Poor Man's Estate Planning

There are certain instances where people feel like they have no use for estate planning, mainly because they are of meager means. Even if you do not have a lot of money, there are still other aspects to cover, such as real estate and healthcare decisions. If you have children it is even more important to set up plans for your estate, and this advice colum goes into the reasons why.


Dear Len and Rosie, My mother is a 78 and is of meager means. She has no real property but does have several thousand dollars in a Vanguard rollover IRA. She does not have a will, and I believe that there is really no need for one. I’m hoping that you can tell me that I am correct. If she chooses to name her five children the beneficiaries of the IRA, does this allow us, in the event of her death, to avoid probate? Mona 

Dear Mona, Your mother’s estate will avoid probate if the assets titled solely in her name upon her death total less than $150,000. From what you have told us, she has nothing to worry about. She can avoid probate with “poor man’s estate planning.” She should name her children as IRA beneficiaries, assuming she wants them to get the money. Anything passing upon her death by means of a pay-on-death beneficiary designation will avoid probate. And it’s good for her children too. If your mother’s IRA pays into her estate, it will be subject to income tax upon her death. But if you and your siblings inherit the IRA as designated beneficiaries, you will have the opportunity to stretch out IRA distributions over your own life expectancies. This may not mean much if the IRA is worth only a few thousand dollars, but for readers of this column who have significant money within IRA’s or other retirement accounts, it’s always important to verify that you have beneficiaries. Your mother can also name the children as joint tenants or pay-on-death beneficiaries on her bank accounts so that they will also pass free of probate upon her death.

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