It can be an existential moment when you decide to prepare your will. You have to imagine all sorts of morbid possibilities, and what will happen in the case of your demise.
But will preparation is actually a smart, mature thing to do. It can provide stability and comfort for your family in the future. It can save your loved ones many difficult decisions and stress.
Intelligent financial planners make their wills quite early in life and update them as necessary. It will actually make life happier and more focused when you know that you have taken care of these issues well before you will ever need to.
Here are a few simple steps to take in will preparation to help you get organized and plan for a happy, successful future.
1. List Your Assets
Before you can decide how to allocate what you leave behind, you need a robust recording of all your current assets.
This will include all bank accounts including savings, trusts, bonds, and stock portfolios. It will also include real estate and valuables like jewelry and cars.
Pensions, 401(ks), and other benefits from your employment are also considered assets. These may obviously increase in value over time, between when you draft the will and when you pass away many years from now.
2. List Your Obligations
Before you can determine who gets how much of your estate, you must know all of your obligations and debts. If you owe a lot of money at the time of your demise, the payment of those debts will come out of your estate.
Mortgages and student loans may make up some of your debt.
You may also have obligations that will continue even after your death. For example, if you have promised to pay your child’s college tuition in your divorce decree, that payment will have to be made from your assets at death.
If there is not enough cash left in your accounts to satisfy your obligations, your assets like your house may have to be sold.
A financial planner can help protect certain assets from being considered part of the estate for the purpose of settling debts.
3. Consider Future Interests
Some people’s financial situation changes after they make their will. Perhaps they invest in the next Google and strike it rich. Those assets will be included in any bequests specified in the will.
Often people know they may inherit something from their own parents or family. These future interests may not count as money in the bank now, but they may affect your tax planning for the future.
You may also have a business now which you intend to divest in the future, which could create a large cash infusion.
A financial adviser like Jasdeep Singh CT can discuss with you ways to prepare your estate to minimize the tax consequences of an expected inheritance or sale of a business.
4. Special Bequests
A will is also a vehicle for making sure that people you love will receive special items in your possession. You may want your grandfather’s watch to go to your special nephew. You may want your family’s cabin to go to the sibling who will really appreciate it.
A financial planner can help you to plan gifts in ways that will minimize taxes. You may transfer ownership of some assets over time, or through an LLC or trust.
5. Arrangements for Minor Children
If you are a parent, it is extremely important to have an executed will, even if you are in the best of health. You want to make sure your children are protected and taken care of, no matter what may befall you.
If you die in an accident or illness at a young age when your kids are under 18, you want them to be raised by the person whom you designate as their guardian. In your will, you should specify that their other parent should get custody if you believe them to be a fit parent.
You may also have to designate a guardian in case you and their other parent both die at the same time, in an accident for example.
Your will may also include financial arrangements if you have a child with special needs, such as a trust. You can use this vehicle to make sure their income is protected and they will have the care they need after you have gone.
6. Philanthropic Gifts
A will is a good way to recognize an organization or cause which means a lot to you. You can leave money in your will to a not-for-profit focused on curing disease, social justice, or any other cause close to your heart.
Some people choose to leave money to museums, theatres or schools. These bequests may be negotiated far before your passing, in ways that may benefit you from a tax perspective. You may also get a building named after you!
7. Your Legacy
What you leave behind after you leave this earth is more than the money that your descendants you inherit. You may leave behind the opportunity for your children to start a business, or your grandchildren to gain an education. You may allow a worthy organization to fund critical medical research or support a magnificent new artist.
Decisions you make now will pay off not only in the future. You can devise ways to accomplish your goals and protect your assets so you can enjoy them while you are still alive.
Careful financial planning during the creation of a will can set the groundwork for a fruitful life, where you can enjoy what you have earned and look forward to supporting others.
Will Preparation: You’ll Be Glad You Did It, and So Will Your Loved Ones
Although will preparation requires thinking about the sad inevitability of your eventual death, it can be an important and fruitful exercise. It forces you to take a careful look at what you have accumulated and how you want to be remembered.
You can focus your finances on enjoying life now, and making sure your heirs will also be able to.
For more important tips on making, growing, and saving your money, keep checking back.