Have you been so focused on building assets that you haven't given much thought to protecting them?
Creating a will, naming beneficiaries, and checking off other estate-planning tasks can help preserve what you've accumulated and distribute it to the people and causes you care about most.
These are uncomfortable topics, but ask yourself this: Would you rather have someone else making these decisions for you? Let’s take a look at five things you can do now to protect what’s yours should anything unexpected occur.
A will is one of the most important legal documents you can create. It states who gets what after you're gone, and it names someone to make things happen according to your wishes. If you don't have a will, your assets will be dispersed according to state statutes—and who wants that?
A will is important to protect large and small amounts alike, and it isn’t something you should wait until your golden years to consider. If you were to die without a will in place—known as “intestate”—it could create a burden for your survivors. When someone dies intestate, his or her assets can be tied up in the costly delay—and public display—of probate court. With a will in place, you may help keep your family from being caught up in legal challenges during an already difficult time.
In addition to a will, it is important to consider a power of attorney. It allows someone you designate to step in and act on your behalf with respect to financial matters if you are unable to make informed decisions for yourself. Keep these considerations in mind when setting up a power of attorney:
A health care proxy (also called a “durable power of attorney for health care” in some states) authorizes someone to act on your behalf for your medical affairs. Unlike a durable power of attorney, you must become unable to make informed decisions for yourself before someone can act as your health care proxy.
Designating a beneficiary for investment accounts is crucial. That’s because assets in your retirement accounts pass directly to the beneficiaries you've designated with your account custodian, trustee, or plan administrator. Furthermore, your beneficiary designations, or lack of designation, can supersede any accommodation you have made in your will for your accounts.
Designate a particular time each year—around tax time, for example—to take inventory of your paperwork and life events that may have changed your wishes. After a birth, death, or divorce, for instance, you might need to update your will, power of attorney, health care proxy, or your account beneficiaries.
Do-it-yourself estate planning is risky, so it may make sense to ask an attorney to draw up legal documents related to your estate. Hiring an experienced professional may save your family money and headaches in the future, making the extra step a worthwhile investment. It’s common to handle other estate planning items, such as naming beneficiaries to your investment accounts, on your own; however, you might want to consider consulting a tax advisor.
Take these steps now, so you can be sure that important decisions regarding your assets aren’t left open for interpretation and debate in the future.
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
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