Do you need a will?
While I’m not an attorney, I very often make recommendations to clients that they retain an estate planning attorney to, among other things, create a will.
You might think that unless you’re in the top 1 percent of wealthy Americans that there’s no real point in creating a will.
That’s totally false.
Even people with moderate wealth may be subject to automatic probate—the court process to conclude all your legal and financial matters after you die—which is often far more expensive and time-consuming than the cost of setting up a will.
The Worst Plan is the No-Plan Plan
During my 25 years as an advisor, I’ve seen tens of thousands of dollars unnecessarily wasted by estates that end up in probate.
In my view, there are two primary reasons that keep people from drawing up an estate plan.
- No one thinks they are going to die today, so they put it off until later.
- It’s no fun to think about how you’re going to divide your assets, especially when a spouse has a different opinion, so you avoid it altogether.
But unexpected death and avoidance are precisely the reasons why it’s important to put a plan into action sooner rather than later.
And, depending on your situation, to safeguard your assets and ensure that your wishes are carried out, you need a specific group of professionals to help you cover your bases. This is not merely a reference to a financial advisor, but also an estate planning attorney and an accountant, as well.
One last piece of advice about your will: Don’t worry if it’s not perfect. A will can always be revised and updated. But having no plan leaves your heirs (and your hard-earned money) at the mercy of expensive and time-consuming probate.
What’s this I hear about living trusts?
One way to help ensure that your estate gets distributed in accordance with your desires is to set up a living trust.
Unlike a last will and testament, a living trust is not a document, per say, but a process. It’s when you transfer all your assets and titles of property and possessions to a trustee to maintain legal possession of them while you’re alive.
Some people believe that if you don’t have children, you don’t need to set up a trust.
That’s also false.
Let’s say that your plan is to designate charitable organizations as the recipients of your assets. Here’s a tip: Some charities will pay for the process of setting one up. This will help ensure that your moneys end up right where you intend, while also helping a charity of your choosing.
Keep Your Beneficiaries Current
Here’s something that I find myself reminding clients of all the time.
Did you know that regardless of whether or not you have a will or living trust, your retirement accounts—your IRAs and 401(k)s—automatically pass on to the beneficiaries you have listed on those accounts?
That’s right! Your list of beneficiaries on your retirement accounts supersede whoever you have listed in your will.
Question: When was the last time you checked who your beneficiaries are? (If you’re still employed, or those accounts are still in intact, you should be able to check who your beneficiaries are right online.)
Dying Isn’t Free
There’s no two ways of getting around the expenses associated with passing on. However, there are plenty of ways to minimize those expenses and avoid egregious taxes and costs that can cut a huge slice out of whatever it is that you intend to leave to your heirs.
Have you considered how your heirs will be taxed on their inheritance? What about the cost of your own death and funeral arrangements?
All these elements need to be safeguarded. Working out the solutions to these questions with your team of trusted professionals is the key to formulating the best kind of estate plan for your needs. Take the necessary steps to protect your legacy today, and talk to your financial advisor to ensure that you’re not leaving any stones unturned.