Estate planning gives you the opportunity to let your final wishes be known. Many of us don’t like to think about dying. But it’s important to leave behind clear instructions on how you’d like your affairs to be settled and who should be carrying out those wishes for you.
For example, who is going to take care of the kids or feed the dog? Can someone access your bank accounts to pay your bills? These are some of the questions that may be addressed with proper estate planning.
When it comes to the distribution of your assets, estate planning also allows you to have a say on who gets what – which can help minimize confusion and the chances of infighting amongst family members. If you don’t have a will or estate plan when you die (or “dying intestate”), your assets will pass based on the laws in your state.
Estate planning details will vary from person to person based on the complexity of their financial situation. But generally, there are a few basic documents that everyone should consider putting together, such as a last will and testament, a living will and power of attorney. Properly designating beneficiaries and titling accounts are also critical.
Let’s take a closer look.
Starting with the basics: beneficiary designations and account titles
When it comes to distributing your assets, you may be able to accomplish a lot through beneficiary designations and account titling. Generally speaking, assets with clear beneficiary designations do not have to go through the probate process. Life insurance policies and retirement plans are two common examples.
You may also want to consider naming contingent (or secondary) beneficiaries, so if the primary beneficiary isn’t alive, the account will pass to the next person listed. For instance, if your spouse is the primary, you may want to think about putting your kids down as the contingent beneficiaries. This way, if you and your spouse were to pass at the same time, the assets would go to your children.
What about bank accounts?
If you have a joint account with your spouse or partner, they can access funds in that account after your death. If you have an individual account, you could add a Transfer on Death (TOD) or Payable on Death (POD) designation. While you’re living, you remain the sole owner of the account, but these special designations allow you to transfer the individual account to a beneficiary of your choice after death. (This is similar to a beneficiary designation you have on your 401(k) or IRA.)
Preparing Basic Documents
Designating beneficiaries and preparing your will and powers of attorney are some of the key components of basic estate planning.
While we can’t cover everything in one article, other considerations you may want to think about are your funeral and burial details. For instance, would you like to be buried or cremated? Is there a specific song or reading you’d like at your service? You can include a letter of instructions along with your other estate-planning documents.
Once you have your documents in order, you should keep them in a safe place and let your loved ones know where they’re kept. This is so they’ll know exactly where to find them if something were to happen to you, saving your heirs from having to look for them during an already stressful time.
Keep in mind that if you don’t have a will, the state may have to step in to determine the distribution of your assets.
Many people may avoid the conversation on estate planning with their financial advisors because it often means you have to think about some unpleasant topics. But at the end of the day, planning ahead means that you get the opportunity to have a final say on how you’d like your affairs to be handled.
United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.
The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.
Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.
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