I often hear individuals, both young and old, reference how they don’t need to worry about estate planning or who they’ve selected as beneficiaries because they’ve executed a Will.
Let’s set the record straight. A Will is a very important estate planning technique that most individuals and families should have, especially those with young children, however, it’s not a complete plan. In addition to a Will, a complete estate plan should include:
- Financial and Healthcare Powers of Attorney. This will select individuals to make decisions on your behalf should you be living but unable to handle your personal affairs.
- Possibly a Revocable Trust. This can be very useful if you have young beneficiaries, would like more protection for your heirs or more complicated arrangements. An example? Perhaps you’d like your child to have access to their inheritance for a starter home, but not to purchase a Lamborghini or quit their job to become a world traveler. A trust is not necessary in all cases, and more advanced trusts may be a good idea for some.
The final estate planning technique I want to address is beneficiary designations.
This is often the simplest, and most overlooked, way to ensure your assets go where you want! In most states, you have the ability to add a beneficiary on almost every asset you own – your investment accounts, 401(k)s, life insurance policies, your home… even your cars! A Will may outline who should receive your assets, however it will not avoid probate which can be costly and take a long time to settle. Instead, we recommend ensuring your beneficiaries are updated, so the asset will pass directly to the outlined person or entity, however, be careful not to name minors directly as beneficiaries if you can help it. If you have minor beneficiaries, work with your estate planning attorney to figure out the best way to leave your assets to them.
A final word of caution. CHECK THESE!
I can’t tell you how many times we have new clients come on board who have their parents or siblings listed on 401(k)s they started before they were married or had children. Even if your Will states you want your assets to pass to your kids, if an old 401(k) has your estranged sibling listed, it’s theirs!!
Reach Out for Assistance
If you have more financial questions, don’t hesitate to ask your Family CFO. We do more so you can too.
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