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I put the cart before the horse by presenting it before explaining
the probate avoidance methods such as joint tenancy, trusts, beneficiary
designations, etc. However, this is a good exercise and shows the
importance of the planning process and it will get you thinking
seriously about your personal situation. It also shows you just how easy
it is to avoid probate with a little planning knowledge.
Refer back to the Asset
Allocation Chart while reviewing this detailed analysis.
Read on for complete information.
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Additional Chart Analysis
This couple wanted all of their joint tenancy property to simply revert to
the other when one dies. That is the primary purpose of owning property in joint
tenancy. The surviving partner would then have to consider how the joint tenancy
property's registrations would be changed to avoid probate when they died. They
would consider either a living trust, POD designations, or estate gifts.
Refer to the Cost Analysis Spreadsheet for
details
Each partner wanted to insure that when either died their two children would
each receive an inheritance. However, because the retiree's wife would have a
reduced pension – 55% of the husbands annuity – the husband and wife designed
their plan so that the wife's estate would be larger to handle any unforeseen
emergencies. The husband's estate is less because his earning power is greater
with his regular annuity.
The example is for a federal employee earning $68,000 a year just prior to
retirement. His FEGLI life insurance coverage included one multiple with
Standard option A, the additional $10,000. Therefore his total life insurance
coverage equals $150,000. He intends to elect a 50 % reduction for his FEGLI
coverage so that his wife would have sufficient funds for unforeseen
emergencies. He also decided to keep the one multiple at least until age 65. An
annuitant can always reduce coverage, however you can't increase coverage unless
there is an open season and they are very rare.
You can see from the chart that most of the assets are transferred to heirs
out of probate through POD or beneficiary designations. The individually owned
stocks and other non registered personal effects (not listed here) are
transferred through an easy to prepare living trust. They used a living trust
because in many cases you can only designate one POD for stocks and bonds and
they have two children they want to leave these assets to. The living trust was
the best way to do this. See the living trust
discussion for more information. The trust also allows you to transfer most
other non-registered property such as jewelry, coin collections, personal
effects, antiques, art work and so on by simply listing the items on a
attachment to your trust document. Therefore, most of your estate can transfer
direct to your heirs without going through probate. I highly recommend that you
purchase a copy of Plan Your Estate
for complete information about wills, trusts and avoiding
probate. This site provides examples that I developed by working up my estate
plans using this valuable resource. You will need their expert guidance to
formalize and finalize your personal plan. This book is easy to follow and
written so all can understand the process.
Now that you identified your assets, list how the asset is owned; jointly,
individually or otherwise. The next step is to decide who you want to leave each
asset to. Your decision will determine – in part – which of the following listed
methods of probate avoidance that you will use.
NOTE: Multiple methods can be used or mixed depending on your
situation. Refer to Plan Your Estate
for variations and exceptions in certain states.
This book is a must for anyone planning their estate and especially for those
approaching or in retirement. Highly Recommended.
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