We all hope to leave something behind after we’re gone. For some people, that takes the form of an inheritance for loved ones, money for a grandchild’s college education, a legacy for a favorite cause or even some sentimental items for friends. For others, it’s simply trying to minimize the challenges—financial and emotional—facing those loved ones.
Pondering your own mortality and what might happen to your loved ones can be scary. It’s what keeps most people from creating an estate plan. But taking this step now—and regularly reviewing your plan after you’ve crafted it—can provide confidence for you and your loved ones that your wishes will be carried out.
Here are three questions your estate plan should help you answer.
Who makes Decisions?
Incapacity is a real possibility as we age
1. Who makes decisions if I can't?
If you become incapacitated and can’t make decisions for yourself, who will make them for you? It’s hard to imagine putting that burden on your loved ones’ shoulders in such a challenging situation, which is why you should spell out your thoughts in a living will or healthcare directive. State regulations can vary on which of these documents are recognized, so be sure to check with an estate planning attorney for what makes the most sense for you.
Creating a living will gives you the opportunity to say which medical treatments you would or would not want to receive if you couldn’t make your own choices.
A healthcare proxy allows you to place someone in charge of making healthcare decisions on your behalf.
A general durable power of attorney designates someone to manage your day-to-day financial and legal affairs. This person can be authorized to receive income, write checks, pay expenses, file your income taxes and more.
“Before choosing the people in these roles, consider all the things that they would be responsible for,” says Daniel Soo, Senior Wealth Management Advisor with TIAA. “Think carefully about whether they have the time and the expertise to handle them. It also helps to have a trusted advisor, like TIAA, to provide support along the way.”
Who gets my assets?
How will your estate pass?
You can add many types of assets into a trust, which is not subject to probate.
By beneficiary designation
Assets that include a beneficiary, like life insurance or retirement accounts, pass to those people named.
By joint survivorship
Assets you own jointly, like a home where you and your spouse are on the title, typically pass automatically to the surviving owner.
Assets that aren't covered by other means typically pass through your will, which is subject to probate.
2. Who gets my assets?
Think about the things you have to share—whether it’s money you’ve saved, the home you own or heirlooms you’ve collected. Passing those on to others can have an emotional, as well as material, effect on their lives. Your estate plan is your way of distributing assets in the manner that you’ve chosen.
Your will is typically the primary component of your estate plan, outlining your general wishes. But not all assets will be transferred through your will.
Life insurance and retirement accounts are typically passed through the beneficiary designations on those accounts.
Similarly, property that you own jointly typically passes to the surviving owner.
Keeping all of your documents updated, including your will, beneficiary designations and titles of large assets, and having a plan to control, manage and protect your assets are both critical to making sure that the people who you want to receive the benefits actually do.
So, what happens if you pass away without an estate plan?
3. How do I minimize expenses and make things easier for my loved ones?
It’s natural to want your loved ones to be able to enjoy as much of your estate as possible after you’ve worked so hard to build wealth. If you have a more complex financial situation or assets of multiple types, there are options beyond a will that can help you minimize your expenses.
Trusts A trust is a way of setting up how your assets will be distributed and may allow your loved ones to avoid probate, which can often be a costly and time-consuming process. There are several different types of trusts, with the most common being a revocable living trust. Having a trust can also help minimize estate taxes that your loved ones could face. Your advisor, working in conjunction with your estate planning attorney, can discuss the benefits of a trust and help you understand how it can be used to help carry out your estate wishes.
Insurance If you’re looking to provide immediate help to your loved ones for money concerns like paying bills, estate taxes or other expenses, consider how other financial tools can help. Life insurance can serve as a financial safety net for these types of costs. Your advisor can discuss how much coverage may be right for your unique situation.
Have you developed an estate plan?
Your advisor can help you understand how an estate plan may impact your finances.
It’s a lot to consider, but it’s important to know that you don’t have to go through it alone. Your TIAA advisor, working with your estate planning attorney, can be a trusted resource to help make sure you have the proper team in place to execute on your wishes. That way, you can feel confident that those wishes will be fulfilled and that you’ll be making life a little easier for your loved ones.
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Before consolidating assets, be sure to carefully consider the benefits of both the existing and new product. There will likely be differences in features, costs, surrender charges, services, company strength and other important aspects. There may also be tax consequences or other penalties associated with the transfer of assets. Indirect transfers may be subject to taxation and penalties. Speak with a TIAA consultant and your tax advisor regarding your situation.
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