Naming beneficiaries, creating a will, and other estate-planning tasks are usually the last thing people want to think about. As we go through our lives we usually focus on building wealth, not what will happen to it when we are no longer there to enjoy it. Taking the time to help preserve what you’ve accumulated and distribute it to the people and causes that are most important to you is an absolute necessity. Do you really want someone else making these decisions for you?
Let’s take a look at some of the important tasks we need to attend to make sure our wishes are carried out.
Create a Will
A will is an essential legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children when you die. It designates an executor, who carries out the provisions of the will. If you don’t have a will, your assets will be disbursed according to state statutes and may benefit people you no longer wish to leave anything to.
If you have minor children, it’s critical that your will designate a guardian for them. If you don’t specify who is best suited to look after your child if you and your spouse die prematurely, the courts will decide for you. Under some state intestacy laws, if you are married at the time of your death, your current spouse may inherit all your assets. If you have children from a previous marriage, this may disadvantage them against your intentions.
Designating a beneficiary on your bank, brokerage, and retirement accounts as well as life insurance policies, can be as important as writing a will. Assets with named beneficiaries will pass directly to the beneficiaries you’ve designated and generally supersedes the directives in your will.
Remember to name beneficiaries on all retirement accounts, such as 401(k) accounts and IRAs. In many instances, having beneficiaries designated on an account allows the account to pass outside probate, enabling your beneficiaries to avoid the time and expense of the probate process.
Keep Everything Up to Date
During our annual financial reviews, one of the first matters we discuss is updating beneficiaries on all financial accounts. It’s easy to overlook such tedious matters, but the impact that it makes is enormous.
In addition to your updating your will and beneficiaries, make sure you have a Medical and Financial Power of Attorney, and look over those once a year to make sure they are up to date.