Do You Have a Will?

Do You Have a Will?

November 15th, 2011 // 3:04 pm @

Wills and other properly drafted estate-planning documents put you, instead of the courts, in control of the way your assets will be distributed after you pass away. Yet only a third of Americans have made wills. Acting now will reduce the cost and burden to your heirs of transferring your assets.

Estate-planning essentials

An estate lawyer can help you determine how many of the following legal instruments belong on your checklist:

  • A will dictates precisely where you want your assests to go and names guardians for your minor children. This directive diminishes the potential for bad feelings among your heirs and reduces legal fees associated with managing your estate.
  • Power of attorney involves naming a trusted individual to manage your financial affairs if you are not able to do so. This person is empowered to sign your name and is obligated to be your fiduciary, meaning he or she must act in your best financial interests.
  • A living will spells out your wishes regarding life-sustaining medical interventions in the event that you are incapacitated. You can also name a health care proxy, or an individual you trust to make medical decisions on your behalf.
  • A living trust, also known as a revocable trust, allows you to avoid probate-the costly and lenghty court-supervised process of settling an estate. Instead, your assets are gathered into the trust, to be used as you wish during your lifetime and are distributed to your named beneficiaries after your death.

When a Will Is Not

When you purchase an insurance policy or invest in a workplace retirement plan or other retirement account, you typically fill out a beneficiary form indicating whom you want to inherit those assets. It’s easy to forget about it – but don’t. Beneficiary designations override wills in most cases.

Life-changing events, such as marriage, divorce or birth of a child, can affect the transfer of your assets. If your will is up to date but your beneficiary designations are not, your money may not wind up where you want it. The following recommendations will help ensure that this doesnt happen:

  • Review the beneficiary designations on your 401(k), Roth and traditional IRAs and insurance policies. If you plan to place assets in a trust for your children or grandchildren, you’ll need to designate the trust as beneficiary rather than as heir.
  • Look up retirement plan accounts that you maintain with your former employers. You might not have had children when the account was first opened or you might have a new spouse.
  • Revisit at least once a year your beneficiary designations and update them immediately after a life-changing event. Also be sure to name contingent recipients who will inherit the assets if your primary beneficiary dies before you do. 

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