Many of us are confronting our own mortality these days. But to be sure, estate planning should be a part of long-term financial planning no matter how you currently feel about the future. If you’re considering a Will, we wanted to remind you that it might not cover everything you need with regard to estate planning.
What a Will can do. A Will gives you the ability to specify some of your final wishes, such as burial information. You can also designate certain heirs to receive cash or belongings such as family heirlooms.
What a Will cannot do. It might surprise you to learn that some assets are not passed to heirs via a Will.
Your retirement account, such as a 401(k) or IRA, are one example. When you pass away, your retirement account will be transferred to the person you listed as the beneficiary on that account regardless of what your Will says. Additionally, 401(k) plans require your spouse to be the beneficiary on that account unless they legally agree to another arrangement. Life insurance payouts, also, will pass to the listed beneficiary.
You cannot change these beneficiaries with a Will, so make sure that the beneficiaries listed on your life insurance and retirement account are still the people you would want to inherit this money. In some cases the beneficiary you originally listed will no longer be appropriate - such as after a divorce, or if that person has passed away or become unable to manage their own finances.
A bank account will be transferred to the person you list on a “payable-on-death” form, which you file with your bank.
Real estate laws regarding inheritance vary from one state to another, so you should also discuss this issue with your estate planning attorney.
If you pass away without having legally designated heirs, assets will proceed through a probate court process. This process can be time-consuming and inconvenient for family members during an already difficult time.
Review beneficiaries regularly. It’s important to know that the right person(s) will receive the assets which you intend to pass to them. Since these designations might change over time, review them each time you review your life insurance and long-term financial plans. Let’s discuss your beneficiary designations at our next meeting, and ensure that your life insurance and retirement account forms are up to date and accurate.