Step by Step to a Will
Going without a will is more than unwise. It can even be cruel to those you leave behind when you die. Beyond tax issues, which are many, estate planning can help you make sure your assets are used as you intended. It also can make things a whole lot easier on your loved ones. Here are the basic estate planning steps you need to take.
Step 1: Draft (or review) your will
If you die "intestate," or without a will, the state will decide how your house, belongings and other assets will be distributed. Just as worrisome, your heirs could end up with a confusing and costly mess on their hands-paying too much in taxes or fighting over who should have inherited Grandma's china. If you already have a will, remember to review it every few years or whenever there's a significant life change such as a marriage, birth, death, divorce or inheritance.
2: Take inventory
Take a broad-strokes inventory of what you own, recording where everything is located and who should get it. Include financial account numbers, and if something is a family heirloom or has special value, note it. Review your list every year or so, adding any new items as necessary, and share this list (or at least its location) with your executor. Once you have an inventory of everything you own, you can begin to get a sense of the worth of your estate-which essentially amounts to your assets minus your liabilities. Calculate the value of everything you own-personal property, real estate, investments, life insurance, business assets and savings and cash-and then subtract any debt. Taking this snapshot of your estate's value can help you determine whether you need additional planning help to pass along your assets as efficiently as possible.
3: Review beneficiaries
Certain accounts will likely be passed along to your beneficiaries with or without a will, because you are asked to list the names of primary and successor beneficiaries when you open them. Such beneficiary-named accounts include IRAs, life insurance policies, annuities, retirement saving plans and bank and brokerage accounts. Remember to review your beneficiaries periodically and make changes whenever necessary. The wrong name or no name at all could result in a sizable chunk of your money getting into the wrong hands after your death.
4: Consider a trust
Think that trusts are strictly for the caviar-and-country-club set? Think again. If you have minor children or would rather that your heirs not receive a lump-sum inheritance, a trust can help manage your assets after your death. And it can be as simple or as complex as you choose
5: Designate others to help
Name an executor to be in charge of settling your estate after your death. Additionally, arrange for a power of attorney to give someone you trust the legal authority to make financial and legal decisions for you should you become incapacitated or die. This power includes such simple things as paying bills or closing unneeded accounts. To retain some control over your health-care decisions, you should also grant a health-care proxy to someone you trust to speak on your behalf if you become incapacitated. To detail your preferences for care in the event you're ever in a vegetative state or are terminally ill, it's also a good idea to draft a living will (also known as a medical directive).
Take the next step...
Turn to the Principal Financial Group for estate planning strategies that make the most of your assets and offer you peace of mind.
