You’ve worked hard to build a career and accumulate assets. You may be thinking about your legacy and how you can pass those assets on to your children, grandchildren and other loved ones. An estate plan is a good start. Unfortunately, 60 percent of Americans haven’t even created a will, which is usually the first step in estate planning.1
Without an estate plan, your hard-earned assets may not make it to the next generation. Many estates face legal fees, local taxes and other expenses. If you don’t have a strategy, those costs could drain your estate and delay the distribution to your heirs.
Fortunately, it takes only a few simple steps to protect your heirs and your legacy. Below are four such actions. If you haven’t reviewed your estate plan recently, now may be the time to do so.
Create a will.
A will is step one in any estate plan. It’s a simple planning document, but it’s also a powerful one. You can use a will to specify which heirs should receive which assets. You can also use it to communicate final wishes and to state who should care for your minor children or other dependents.
What happens if you die without a will? Your estate is considered intestate. That means all estate settlement decisions are made by the local probate court. Courts will decide who gets which assets, who cares for your minor children and more.
As you can imagine, intestacy can have a big impact on your estate. The court’s decisions may not align with your wishes. The process could create arguments, conflict and even litigation among your heirs. Your estate will likely have to pay a significant amount to lawyers and accountants. You can avoid this risk by creating a will.
Check your beneficiaries.
Do you have life insurance or maybe an annuity? Do you own an IRA or a 401(k)? These types of accounts are all driven by beneficiary designations. That means that when you die, the account balance is distributed to the individuals you name as beneficiaries. The asset distribution isn’t driven by your will or by the probate court.
Unfortunately, though, people sometimes forget to name a beneficiary, or they name the wrong person. For example, it’s not uncommon for someone to accidentally leave a former spouse as a beneficiary on an insurance policy.
When you die, the named beneficiary gets the money. It doesn’t matter if it was a mistake or an accident. The insurance company or account manager is required to distribute the funds to whomever the policyholder names as beneficiary. It’s usually very difficult for an heir to challenge a beneficiary designation in court.
If you fail to name a beneficiary, the funds are paid to your estate. This can be a problem because the assets may then go through probate. That can generate fees and delay distribution to your heirs. Again, you can avoid all of this by regularly checking your beneficiaries and making sure they align with your wishes.
Draw up an incapacitation plan.
Unfortunately, incapacitation is a very real possibility for many seniors. Incapacitation is the inability to make or communicate decisions. It’s usually caused by cognitive diseases like Alzheimer’s.
If you become incapacitated, someone will have to make financial decisions on your behalf. This person will have to pay bills, make investment decisions, file taxes and possibly even take steps like selling your home. It’s possible that the wrong person could fill the role and make decisions that aren’t in your best interest.
You can minimize that risk by creating a power of attorney, which allows you to designate someone as power of attorney if you become incapacitated. Other tools, such as joint accounts and living trusts, can provide further protection.
Use a trust.
Even if you have a will, your assets will likely go through a process called probate. This is the legal term for settling one’s estate. It involves things like filing taxes, selling assets, notifying heirs and more. Probate can take months and can create a substantial amount of fees for things including legal and accounting services.
However, you can bypass probate by putting your assets into a trust. Upon your death, the trust distributes assets according to your instructions in the trust document. There’s no probate process and no need to involve the courts and lawyers. That can reduce expenses and get your legacy to your heirs in less time.
Ready to protect your legacy? Let’s talk about it. Contact us today at First Fidelity Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18274 - 2018/11/27
First Fidelity Group
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