The Socially Inspired Investor Basic Investing

Basics of Estate Planning

Greg Chona
NWI Times

Originally published: February 9, 2020

No one can predict the future, but one thing is for sure: If we leave unanswered questions about how to handle our affairs after we pass, life for our loved ones could become much more difficult. That’s why formalizing your wishes in an estate plan is an important aspect of financial planning that shouldn’t wait.

It’s never too early to begin thinking about your legacy. To get the process started, consider the following basic steps:

  1. Prepare a will. Your will is a legal document that spells out your wishes about who will inherit specific assets after your death. A properly drafted will can play a critical role in minimizing your estate’s exposure to taxes. If you should die without a legally binding will in place, courts may end up making decisions about who benefits from your estate, regardless of your best intentions. Be sure to review your will regularly.
  1. Consider a living trust. Explore living trust options if you have concerns regarding estate taxes, privacy, lawsuits or creditors. You might also establish a living trust if you want to specify how assets are distributed to heirs, to help prevent mishandling of an inheritance.
  1. Name your beneficiaries. Certain assets such as retirement plans (401(k)s, 403(b)s, etc.), IRAs, bank accounts and insurance policies allow you to designate beneficiaries. These forms take precedence over designations contained in a will. For this reason, it is important to update your beneficiaries when things change. Marriage, divorce, a move, birth of a child or death in the family are common life events that can trigger beneficiary updates.
  1. Assign a power of attorney. A power of attorney is a legal document that assigns the right to manage your affairs if circumstances arise that prevent you from doing so. Each state has its own specific rules to establish this legal arrangement. Designating a person to be a “durable” power of attorney means they can act as your agent, making medical and/or financial decisions for you when needed.
  1. Gather important information. Create a folder to house critical documents about your assets and obligations. This should include a copy of your will, deeds to property, car titles and other documents that show ownership of your assets. List all accounts where money is held, sources of income, bills and outstanding debts. Also list names, addresses, phone numbers and email addresses for anyone your next of kin may need to contact. Don’t forget to include user names, passwords and even answers to security questions to allow your survivors to access online accounts as well as your cell phone, voice mail and email accounts. Consider storing key materials in a safe deposit box, home safe or with a trusted adviser.

Preparing your estate is one of the most thoughtful things you can do for your loved ones. Be sure to consult with an attorney for assistance in creating the necessary documentation for your plan. Your financial adviser can review your estate goals to assure that your legacy intentions are consistent with your overall financial strategy.

Gregory A. Chona is a financial adviser with Ameriprise Financial Services in Crown Point.


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