Q: I am a 78-year-old widower and have two sons, two grown grandchildren and one great-grandchild. We all live and work on the family farm (300 acres worth $450,000) I inherited from my father. I have an IRA ($120,000) certificates of deposit ($100,000), and some old farm equipment. I receive Social Security and a pension from my old "day job," totaling $25,000 per year.

A financial person recently told me that if I didn't begin planning, estate taxes and probate would "eat me up." He suggested putting everything into a living trust that will cost me about $3,000. I have a will that leaves everything to my sons equally. I have a power of attorney that allows my sons to handle things if I am unable to function. Should I consider this trust? Do I need to avoid probate?

A: Unless you made substantial gifts during your lifetime, you should not have an estate-tax problem. As of 2009, the estate-tax exemption is $3.5 million. Even assuming you had an estate-tax problem, establishing and transferring assets into a revocable living trust would not avoid the tax.

You can easily avoid probate -- if that is your desire -- as follows:

1) Your IRA is not a probate asset unless your estate is the beneficiary -- which would be a mistake. We suggest you split your IRA into two equal IRA accounts (no tax liability involved) and name one of your sons as the beneficiary of each.

2) Consider gifting to your sons a remainder interest in the 300 acres and retain a life estate. Because the value of the gift will be in the vicinity of $240,000, you will file a gift tax return April 15 of next year, but there will be no tax liability due. At your death, your sons will receive the property at a stepped-up basis. Value and gift your sons the farm equipment now.

3) Name your sons as "payable on death" beneficiaries in equal shares of your certificates of deposit. You should make your intentions clear with the bank that you own these funds until your death, at which time the accounts will bypass probate and be paid to your designated beneficiaries.

While we recommend that you see a qualified lawyer before you make a decision, we don't see how attaining your goals will cost $3,000.

Doug Oster writes a blog, "Growing With Doug," exclusively at PG+, a members-only web site of the Pittsburgh Post-Gazette. Our introduction to PG+ gives you all the details.