Many people put off estate planning because they assume everything will work out fine if they die unexpectedly. But this isn’t always the case. One of the most important factors to consider in your financial plan is who is going to inherit your wealth. Here, we cover everything you need to know before choosing your beneficiaries.
When it comes to inheritance, there are no fool-proof guides to help you objectively determine who should get your money and assets when you’re gone. It’s a decision every person should have a right to make for themselves. Depending on the assets and people you care about, you might be forced to make some hard decisions. Divorce, children from multiple marriages, grandchildren and personal philosophies on charity or generational wealth can pull you in multiple directions.
So when you're gone, who gets what? It's a question every person should have the right to answer for themselves. But without a legally binding plan, your wishes may not be carried out.
With Agemy Financial Strategies, you can create a legally binding plan that clearly lays out who gets your assets and how they are distributed—so there's no confusion when it matters most. Here's what you need to know.
Assets & Trusts
When it comes to planning your will, it's best practice to speak with your trusted financial advisor - or even better, Fiduciary - about what your requests are. At times, financial advisors will suggest putting your assets into a trust.
There are two kinds of trusts, revocable and irrevocable. Under the two categories are there a number of different classes of trusts. Each trust serves a specific purpose. Some options include charitable trusts, generation-skipping trusts or special needs trusts for a dependent or family member.
A trust can be a useful tool for your family and beneficiaries to ensure that your wishes are carried out as you intend. When you create a trust, you are creating an entity that will manage your assets according to the terms of the trust.
Trusts are managed by a trustee regardless if you're living or deceased. The trustee can be a person or an organization and they are responsible for carrying out your i.e. the trustor’s wishes. When you pass away, the trust is immediately passed on to beneficiaries or can continue to be managed by co-trustees.
Unlike wills, bequeathing through a trust can prevent your family or beneficiaries from needing to go through the traditional probate process. Which can be easier to ensure your wishes are followed as you intend with a carefully designed and properly executed trust.
Trustees and Executors
There are two primary types of individuals who can serve as trustees: a trustor, and an executor. The trustee is responsible for managing the trust and can be the trustor themselves, or an executor. An executor can be named in a person’s will as the individual who will handle the dissolution of their assets and liabilities.
An executor is solely in charge of administering a person’s estate after their death and can also be a co-trustee and/or the one to disburse assets according to the decedent's wishes. Be sure your will and trust documents include specific instructions on who you want in charge and what you want them to do after your death.
Choosing Beneficiaries
For some, gaining sudden wealth could mean finally being able to buy a home, pay back student loans, save for retirement or start a business. For others, it could mean achieving financial freedom for the first time in their lives. However, passing on your assets to an individual could adjust their income negatively. This could negatively impact the benefits they may be receiving such as supplemental security income, disability or medicaid. It's important to make sure that the person you choose to inherit your wealth does not suffer any consequences.
This also means doing your due diligence and checking the beneficiaries you have listed on your estate planning documents, annuities, life insurance policies, and retirement savings accounts are aligned to avoid any additional disputes. Making a trust of your beneficiary could be ideal if your goal is to leave assets to minors, an adult child with questionable judgment or a dependent with a disability. Estate planning is all about being prepared for the unexpected. So when you choose who you want to inherit your estate, we’ll also ask you to name back-ups in case your chosen beneficiary dies before you. These are known as secondary beneficiaries.
Lastly, you can leave specific assets to different beneficiaries in your estate plan. Compare it to leaving a specific piece of property to a child from a past marriage or a bank account to a grandchild.
Considerations
Effective estate management enables you to manage your affairs during your lifetime and control the distribution of your wealth after death. An effective estate strategy can spell out your healthcare wishes and ensure that they're carried out – even if you are unable to communicate.
Once you have decided who will inherit your wealth, it's important to keep open lines of communication so your family can properly prepare. When the time comes to review your will or estate plan, you are looking to ensure that your intentions have not changed, that the right people are included, that major life changes are reflected, and that all other major changes are notated.
If you're looking for a firm that handles estate planning and ways to reduce your taxes in life and death, look no further! Agemy Financial Strategies can help you look for ways to fortify your finances and get a properly prepared plan in place. For more information on our Estate Planning and Financial Advisory services, contact us here today.