Who Gets Your Nest Egg When You’re Gone?

Mar 1, 2016
Author: Scott Hanson

What Good Is a Will?

Let me say right up front that I am not an attorney. At Hanson McClain we provide comprehensive financial and retirement planning and investment advice to our clients, and that often includes recommendations that they retain an estate planning attorney to, at the very least, create a will that makes certain their estates, wishes and heirs are protected.

So, who really needs a will?

Perhaps you believe that unless you live on a hillside in Malibu, there’s no real point in creating a will. Here’s an alarming fact: even folks with moderate wealth may be subject to automatic probate—the court process to conclude all your legal and financial matters after your death—which can be far more expensive and time consuming than the cost of setting up a will.

Remember: Almost Any Plan is Better than No Plan

During my twenty-five years of experience working as an advisor, I find there are two primary reasons that keep people from drawing up an estate plan.

  1. No one thinks he or she is going to die today, so they put it off until later.
  2. It’s often too difficult to think about how to divide assets, especially when a spouse has a different opinion, so they avoid the uncomfortable discussions.

But unexpected death and avoidance are precisely the reasons why it’s important to put a plan in action sooner rather than later. And, depending on your situation--to properly safeguard your assets and ensure that your intentions are carried out after you die--you may need a trusted team of professionals, including a financial advisor, estate attorney, and an accountant to help you do it right.

Simply, a will can always be revised and updated. But having no plan leaves your estate and your heirs at the mercy of expensive and time consuming probate.

The Advantage of a Living Trust

One way to help ensure that your estate will be efficiently distributed as you see fit, and not become subject to probate, 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 is when you transfer all your assets and titles of property and possessions to a trustee to maintain legal possession of those assets while you are still alive.

Some folks mistakenly think that if they don’t have children, they don’t need to set up a trust. Perhaps your plan is to designate charitable organizations as the recipients of your assets—but that’s even more reason to set up a living trust. Most charities will probably pay for the process of setting one up, saving you the upfront fees—and ensuring that your moneys will go to where you intend.

Have an Advisor Walk You Through Your 7 Personal Decision Points

Keep Your Beneficiaries Current

Regardless of whether or not you have a will or living trust, your retirement accounts--your IRAs and 401(k)s--will automatically pass on to the beneficiaries you have listed on those accounts. What’s critical to keep in mind here is that your list of beneficiaries trumps whatever you have listed in your will.

That’s right. The beneficiaries listed on your retirement accounts supersede your will.

So, when was the last time you checked who those folks are? Have there been any changes in your family? New children, grandchildren, nieces, or nephews? What about marriages or divorces? Have any of your beneficiaries died? You may find that when you revisit the list of beneficiaries on your accounts, they don’t include names of the important people you want, or perhaps they still list names of people who you no longer wish to include. These are among the questions you want to keep top of mind when you meet with your financial planner to ensure that all of your information is up to date and will proceed according to your wishes.

Dying Is Not 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.

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