Choosing and regularly reviewing your beneficiaries and asset distribution plan is critical for ensuring everything goes according to your wishes. This includes structuring your plan around cost-effective measures such as tax benefits during and after distribution, potential probate or dispute hearing costs, and other unforeseen expenses or obstacles that arise. The goal is to safeguard your legacy while ensuring your loved ones are left in the most beneficial position with the least number of hassles to deal with after you pass. Here are some ideas that may help you during your estate planning.
Create an inventory of your assets
- Make a list of all your assets – Include tangible and intangible assets.
- Tangible assets include real estate, vehicles, jewelry, artwork, and other collectibles).
- Intangible assets include bank and investment accounts, retirement accounts, and life insurance policies.
- Financial accounts such as bank accounts (checking, savings, money market accounts, and certificate of deposits (CDs), brokerage accounts (stocks, bonds, index, and mutual funds), retirement accounts (401(k)s, IRAs, pensions, and other retirement savings plans, safe deposit boxes (locations and contents).
- Include details for everything – Describe current values, account numbers, and the location of documents or deeds associated with the assets
- Don’t forget about digital assets – List all of your digital accounts, social media profiles, and other online assets.
List your beneficiaries
- Who gets what – Determine who gets what of your assets and what percentage, per each beneficiary. Also, have contingent beneficiaries in the event your listed beneficiaries are no longer around to receive their inheritance.
- Consider other circumstances – In some cases, for example, to avoid probate, if you have minor children or dependents with disabilities, you may consider creating trusts to efficiently manage the assets.
- Include Transfer on Death (TOD) or Payable on Death (POD) designations – These strategies help to bypass probate. PODs are generally associated with bank accounts (checking, savings, and CDs); while TODs are generally used for brokerage accounts, stocks, and bonds.[i]
Organize and secure your documents
- Collect your documents – Compile all your documents: property deeds, proof of ownership for vehicles, life insurance policies, account statements, receipts for appraised assets of value.
- Make copies of your documents – Have multiple copies of your documents and share them with your spouse, executor, and yourself.
- Secure your documents – Store your documents in a secure location and make sure someone knows their location.
Pros and Cons of making children vs. other family members responsible for important decisions
Deciding whether to give executor responsibilities to your children or other family members to make critical decisions on your behalf should you be incapacitated, or even for end-of-life directives, is something that requires significant thought and discussion with those close to you, including your financial professional. There are pros and cons of each, which we want to explore here.
- Pros of giving your children this responsibility
- You trust them most – You may trust your children will adhere to your wishes more so than your other family members.
- They will feel valued – Your children will feel valued and that you saw them as being capable of ensuring your wishes are followed.
- They can learn from this experience – As a parent, you spent your life teaching your children, and this may be one of the most significant teaching moments of their lives. They will grow from the experience no matter how hard it is, and they can learn from any mistakes they make.
- It helps to develop their autonomy and self-confidence – Making critical decisions builds character and self-confidence.
- Cons of giving your children this responsibility
- They may not act in your best interest – Your children may not act in your best interest or see to it that your wishes are followed.
- They aren’t mature or have enough life experience – They may not be mature enough or have enough life experience to make the proper decision.
- They may mismanage resources, never having had so much before – They may misuse resources, having not had access to so much before.
- Pros of giving your other family members the responsibility
- They are more mature or have more life experience – Other family members may be more mature or have more life experience, and therefore can make necessary decisions during critical times.
- They can safeguard a minor’s well-being – Other adult family members may be more suited to caring for a minor.
- They are more stable being older than the children – An older family member may be more financially secure and emotionally grounded, leading to a more stable environment.
- Cons of giving your other family members the responsibility
- Your children may feel disempowered – Children may feel disempowered or that their opinions don’t matter, leading to a diminished sense of agency.[ii]
- Your children can’t learn from you – Your children won’t be able to learn from you if you pass on responsibilities to other family members.
- Other family members may not understand the needs of the children – Other family members may not fully understand the needs of the children, their preferences, or unique perspectives.
Consider scheduling a meeting with your financial professional
Not letting fate force your hand includes being prepared and making the decisions now that will safeguard your legacy and benefit your beneficiaries in the future, as well as how your estate gets distributed. There are many different factors that you should take into consideration, from tax advantages to probate costs, and other unexpected fees and expenses, to ensure your financial wishes are followed. An experienced financial professional can help you work through everything efficiently and effectively. Contact us today.
Important Disclosures:
Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
All information is believed to be from reliable sources; however, LPL makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
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Sources:
[i]Payable on Death Account vs. Transfer on Death Account
[ii]Pediatric decision-making: Help parents protect, empower kids | American Medical Association