Blue Bell PWM


Plan Now for Less Pain Later

March 21, 2017

Whether you are approaching retirement or still in the height of your working years, it is always a good idea to review your estate plan and named beneficiaries on accounts. We have discussed in the past the benefits of doing such here and here. Naming beneficiaries can direct your money to your loved ones in a more efficient manner than just a will and discussing your estate plan with your loved ones prior to your passing is recommended in most cases.

A recent study by RBC Wealth Management and Scorpio Partnership survey found that “Only 54% of those surveyed had even prepared a will, and most respondents with wills hadn’t updated them.” Anyone that is married, especially if you have children, should look to create an estate plan if they have not already done so. This includes reviewing or naming beneficiaries on 401(k)s and IRAs and making sure your will is completed and up to date. These processes ensure that your assets pass on to your loved ones in the most efficient way possible by avoiding probate and often taxes. The most important reason to review your estate plan is to make sure that your assets are being distributed in the manner that you wish to the people that you care about the most.

Not having a plan in place can prove costly. Your estate could end up in probate, costing your loved ones more money and headaches, often times, leading to discord amongst the remaining family members. According to an Ameriprise Financial survey of adults ages 25-70, 25% of respondents said that conflict arose between family members after a loved one’s death once they had learned the terms of the will. This is usually because there is some level of misunderstanding about the actual amount of inheritance people believe they will receive. In that same study, “more than half of the survey expect to get an inheritance of more than $100,000. Among those who had already received an inheritance, about the same percentage (52%) got less than $100,000.”

There are several reasons for this. People are living longer and with healthcare costs rising, retirees are having to dip deeper into the funds they may have originally apportioned passing on to their heirs. Other reasons may stem from family values such as wanting their children to work for their money. Moreover, one sibling may be wildly successful while the other may be struggling. Whatever the reason, it is important to understand that these misunderstanding can cause severe family turmoil when you pass away.

This applies to all possessions, not just money. We see problems arise many times over family heirlooms such as jewelry or furniture. Disagreements can arise when an heir does not receive the item they may covet most.

What can you do to eliminate this possibility?

While you may never be able to entirely eliminate the possibility of fighting, the first step is to be sure that you have a will that states how you wish your assets to be distributed in the event of your death. Secondly, you should be sure that there are named beneficiaries on all of your investment accounts. Also, discussing expectations of an inheritance with your children or beneficiaries can be helpful while you are still alive. The Ameriprise Financial survey discussed earlier stated that 83% of people surveyed hoped to leave an inheritance to their children yet only 21% of respondents had spoken to them about it. Discussing your reasoning about why you are doing what you are doing can lead to less misunderstandings and can even help you to decide how to allocate your assets. If you don’t want to have that discussion with them now, leaving a video or letter stating why you distributed things the way you did is another alternative.

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