Estate Planning Checklist


Question:  I like to review my estate plan and documents every few years.  My wife and I have a will and a living trust, and we would like to make sure that when we die our home and any investments and IRA money that is left will pass smoothly to our two children. What should I look for?

Answer:  Here are some of the more important things to check:

  1. Bypass Trust:  If you have a standard A/B survivor/bypass trust, ask your attorney if that arrangement is still appropriate for you.  Today’s large estate tax exemption and portability opportunity may make the bypass trust an unnecessary burden.
  2. IRA beneficiaries:  Verify the primary and contingent beneficiaries of your IRA.  If your spouse is your primary beneficiary then you probably want your children to be the contingent beneficiaries.   If you don’t designate contingent beneficiaries and you and your spouse die together, then your estate will be the beneficiary by default and your children may lose a significant income tax advantage on top of the probate hassle.
  3. The unfunded living trust:  One of the reasons you created a living trust was to avoid probate.  It’s all too common for someone to die with major assets outside of the trust.  If your mortgage lender requires you to take your house out of trust before a refinance, make sure they put it back and that the title insurance covers it in the trust. As a general rule, if you have a living trust, all of your assets except for retirement accounts, annuities, and maybe your car should be held in the trust with you as trustee.
  4. Missing documents:  Tell your beneficiaries where to find your current estate planning documents, and destroy or make a notation on documents that are no longer valid.  If your documents are in a safe deposit box, make sure someone knows where you hide the key.
  5. Naming your trust as the beneficiary of your IRA:  Under normal circumstances you should name individuals, not your trust, as the beneficiaries of your IRA.  When naming a trust is appropriate, consult with your estate-planning attorney and follow the IRS rules.
  6. Transferring low cost basis assets:  Don’t give a gift such as company stock or real estate with low cost basis to your kids.  You are passing along your low cost basis to them.  Let them wait to inherit it.  They will receive a new cost basis equal to the market value of the asset on your date of death.
  7. Charitable gifting:  Do give low cost basis, appreciated assets to eligible charities.  In most cases, you can deduct the fair market value of the gift.  And if you plan to leave something to charity at death and you have an IRA, some or all of it should be your first choice, because the amount you give will be deducted from your taxable estate and the charity won’t have to pay any income tax.
  8. Owning life insurance:  If you are the owner of your life insurance policy, then add the death benefit to the total value of your taxable estate.  To avoid the life insurance proceeds from being taxed, ask your attorney to help you transfer the ownership of the policy to either an irrevocable trust or another person. 

Kenneth B. Petersen CFP®, EA, MBA, AIFA® is an investment advisor and Principal of Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investing, taxes, retirement, or estate planning.  Send your questions to: Ken Petersen, 2340 Garden Road Suite 202, Monterey, CA93940 or email them to