By Marisa Otto
Like most Morgan Hill residents, you probably want to leave something behind for your loved ones and possibly to some charitable organizations. In other words, you want to create a legacy. But how?
To leave the legacy you want, you need to construct a comprehensive estate plan. There’s not a “one-size-fits-all” model for everyone, but these are the key elements of most estate plans:
- Beneficiary designations — Beneficiary designations are typically found on retirement accounts (such as your 401(k) and IRA) and life insurance policies.
In many states, beneficiary designations may also be added to banking and brokerage accounts, where they are referred to as Pay on Death or Transfer on Death designations. These designations can supersede the instructions on your will — yet nearly two-thirds of Americans have not designated beneficiaries for any of their accounts, according to the recent Leaving a Legacy survey commissioned by Edward Jones.
Even if you have designated beneficiaries for your 401(k) and other accounts, you may need to revise them periodically in response to changes in your life — marriage, divorce, new child, etc.
- Will — A will, sometimes referred to as a last will and testament, can help ensure your assets are distributed according to your wishes. And if you have young children, a will can name a guardian if something happens to you and your spouse.
- Trusts — A trust provides you with even greater control than a will. You can dictate exactly how and when your beneficiaries receive the trust’s assets, so, for example, if you’d prefer that your grown children not inherit a large sum at once, you can specify that they will get the money over a period of years. And a trust may help your estate avoid the time-consuming, expensive and public process of probate, reducing or eliminating the possibility of intra-family fights over your assets.
- Power of attorney — A power of attorney lets you name someone to manage your finances should you become incapacitated. This is an especially important document for any individual who doesn’t have a spouse to step in.
- Health care directive — If you become incapacitated, your health care directive can provide instructions for your health care (a living will) and name a person to make medical decisions on your behalf (a health care proxy). These documents can be valuable if your family disagrees about your care.
Even after you’ve created your estate plan, you may need to adjust it to accommodate changes in your financial assets, your family relationships, your association with charitable groups, and so on. Plus, you’ll need to be aware of changes in tax laws that could affect your plans.
In any case, it’s essential that you communicate your wishes to your family. Just 49 percent of beneficiaries are confident they know how to carry out the estate plan of a loved one, according to the Leaving a Legacy survey.
Here’s one more suggestion: Get professional help. Your financial advisor can assist you with the investment-related aspects of your estate plan and work with your team of professionals, including an attorney, who can help you create the necessary documents — will, living trust, health care directive, etc. — and a tax advisor, who can provide information on tax aspects of estate assets, among other issues.
An estate plan can be a big gift to your loved ones, so take action soon.
Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.
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