Harris: Update your estate plan
By: Charlestien Harris
There is no doubt that life happens every day, but when the unexpected occurs, you should be prepared emotionally as well as financially. You will never be fully prepared for everything that happens in life, but you can sit down and create a plan for your financial affairs.
By definition, estate planning is the “process of anticipating and arranging for the management and disposal of a person’s estate during the person’s life, in preparation for a person’s future incapacity or death.” Since death can happen at any moment, you may want to consider periodically updating your wills and other estate planning documents. Year-end can be a good time to review the changes the past year brought to your family, as well as your overall estate plan, to ensure it still reflects your situation and goals.
An estate plan does not have to be complicated, but there are some basic items that need to be included in the plan.
The process of establishing your estate plan involves three primary components: (1) the execution of specific legal documents, (2) the coordination of assigning assets to heirs, and (3) updating beneficiary designations. Typically, the following documents are prepared and executed as part of each person’s basic estate plan: a Last Will and Testament, a Trust Agreement, a Financial Power of Attorney, and an Advance Directive. Make sure you have a clear understanding of how these documents will carry out your last wishes. Also, ensure that your documents are kept in a safe and secure place. You should let a designated person of your choice know where those documents are stored and how to access them when the time comes.
Together, your Will and Trust control the distribution of your assets; these documents set forth who is to receive your property, as well as how and when they will receive it. If your children are minors, your Will also appoints guardians for them. Your Financial Power of Attorney and Advance Directive grant a designated named person or persons the authority to make financial and health care-related decisions for you if you are incapacitated. Once you execute the legal documents you prepared, it is equally important to title your assets and complete your beneficiary designations in a way that does not override the provisions in your Will and Trust.
Assets may be titled in your individual name, in the name of your Trust, or jointly with another person. Proper asset titling can help ensure that your property and investments are passed down as you intended. To fully carry out your intentions regarding the disposition of your assets following death, it is critical that the titling of your assets be coordinated with your estate plan documents. Titling arrangements can also have significant income and estate tax consequences, and if properly structured, can help you avoid probate.
A beneficiary is a person who derives advantage from something, especially a trust, will, or life insurance policy. Beneficiary designations for assets such as life insurance and retirement accounts control who receives the asset upon your death, regardless of the provisions of your Will and Trust, so updates are necessary to ensure that your wishes will be carried out after your death. Beneficiary designations can also have significant tax consequences. Of course, the beneficiary is going to be responsible for paying the taxes that are due, if any. Federal or state taxes may apply.
To achieve your goals and wishes, your estate plan must be comprehensive and coordinated with several advisors, such as your lawyer, your accountant, and your investment advisor if you have them. You have a lot to consider, but as with most things in life, having a plan feels good.
If you would like additional information on this or other financial topics, you can email me at Charlestien.Harris@banksouthern.com or call me at 662-624-5776.
Until next week – stay financially fit!
Charlestien Harris is a financial contributor to DeSoto County News. She is a financial expert with Southern Bancorp Community Partners whose articles are seen in a number of publications around the region.
