Death is often a subject that nobody wants to think about or talk about, but preparation is key to protecting your legacy and easing the process for your loved ones. A will is an important component of your estate plan, but it should not be the only piece. The right documents drawn up in advance can set out your wishes for your loved ones, even after you are gone.
Our will planning guide helps lay the groundwork for a successful outcome in the aftermath of your passing. Consider some of these topics to ensure that you have a well-rounded and thought-out plan for your loved ones.
Step 1: Inventory Your Assets and Liabilities
When writing a will, the first step is to consider the assets in your possession. This can include real estate, cash in a checking account, and investments.
Next, expand your list to include other assets that will pass to the next generation, such as intellectual property, any businesses you own, or valuables like a coin collection or jewelry. Don’t forget about any digital assets and the usernames and passwords necessary to access them.
With a detailed list of the things you own, you can set out what you want to happen with each. If you want them to pass to a surviving spouse, a child, or someone else, you can specify each one individually in your will.
Remember that liabilities will reduce your estate as well. Debts that need to be paid off (like the mortgage on your primary residence) should be accounted for in the estate planning process.
Step 2: Choose Your Executor and Beneficiaries
The first person you will need to name is an executor. The executor is the person who will settle your estate according to your wishes. They will handle all of the financial and legal aspects of achieving your wishes.
The importance of this role cannot be understated. It can be a difficult and time-consuming job, especially if the executor must navigate tenuous family relationships. The executor will also have incredible power over your estate after your passing, so choosing the wrong person for the job could put you at risk for inheritance theft.
For this reason, many individuals choose to work with a corporate trustee instead of a family member. Third-party professionals have a fiduciary responsibility to act in the best interests of the estate, meaning they can make unbiased decisions without the added weight or worry of straining family relationships.
Keep in mind that you can name a co-executor so that they can share the burden with someone else trustworthy and reliable. Be careful though, because if these two people disagree, you may unwittingly throw your estate into court, where no one but the lawyers win.
You will also need to name your beneficiaries, who are the people who will inherit your assets. The will should outline who receives what and how those assets are to be divided between beneficiaries to minimize arguing and conflict.
Step 3: Designate Guardians
One of the most overlooked aspects of a will is the designation of guardians for those you love and provide care for. Think about who you would want to assume care of your minor children or adult dependents if you could no longer fill the role. You will want to name a responsible person to take over your duties.
The same may also be true for pets. Who should take on their responsibilities and care in your absence? And don’t forget to make financial provisions for them. The cost of providing for an animal during their entire lifetime can exceed $25,000.
Nobody wants to think about what would happen if they were not around, but your dependents rely on you for their care. Make arrangements for them so that they are in good hands, even after your passing.
Step 4: Complete Your Estate Plan
A will is only the first step to thinking about what will happen when you pass. While important, it is far from the only thing that you will need to have drawn up to ease your loved one’s path when you die.
For the most part, a will won’t override any beneficiary designations you have set for accounts such as a 401(k), HSA, or any insurance policies. You will need to update these separately in their respective locations.
Other estate planning documents that should be drawn up by a trusted legal professional can include a power of attorney and the formation of trusts.
Trusts, in particular, can be important for the division of assets. They remove those assets from the taxable estate and pass more easily to beneficiaries by avoiding probate. Some trusts, such as a charitable remainder trust, can provide a steady source of income for your loved ones in the event you are no longer around to help, and comes with significant tax advantages.
Step 5: Finalize and Store Your Will
Make sure you understand all of the legalities of formalizing your will in your state so that it will be honored after your death. Consult with a legal professional to make sure that you check all the boxes around witnesses, notarizing, and more. Keep in mind that a beneficiary should not serve as one of your witnesses.
Once the will is official, you will need to find a safe and well-known place to store it. You could keep it in a safety deposit box, a fireproof safe, or anywhere secure where you can store the will and any other estate planning documents. Make sure its location is known to your executor.
Step 6: Review and Update Your Will Regularly
Remember that making a will is not a one-time thing. Life events can happen at any time and age, and you may wish to change the beneficiaries or assets listed in your will. Maybe you got married or divorced, had a new child, welcomed a grandchild, or dealt with the death of a beneficiary. Even good things like buying new assets can be a cause for adjustments.
Make sure you review your documents every three to five years or during major life events. This might mean that you need to finalize changes legally again, but it will be worth it to ensure that your wishes are honored.
Let Magellan Help You with Estate Planning
Effective estate planning involves more than just one expert. You may need to work with a financial advisor, attorney, and CPA, just to name a few. For a smooth and effective process, these experts must stay in regular communication and work together seamlessly.
Magellan can assist with legal, financial, tax, and estate planning all under one roof. We specialize in trust formation, helping you to handle your assets after your passing for your beneficiaries. If you are ready to get serious about providing for loved ones after your passing, then give us a call and book a consultation!
For a comprehensive review of your personal situation, always consult with a legal or tax advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
This material provided by Kevin Meaders was written by Axle Eight, a non-affiliate of Magellan Planning Group and Cetera Advisor Networks LLC.