We have all heard the classic “KISS” design principle, which can be politely interpreted as “keep it short and simple.” The fact is that some estate plans demand a bit of complexity due to the size and scope of the estate and the wishes of the individual involved, but even in those cases it is best to keep it as simple as possible.
The point is that estate planning solutions don’t have to be overly complicated to be useful and effective, and we would like to underscore that fact here by pointing out the value of these three simple inheritance planning tools.
Life Insurance
Life insurance is as rudimentary as it gets but we couldn’t get by without it. If you are single and have no one depending on you, it is a good idea to carry enough insurance to cover your final expenses. But if you have a spouse and children that rely on your income, it is important to do the math and make sure that sufficient coverage is in place.
Gift Giving
You are entitled to a $1 million lifetime gift tax exemption, so you can use this to give tax-free gifts to your heirs while you are living and reduce your estate tax liability. In addition, each taxpayer can give gifts of up to $13,000 every year to an unlimited number of people. If you use these exemptions wisely and with good timing they can provide you with a great deal of tax efficiency.
Pay On Death Accounts
POD and TOD (transfer on death) accounts are an ideal vehicle for those who are seeking simple and direct transference of assets to their heirs. All you do is fund the accounts at a bank or brokerage and name your beneficiaries. When you pass on they assume ownership of the assets directly and the transaction avoids the process of probate.
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