What to Know About Wills and Estate Preparation

If you’re in the midst of retirement planning, you’re probably thinking about your Social Security benefits, how much money you should be saving and the best places to retire. But have you taken care of your will and estate planning yet? We know, it’s not the cheeriest of subjects, but putting it off until later can cause problems down the road.

Without a legal will, state law will determine how your assets are distributed — not you. A court may also need to appoint someone to administer your estate or, in some circumstances, determine guardianship arrangements for your children. This can be a difficult experience for your loved ones, especially if you and your partner are not married, so don’t leave this important part of retirement planning until it’s too late.

Thanks to online resources, writing a will can be convenient and relatively inexpensive.

Read on to learn more about creating a will, and whether you should also establish a trust.

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Writing a Will

If your assets are fairly simple, you can create a basic will online through a website such as LegalZoom, RocketLawyer, MetLife Legal Plans or LegalShield.* These services are affordable and will guide you step-by-step through the process. If your situation is more complicated, you may need the help of an attorney.

In your will you’ll provide instructions for who should receive your property and assets. You can include items such as:

• Real estate
• Money in bank accounts
• Stocks, bonds and intellectual property
• Artwork, jewelry and furniture

Keeping Your Estate Plan Up to Date

Naming who gets what will ensure that your wishes are carried out and can prevent disagreements between family members. If you have dependent children (minor or disabled), an important part of your will is naming a legal guardian to care for them, so the decision is not left to a probate court.

You will also designate an executor to handle the estate, including paying valid debts and taxes and distributing property according to your wishes. Naming someone you trust can help provide clarity and make the administration process more orderly.

Beneficiaries and estate plans should be reviewed after major life events, such as marriage, divorce, birth or adoption of a child, death of a beneficiary or significant changes in assets.

Outside of your will, it’s important to make sure the beneficiaries you’ve named for your IRAs, 401(k)s or life insurance policies are current and up to date. These retirement accounts and financial products are also legal contracts and will generally take precedence over your will. So even if you’ve named your child in your will as the beneficiary of your 401(k), if your ex-spouse is still listed on your 401(k), they’ll be the one receiving your money. If no valid beneficiary is named, the account or policy may provide for the proceeds to go to the estate.

You may also want to complete advance care planning documents that explain your wishes for medical care if you become unable to make or communicate decisions yourself. Depending on your state, these may include a healthcare proxy or healthcare power of attorney and a living will. Five Wishes is one resource people may consider, but the legal requirements and documents recognized vary by state.

Creating a Trust

Depending on your circumstances, you may want to explore establishing a trust alongside your will. Trusts can be useful for a variety of reasons, but they can also be more expensive and complex to set up.

When establishing a trust you’ll transfer legal ownership of your assets to the trust itself and appoint a trustee to manage the assets. With a living trust you can designate yourself as the trustee so you can maintain control of your assets. You’ll also name a successor trustee who will distribute your assets to their intended beneficiaries after your death.

Establishing a trust can be beneficial for several reasons:

• Greater control over your assets – You can be more specific about who gets what and when, such as deferring release of funds to your children until they reach a certain age or providing for a beloved pet or charity.

• Faster settlement process – Assets properly transferred to the trust may be distributed without going through probate.

• Potentially lower costs – Probate can involve court costs, professional fees and other expenses, which vary depending on the state and circumstances of the estate.

• Privacy – Assets held in a properly structured trust generally don’t go through probate, which can provide greater privacy.

There are many different types of trusts, and if you’re considering setting one up you’ll want to discuss your options with an estate planning attorney.

Have you gotten started on your will and estate plans yet?

Estate-planning laws and requirements vary by state. The information in this article is for general educational purposes and isn’t a substitute for advice from a qualified attorney or other professional. Links are provided for informational purposes only and are not an endorsement from AAA Northeast.