Accounts that skip the will
Most of what a person under forty owns passes by contract and never touches the will: the 401(k), the IRA, the life insurance through work, and often the bank accounts. Each of these has a beneficiary form, and the form controls. Name a primary beneficiary and a contingent one, so that the money has somewhere to go if the first person dies before you. Avoid naming your estate, because that drags the asset into probate and exposes it to creditors. Do not name a minor child outright, since an insurer will not write a check to a ten-year-old. Name an adult custodian or a trust. After a divorce, change every form yourself, because many employer plans pay whoever is named, whatever the decree says.
Cheap ways around probate
Banks will add a payable-on-death beneficiary to a checking or savings account, and brokerages will add a transfer-on-death registration, usually free. About thirty states allow a transfer-on-death deed for a house, and some allow the same for a vehicle title. Adding a joint owner also avoids probate, but it hands that person a present share and exposes the asset to their debts and their divorce.
When a living trust earns its fee
A revocable living trust holds your assets during your life and passes them at death without probate and without a public record. It is worth the cost, commonly $1,500 to $4,000 through a lawyer, if you own real estate in more than one state, live where probate is slow and expensive, or want money managed for young children over time. The classic failure is the unfunded trust, in which the documents are signed, the house and accounts are never retitled, and probate follows anyway.
The file your family will need
- Write a one-page list of every account, policy, debt and recurring bill.
- Set the legacy or inactive-account contact that major email, photo and social platforms offer.
- Give a trusted person emergency access to your password manager.
- Sign a health care directive and a durable power of attorney along with the will.
- Tell your executor where the folder is kept.
Review the file every three to five years and after any marriage, divorce, birth or move. The federal estate tax reaches only estates worth many millions of dollars, though about a dozen states tax estates or inheritances at far lower thresholds.
Tip Request a printed beneficiary confirmation from each plan and insurer once, and keep the pages in the folder. Employers change plan administrators, and designations have been lost in the move.
