With the Coronavirus making its way through countries and countless healthcare systems, it’s a good opportunity to check in with everyone about their will and general estate planning.
We’ve written a couple of posts about the finer details of estate planning, but one of the most important things you can do is make sure that you have an updated will.
Beneficiaries
A beneficiary is anyone that will receive an asset, or assets when you pass away. You will have beneficiaries listed on your retirement accounts and life insurance policies. They can also be added to brokerage accounts via a Transfer on Death (TOD) designation.
It’s important to note that beneficiary designations and TOD designations bypass probate. The assets that the deceased owned at the time of death do not need to go to court. They go directly to the beneficiary (beneficiaries) listed on the account.
So…why is it so important to keep your beneficiaries up to date? The obvious answer is because life changes all the time.
Life Changes
People get married, divorced, re-married, etc. People have kids or marry someone that already has kids. The more grim circumstance is when a beneficiary predeceases you. It’s unfortunate, but something that does happen.
When you assign beneficiaries, there is often a box you can check labeled “per stirpes”. This simply means that if one of your beneficiaries passes before you do, that beneficiaries portion would be received by their children instead.
Not only can changes take place with your beneficiaries, but they can also change with the people you’ve entrusted with your estate. Roles like the power of attorney and executor.
Again, people can pass away before you and/or relationships can fall out of favor.
When it comes to your assets, those change often too. Good or bad years in the stock market can see drastic fluctuations in portfolio value.
Moving will change your residence, but it can also change your net worth depending on the value of your new home and how much you owe on that home. Remember Finance 101? Net worth = assets – liabilities?
Consequences
There could also be consequences for not having an updated will. The wrong beneficiaries could receive assets. Your power of attorney could be your brother and not your sister.
You actually have a much higher net worth than you thought, so now your heirs will have to pay estate taxes. Had you known that, you could have taken advantage of the gift tax exclusion and shared your wealth in order to bring your net worth down to avoid taxes.
To sum things up, you need an updated will because the items within it are going to change…plain and simple.
Related Reading:
How Long Should You Keep Financial Records After Death?
Where Your Property Goes When You Die
Registered representatives offer securities through Securities America, Inc. Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc., an SEC Registered Investment Advisory Firm, Jacob Sensiba, Investment Advisor Representative. CRG Financial Services, Inc. is not affiliated with the Securities America companies. Securities America and its representatives do not provide tax advice. Please consult with your tax advisor regarding your specific situation. The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.
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