The idea of estate planning can be daunting. Even the term itself is intimidating. If the prospect of consolidating your assets into a series of complicated legal documents while directing the right assets to the right heirs seems daunting, you’re not alone. And you don’t have to go it alone.
By breaking the estate planning process into smaller, more manageable pieces you can take the first steps to ensure that your wishes are carried out.
Begin with Beneficiaries
The easiest place to begin is with beneficiary designations. If you have a 401(k), 403(b), or other retirement savings account, you have already established a beneficiary. Found on life insurance policies and retirement accounts, beneficiary designations simply dictate who will receive the account assets upon your passing. They also have tax implications; not naming a beneficiary means your assets may become taxable five years after death.
Naming a beneficiary isn’t enough, however. Your beneficiary designations actually supersede your will, so you will want to review them on a regular basis. Our recommendation is to revisit your designations at least once a year.
The Will Provides the Way
If you’ve started estate planning you might have started with a will. Your will can prevent the loss of thousands in needless taxation and can ensure experienced management assistance for your family. If you have dependents, it is important to establish who will serve as guardian in the event of your passing, or if you and your spouse become incapacitated.
As with beneficiary designations, you’ll want to update your will regularly, especially after a life event such as divorce or retirement.
Directives: Helping Your Family Through a Difficult Time
While we hope you will never need them, health care directives can relieve your family of an enormous burden in the event you are no longer able to make health care decisions. You might be already be familiar with a living will, a written statement that outlines what kinds of treatment you do or do not want if you are incapacitated. Another document, known as a health care proxy, designates someone to make medical decisions on your behalf. Make sure to use your state’s statutory forms and that all concerned parties (not just your doctor) have copies. This will ensure to ensure your final wishes are carried out and potentially prevent conflict among family members who might disagree about your care.
A power of attorney is similar to health care directives, but for financial decisions. Simply put, it allows you to designate someone to step in and manage your finances should you become incapacitated. A power of attorney is especially important if you are single because without one, a court will decide who serves as your financial guardian, and the guardian of your assets.
Fine Tune Your Plan with Trusts
If you have a lot of assets or a particularly complicated estate, you might consider a trust. Trusts are legal arrangements that hold assets on behalf of a beneficiary or beneficiaries. There are three primary types of trusts. Revocable trusts is used to avoid probate, a lengthy and expensive process that can keep assets tied up for years. Irrevocable trusts allow you to relinquish control of your assets, protecting you and your heirs from possible estate taxes. Testamentary trusts only go into effect upon your death, offering flexibility to designate an heir, though your assets will not necessarily avoid probate.
As you move forward with your estate plan, it is important to coordinate the various legal documents. A financial adviser can help you align each component of your plan with your overall goals.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations.
This article originally appeared in Pioneer Press on August 10, 2019. You may view the article here.
Series 7, 53 & 63 Securities Registrations,1 Series 65 Advisory Registration,† Insurance License Peg was attracted to the financial services industry early in her career. She feels fortunate to be able to use her 30 years of in-depth knowledge working alongside Preston, the Roundtable™ and their staff to prepare clients for retirement. A lifelong learner, she enjoys collaborating with her team to stay on top of the best practices regarding comprehensive planning....Read More