Estate Planning for the Bourgeoisie

downton abbeyLike most of you, I am busy today updating my will, following the birth of the Prince of Cambridge.  I, too, want to ensure that he grows up in the world wanting in nothing.

Naturally it is only just and right that I designate a portion of my entail to His Royal Highness.

That got me thinking about whether I had any advice for the bourgeoisie regarding estate planning.

If you can afford it, please don’t take estate planning advice from a blogger

If you will have sufficient funds at your death to require sophisticated estate planning, you will serve yourself well by hiring a specialized attorney who can advise you on up-to-date, optimal strategies for leaving money in a way that matches your values.

But if you can’t afford it, read on…

If you do not now have – or do not yet have – sufficient funds to pursue sophisticated advice on estate planning, here’s some basic principles to keep in mind.

Make a Will

Even if you are too young to have ever felt death’s breath upon your neck, everything can change in an instant.  Writing down your wishes, having a witness, signing it, storing it safely, and notifying family members of its existence is an act of kindness for all who love you.

Retirement Accounts

You should know that when you open your IRA and 401K accounts, you designate a beneficiary (or beneficiaries) upon your death, and that furthermore, that choice trumps anything written in your will.

Which is why smart estate planners advise you to check your IRA and 401K beneficiaries periodically to be sure they reflect your current wishes.

So, you may have named the cute barista at your favorite coffee shop as a beneficiary to your 401K as a joke when you were 23 and unemployed, but if you don’t change that 70 years later, you may be giving money away on your death to a total stranger, albeit one who made amazing cappuccino foam hearts once upon a time.

A more likely scenario, and hence more worrisome: the 100% IRA beneficiary designation you gave to your first child – because you thought “one and done” – no longer reflects your larger brood of seven additional children and their 43 grandchildren when you die.

Pro tip: Do not create 50 enemies within your own family, cursing you in the grave because you forgot to update your IRA beneficiaries.

Tax Planning

The only thing I want to say here is that my old rule on taxes still applies: If you are going through extraordinary legal and financial hoops to avoid paying taxes, you may be missing the big picture.

Keep it simple – or as simple as you can – and be wary of complicated tax avoidance plans.  The more effective they are, the more likely it is that the IRS will declare them void in the future.  At which point, you’ll owe a lot of money and need to pay more fees to undo the plan.

The more intricate the tax avoidance plan, the more likely it is you’ll create headaches to be undone in the future, albeit with additional expensive fees – of course – for lawyers and advisors.

If it seems too good to be true, like all investments, it probably is.

Letting heirs know your plans

The more I study estate planning, the more I understand that the biggest mistake people make is to keep their plans to themselves.

If your worthy children will not get anything from your estate – which is fine with me because the expectation of inheritance can be a cruel corruptor – then it makes sense to let your heirs know ahead of time.

If your unworthy, rascally, children will not get anything from your estate – which is fine with me if that reflects your values and they’re jerks anyway – then they should know that before you die.

If some children will get more than other children – for whatever valid reason which trumps equal treatment – for goodness sake give everyone a warning and a reason for your choice.

Receiving less than a sibling from a deceased parent, without so much as a warning and a reason, is enough to guarantee inter-generational family strife for your kids’ remaining lives.  Be empathetic, and tell them what’s in the will.

His Royal Highness the Prince of Cambridge

In the meantime, God bless the little heir.  In the event of my untimely death, I hope he enjoys all of my hand-painted Dungeons and Dragons figurines as much as I did.

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One Reply to “Estate Planning for the Bourgeoisie”

  1. I have much to say on this topic after having a relative pass away without sufficient estate planning. First, to avoid encounters with trolling attorneys, this is not legal advice. Step 1) Go to the library and educate yourselves on the basics of estate planning BEFORE you contact a professional. Step 2) Pay close attention to anything that mentions a “revocable living trust” and re-read everything about said instrument. Step 3) Contact a reputable estate planning attorney.

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I founded Bankers Anonymous because, as a recovering banker, I believe that the gap between the financial world as I know it and the public discourse about finance is more than just a problem for a family trying to balance their checkbook, or politicians trying to score points over next year’s budget – it is a weakness of our civil society. For reals. It’s also really fun for me.

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