“We’ve never gotten around to it,” “We need to do that,” “That is something we have discussed, but it always gets put off.” These are common responses I hear from families when I ask if they have their estate documents created or updated. It is a common observation that people avoid making important financial decisions until they have a triggering event or transition in life that propels them to move forward, and unfortunately, waiting for one of these life-changing events can be too late. What most people do not know is that they already have an estate plan in place – it just might not be what they intended.
The legal terms are testate and intestate. If you have estate documents in place – most importantly a Will – you will die “testate, ” meaning you have dictated in a certain amount of detail how you would like your assets to pass to your heirs. If you do not have a Will in place – you will die “intestate,” meaning the state will use intestate-succession laws to determine how your assets will pass to your heirs.
Only the assets that are owned in your name and do not have a beneficiary designation attached to them qualify to pass testate or intestate to your heirs. Here is an example: I set up an individual investment account in just my name and do not provide beneficiaries. When I die, this account will go through probate, and the state may rule to give 50% of this account to my spouse, and the other 50% will be split among my children. It may have been my intention for my wife to receive the full account, but since I did not add a beneficiary designation, this decision is no longer under my control.
So, to restate my original thought, even if you do not have estate documents in place, the state you live in has an estate plan ready to operate on your behalf.
As a financial advisor, I ensure the most basic estate planning has occurred by verifying that every account under my watch has a beneficiary listed. This guarantees that your assets are passed directly to your listed heirs after you pass away. As Financial Enhancement Group’s managing partner and CFP®, Joe Clark, often says, “You may love your beneficiaries equally, but not all beneficiaries are created equal.” You may want each of your children to receive an equal share, but it may not be beneficial for each of them to receive it all at once. The only way to prevent your assets from passing in one lump sum after you die is to dictate distribution guidelines inside of a trust. A trust is a valuable estate planning tool for many reasons, but one of the most common reasons why families establish a trust is to provide control over the timing of distributions to heirs.
Your estate plan is an important but often overlooked, part of your financial journey. Take the next step to make sure your plan is in good order.
Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.