When considering their estate planning needs, many people who do not have significant financial holdings assume that they have no need for many of the tools offered within the estate planning process. It is true that individuals with a low net worth can avoid probate without the use of a will, doing so can be tricky, and can lead to a range of difficulties. In addition, there are other estate planning practices that should be put into place no matter how much money a New Jersey resident has amassed at the time of their death.
For individuals who have less than $150,000 in assets that are titled in their name at the time of death, their estate can avoid probate. Any funds held within an IRA must be designated to pass directly to named beneficiaries. This is a good way for parents to pass their IRA savings along to their children, as the money will not go through the estate and incur income tax. The children can then stretch the distribution of the IRA over the course of their lives.
Another way to avoid probate is to name beneficiaries for any and all bank accounts. Doing so allows the bank to pay remaining balances directly to the named parties, which also bypasses the estate and probate process. For anyone taking this route, it is imperative to keep the named beneficiary list current and in line with your wishes.
Aside from the desire to avoid probate, there are other estate planning needs that should be considered. Every New Jersey resident should draft a living will and/or medical power of attorney. This allows an individual to outline how they wish to receive medical care in the event that they become incapacitated. It also serves to lower any possible levels of contention between surviving loved ones and make it easier for those left behind to deal with end-of-life challenged related to medical care.
Source: Napa Valley Register, Poor man's estate planning, Len Tillem and Rosie McNichol, Feb. 27, 2014