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Estate Planning Isn’t Just for the Rich

Over the course of your lifetime, you've saved for retirement, perhaps bought a house, and filled your home with possessions. Whether you've put away a significant nest egg and are close to retirement or still have a way to go, you should have an estate plan in place to make sure your assets get transferred according to your wishes in the event of your death.

Your Beneficiaries: Avoid Common Pitfalls
When it comes ensuring that your assets are transferred properly, naming your beneficiary (ies) is one of the simplest steps you can take. Don’t let your financial institutions – or the courts – decide what to do with your assets. Some common mistakes include:

  • Failing to name a beneficiary
  • Incomplete or inaccurate contact information
  • Failing to designate contingent (or secondary) beneficiaries
  • Failing to keep your beneficiary designation forms up to date to reflect major life events including marriage, divorce, births & deaths

A Will
A will is a legal document that describes how you want certain assets distributed after your death. It typically lists all real estate and significant personal property owned by an individual along with instructions as to who will receive each item. A will should designate a person to serve as the executor/executrix to administer the estate, and a guardian for minor children or dependents with special needs, if necessary. State law dictates the legal requirements for a valid will, so you may want to work with an attorney to draft your will.

If You Die with a Will your heirs must go through a legal process called “probate” to transfer ownership of your assets (your estate).

If You Die without a Will referred to as “dying intestate,” your estate will still have to go through the probate process, but the probate court will determine, based on state law, how your assets will be divided among your heirs.

If You Die with a Living Trust your beneficiaries will receive certain assets without going through the probate process. Under this arrangement, a person establishes a trust during their lifetime and transfers ownership of some of their property to the trust (e.g., real estate, automobiles). The trust agreement specifies how the assets will be distributed upon the individual’s death. You will generally still need a will to do things living trusts cannot, such as designating guardians for children. Implementing a living trust can be expensive up front (regarding legal fees), but if you want to avoid probate, you may want to discuss this option with an attorney.

Assets That Can Be Transferred Without a Will
Some types of property can be transferred upon death outside of the probate process and without either a will or a living trust. As a result, your beneficiaries may be able to access your assets faster and without incurring legal expenses.

Assets You Hold Jointly with Another Person will transfer to the surviving joint owner immediately upon your death.Many married couples, for example, hold assets jointly, such as real estate, checking, savings and brokerage accounts.

Transfer on Death (TOD) Accounts are typically available at brokerage firms and some banks. Unlike joint ownership accounts where the arrangement is owned together, recipients of these accounts do not hold any ownership interest in the account until the death of the account owner.

Assets with a Named Beneficiary such as IRAs, 401(k) plans, and annuities permit the owner to name a beneficiary and avoid the probate process. A valid beneficiary designation cannot be overridden by instructions in a will or trust. Invalid or ambiguous beneficiary designations can be disputed in court. So it's critical that you make sure your beneficiary designations meet every requirement.

If no beneficiary is named for these types of assets, they will pass to your spouse, if you have one, or to your estate, according to state law. Most employer-sponsored retirement plans, however, require that assets pass to your spouse if you are married when you die, and require spousal consent if you wish to name someone other than your spouse as beneficiary.

Proceeds from Life Insurance Policies are another asset that will transfer to your designated beneficiary upon proof of your death. Many employers provide life insurance benefits to employees and their families, and you may purchase life insurance policies separate from your employer. Proceeds from these policies often provide critical financial support for family members who need to pay for funeral expenses and replace your income for a period of time, etc.

Going beyond wills & beneficiaries
Other common estate planning documents allow you to authorize another person to engage in specified business, financial and legal transactions on your behalf. These agreements do not terminate if you become disabled or incapacitated. You should consult your legal counsel for assistance with these documents.

  • Durable Power of Attorney – This document allows you to appoint someone to act on your behalf in handling your property and financial matters. A broad range of powers may be granted including the authority to act as your agent in real estate, banking, and investment transactions.
  • Healthcare Power of Attorney – With this document you can appoint someone to make health care decisions for you at any time you are unable to do so (e.g., when you’re under anesthesia).
  • Living Will – This document will state your wishes regarding the types of life-sustaining medical care that should be provided if you become terminally ill and are unable to communicate.

What will it cost?
While there are several ways to download and prepare your own basic will from online forms, many prefer an attorney prepare such important documents. While fees vary based on several factors including your location, basic wills start around $150 and can cost $1,000 or more if complicated or additional estate planning documents are required.1 But considering the potential negative impacts on your loved ones by not having these documents, the cost can provide you and your family peace of mind.

You will want to review your estate plan periodically, as events like a divorce or birth of a child may change your wishes. You should also review your beneficiary designations annually to make sure the information is up to date.

Make changes or get help now
Log in to your account to review your retirement plan beneficiary designations, or call your Retirement Specialist at 1-800-854-0647 for more information on how to add or update beneficiary information for your account.

1 “What is the average cost of a making a will?”, March 31, 2016. Accessed Feb 23, 2018.

The information provided is not written or intended as specific tax or legal advice. MassMutual, its subsidiaries, employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.

© 2018 Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001.  All rights reserved.