Are you planning your legacy? Are you thinking about ways to pass your hard-earned assets on to your children, grandchildren or other loved ones? An estate plan can help you do just that. Unfortunately, 60 percent of Americans haven’t even created a will, which is usually the first step in estate planning.1
An estate plan helps you avoid risks and protect your assets so they can be distributed to your heirs according to your wishes. Without a strategy, your estate could face a wide range of risks, expenses and costs. A few of those risks are listed below. If you haven’t taken steps to address these, now may be the time to do so.
If you pass away without a will, your estate is considered intestate. That means the local probate court makes decisions about how the estate is distributed to heirs. It’s possible that the court’s decisions may not align with your wishes. It’s also possible that your executor may need to hire lawyers, accountants and others to guide your estate through the process. That could generate substantial fees, which would have to be paid out of your estate assets.
Fortunately, you can avoid this risk by simply creating a will. A will expresses your wishes for how your estate should be distributed to your loved ones. While your estate may still have to go through probate, that likely won’t be as costly or time-consuming as the intestacy process.
You probably own accounts that have beneficiary designations, such as life insurance, annuities and qualified plans like 401(k) accounts and IRAs. When you die, the account balance is distributed to the individuals you name as beneficiaries.
Unfortunately, people sometimes make mistakes with their beneficiaries. A common one is to leave a former spouse on an account or policy as the primary beneficiary. Another common mistake is not to name a beneficiary at all or to name one’s estate as beneficiary.
Beneficiary designations are usually ironclad and difficult to challenge in court. That means your beneficiary will get the assets, even if this person was named mistakenly. Be sure to check your policies and accounts regularly, especially if you’ve recently gone through a major life change such as divorce.
Failing to name a beneficiary or naming the estate as beneficiary can also be problematic. Beneficiary-designated assets don’t go through probate. However, they will if the assets are left to the estate, which is what happens if there’s no beneficiary on the account. That can generate fees and delay distribution to your heirs. Again, you can avoid all of this by regularly checking your beneficiaries and making sure they align with your wishes.
As you approach the later years of retirement, you may become more vulnerable to various health challenges. Alzheimer’s and other cognitive issues are common among older seniors. You may need long-term care, which can cost thousands of dollars per month.
Incapacitation is another reality for seniors. That’s the inability to make or communicate decisions. If you become incapacitated, someone will have to make financial decisions on your behalf. It’s possible that the wrong person could fill that role and make decisions that aren’t in your best interest.
You can minimize the impact of long-term care and incapacitation by planning ahead. Long-term care insurance can help you reduce your out-of-pocket costs and protect your estate. You also may want to consider a power of attorney, which allows you to designate someone as your decision-maker should you become incapacitated. Other tools, such as joint accounts and living trusts, can provide further protection.
Ready to protect your legacy? Let’s talk about it. Contact us today at Thomas Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
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