Estate planning

It’s not just for the wealthy


When people hear the phrase “estate planning,” most think, “That’s for wealthy people.” And while wealthy people, at least the prudent ones, take the steps to plan for their estate, this type of planning is about more than wealth. It’s actually about eliminating bad outcomes and confusion for those you may leave behind.
I realized a couple of years ago that my wife and I needed to address estate planning for our family. Having two young children will do that. And while we have modest assets in our estate, along with life insurance, the planning was never about maximizing wealth transfers to our children. It was about protecting them and other loved ones. I’d often think about this on the way home from our monthly “date night” dinners. What if something happened to both of us at the same time? Like the proverbial car crash? What would our children’s lives look like 10 to 15 years down the road? A lot could go wrong.
Putting aside the fact that the children will have lost their parents, they might be in line to get their hands on assets at 18 years of age. Even with their guardians doing the best job possible in raising the kids to be responsible, that is a scary proposition. Those sweet, happy kids may have very different ideas at age 18. No matter how smart those kids are, this is a bad situation waiting to happen. Having a trust in place helps you control that risk, along with almost all probate issues, which are messy, time-consuming, and costly. 
So we took the step of creating a living revocable trust with a local attorney. My wife and I are happy we took that step. One of the positive effects of setting up the trust is that we had to review all of our accounts and make sure the beneficiaries were correct and up-to-date. This mostly applies to 401(k)s, IRAs, Roths, or any other account that can have beneficiaries.
It’s also worth noting that a trust only works if it owns your other assets. You need to take the steps to register the assets to the trust for ownership: real estate, other property, bank accounts, investment accounts, cars, and more. Anything of worth that doesn’t already have a beneficiary should be owned by the trust. Otherwise it will end up in probate court. But estate planning shouldn’t start and end with a trust. A more comprehensive approach will include the following important documents:

A will If there are two of you, you would each have your own will. It simply states who gets your property. In our case we elected each other, and then the trust.

A durable power of attorney This allows someone to act on your behalf in financial matters. Generally this would be your spouse, if he or she is alive. Think carefully before you make this document effective if you choose someone other than your spouse. That person can control your money, and a significant level of trust is required. Even if your spouse has passed away, you must think very carefully about whom you choose.

A durable power of attorney for healthcare If you become incapacitated, this person can make healthcare decisions for you. This helps eliminate disagreements between family members on what treatment you should receive.

A living will This dictates your wishes about what kind of treatments you do or do not want at the end of your life. For lack of a better description, it is the “pull the plug” document. It is best to make that decision yourself when you are healthy and able.

Contemplating your own demise isn’t a cheery exercise. No one really wants to do that, but it is valuable. It may help you to simply focus on the good you can do for the people most important to you. It will make their lives a lot easier when coping with the loss of someone they love.
So what do you get for all of this? Taking all these steps eliminates many potential problems, and provides the following benefits:

  • Knowing you can provide reasonable financial stability to your loved ones when they can most use it, and can responsibly handle it.
  • Control the timing and method of distributing assets to any beneficiary.
  • Avoid the hassles and headaches of going through the probate process. And keep your family’s private business out of public records.
  • Making sure your wishes are honored if you are no longer able to act for yourself.
  • Certain tax benefits that could enable your assets to last longer for the beneficiaries.
  • Allows you to have discussions with family members about what to expect should the trust start distributing assets. This is especially important for your children, when they are of an age to handle that discussion.

Setting up the trust and the other legal documents cost my wife and me a little less than $2,000. That’s not an inconsequential check to write for many families. Look around, and you may find lower costs. I look at it as an investment. And just a couple of years later, the return, in the form of peace of mind, is incalculable.

John Kageleiry is a business writer and financial planner. Read more finance columns at Have a question for “Finance 101”? Email it to