It seems odd thinking about planning for your estate if you are young and don’t have much of a net worth, but everyone can take several basic steps to make it easier on your surviving family members.
Current federal estate tax laws for 2020 allow for no taxes due upon death if an individual’s net worth is below $11.58 million (rising with inflation annually), so many times estate planning is done not to avoid taxes but rather just to make sure the process is relatively smooth and your assets go to where you want.
Generally, it makes sense to engage an estate attorney to draft basic estate planning documents after you become married. If you don’t intend to become married then the document drafting is still strategic. An attorney can write a will that directs where your assets flow at your death, a living will that directs what type of life support and medical attention you want if you are incapacitated, and durable and healthcare powers of attorney to identify a person to make financial and healthcare decisions for you if you are mentally or physically unable to do so.
With your retirement accounts, you can identify who will receive those assets at your death through a beneficiary designation. This allows for a direct transfer of those accounts to the beneficiary and removes those values from the court’s probate process of your estate, which lowers the cost and complexity of the estate process. It also allows that person to maintain the tax-deferral benefits of those retirement savings over the rest of his/her life. If you have charitable intentions it may be strategic to list a charity as a beneficiary on your pre-tax retirement assets since they will not be subject to taxation on those funds when the charity receives them unlike with an individual.
With non-retirement accounts, you can consider a “Transfer on Death” designation where you can name individuals to receive those funds. This designation, along with retirement account beneficiaries, takes precedence over instructions within your will, so be sure they are updated throughout your life.