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5 things to consider when creating a will and other end-of-life plans


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Contemplating your own death may not be on the list of things you really want to do.

However, for your family or other loved ones who are trying to sort out your affairs while dealing with the emotional aftermath of losing you, you have what is called estate plan it’s important, experts say. And this is the case whether you are rich or not.

“When you get your things in order, it’s a gift you give your family,” said certified financial planner Lisa Kirchenbauer, founder and president of Omega Wealth Management in Arlington, Virginia.

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Simply put, your estate plan defines who you want to make decisions and who will inherit what you own. “Estate” simply refers to property and other assets.

Experts say most estate plans don’t have to be complicated. But in order to make sure your wishes are carried out, they need to be carried out correctly – so it may be worth consulting with a local estate planning attorney.

Here are five key things to know as you begin to think about how to develop an estate plan.

1. A will may not cover all your grounds

“If your ex-husband on the beneficiary list, your ex-spouse will get the money regardless of what your will says,” said CFP Steven Maggard, an advisor at Abacus Planning Group in Columbia, South Carolina.

Keep in mind that many 401(k) plans require your current spouse to be the beneficiary, unless they have legally agreed otherwise.

Regular bank accounts, may also have beneficiaries listed on a death benefit form that your bank may provide. The same goes for brokerage accounts.

If your ex-spouse is listed as a beneficiary, your ex-spouse will receive the money regardless of what your will says.

Stephen Maggard

Abacus Planning Group Advisor

If no beneficiary is listed in these various accounts, or if the named person is already deceased (and a contingent beneficiary is not listed), the assets automatically pass to the estate.

This is the process by which all of your debt is paid off and any remaining probate assets, including those that pass through probate, are distributed to your heirs. This can take anywhere from a few months to a year or more, depending on state laws and the complexity of your estate.

2. It is necessary to carefully select the executor of the will, other key roles

When you create a Will, you appoint an executor to carry out your wishes and manage your assets. It can be a lot of work.

Things like liquidating or closing accounts, making sure your assets go to the right beneficiaries, paying any outstanding debts (eg taxes obliged) and even selling your home may be among the duties controlled by the executor.

That means you need to make sure that whoever you name is right for the job—and that they’re capable of taking it on.

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In addition, an estate plan should include other end-of-life documents, including a will. That defines it health care you want and don’t want if you can’t express those desires yourself.

You can also appoint powers of attorney to trustees so that they can make decisions on your behalf if you become incapacitated at some point. The person who is given responsibility for decisions related to your health is often different from the person you would appoint to handle your financial affairs.

Just don’t forget to mention the alternatives.

“It’s very important to have back-up people in all roles in an estate plan … in case someone is unable to serve,” Jennifer Bush, a financial planner with MainStreet Financial Planning in San Jose, California, told CFP.

3. Some assets get “basis expansion”

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However, after your death, your heirs who inherit these assets will receive a “basis step-up”. In other words, the market value of the asset at the time of your death becomes the cost basis for the heir – which usually means that any increase in value before that is tax-free. And when the heir sells the asset, any gain (or loss) is based on the new cost basis.

On the other hand, if you gift such valuable assets to your heirs before you die, they will take on the basis of your original cost – which can turn into an outsized tax bill when the assets are sold.

“We often recommend that clients give their grown children cash instead,” Maggard said.

4. You may want to consider creating a trust

If you want your children to receive money, but don’t want to give a young person—or someone prone to poor money management or other behavior—unfettered access to a sudden windfall, you might want to consider setting up a trust to be the beneficiary of a specific asset.

A trust holds assets on behalf of your beneficiary or beneficiaries and is the legal entity dictated by the documents that create it.

If you go this route, the assets will remain in the trust and not directly with your heirs. They can only receive money as (or when) you specify in the trust documents.

5. You will need to review your estate plan

Whenever you have a major life change – such as having a baby or divorce — it’s important to review your estate plan.

You’ll want to confirm that your named executor (or trustee if you’ve created a trust) is still a suitable choice. Also, check all listed beneficiaries on your financial accounts to make sure no updates are needed.

Also, if you move to a new state, make sure you need to update any part of your plan to comply with that state’s laws.

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