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.
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.
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?
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.
My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: email@example.com