.  Determining the an appropriate mixture of these tools can be complex.  An ideal place to start is to create a financial plan so that you have a strong understanding for where you stand financially.  From there, we’ll work with your estate attorney to draft a comprehensive plan.  In the meantime, here are a few general tips to keep in mind when you’re working on establishing or developing your estate plan:

  • Remember, a trust’s distribution instructions may be most effective if you use percentages of the total portfolio value, not dollar amounts. Simply put, your account values will change over time and using percentages will stay relevant for a longer period.  Not to mention, you’ll be assured that every dollar will be accounted for.
  • Consider your age and the complexity of your financial picture before jumping into the typical revocable trust arrangement.It’s quite common that a revocable trust will be recommended to someone who might have been able to achieve their goals in a more cost-effective way.  So, if you’re young (say, under 60), ask yourself if you want to pay a fee to update your trust every time you acquire a new asset.  The younger you are, the more often you’ll be paying fees to update your trust. 

If you have a relatively simple financial picture, it may benefit you to use a mixture of easy, cost-effective strategies to create your estate plan.  For example, you may want to establish “testamentary trusts” by way of a will.  We won’t go too deep here, but it could save you from updating your trust every time you acquire a new asset (talk to your estate attorney about how you might benefit from this strategy).  This, coupled with proper beneficiary designations is a sound approach to making sure your inherited assets get into the right hands. 

There is a whole host of estate planning tips, tricks, hacks – call it what you want – that can significantly improve your tax efficiency, timeliness, and the lives of your heirs.  It takes a little work up front, but can pay dividends in comfort and confidence.  

Please feel free to reach out anytime with thoughts or questions.


Written by: Scott Stanley, CFP®  

These concepts are discussed in general terms.  Without question, each circumstance will be different so it’s important to speak with us (or your estate attorney) before implementing any of the strategies discussed here.  This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

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