You work hard to save, invest, and build your assets. And you probably have an idea of where you’d like them to go when you die. So it’s important that you plan for the future as soon as you begin to accumulate assets.
If you die without a will, the courts will distribute your property according to the laws of the state where you live — usually to surviving spouses and children when you have them and other family members when you don’t.
If you have a legally valid will, however, your assets are much more likely to be distributed according to your wishes.
Other estate planning tools, including naming
beneficiaries
for your retirement plans and insurance policies, creating trusts, and making gifts, can help you ensure that your assets go to family, friends, and charities of your choice while minimizing the assets that might be vulnerable to estate taxes.
Define your wishes
You can give away everything you own in your own name, as well as any property you own as a tenant in common. If you own property jointly with someone else, that person becomes the owner of the property at your death. That’s another way to ensure that real estate,
brokerage accounts,
certificates of deposit (CDs),
and other assets pass to the person of your choice. The person or organization named as beneficiary of your
401(k),
IRA,
or other retirement plan similarly has the right to income from those accounts.
In addition to your will, you might consider creating a
power of attorney
— a legal document in which you give someone the authority to take care of your financial affairs.
Having an official representative is especially important if you become incapacitated. A power of attorney
is revocable while you are still able to make decisions, which means you can always alter your designate
or the type of authority you’re granting.
