It can be tempting to think that your spouse or grown children will be able to figure out how to divide up your money and possessions after your death. But this responsibility can be complicated legally and difficult emotionally, especially when family members disagree. There are three things you can do to eliminate disagreements and make sure everyone receives exactly what you want them to receive: Make a will, update your beneficiaries, and consider setting up Payable-on-Death accounts.
Every adult should have a will, also called a last will and testament. Married individuals and those in committed relationships should each have separate wills. A will is a legal document that says who will receive your money, property, and other assets when you die and how you want your heirs, or beneficiaries, to receive those assets. If you have young children, you also can use your will to name a guardian for them. The "executor" you choose is responsible for carrying out the details of your will. Because there are so many money matters involved, consider choosing a trusted person who understands financial issues as your executor—or a knowledgeable third party such as a bank or law firm.
If you die without a will, the state will decide who will get your assets and who will look after your children. Wills can be complex documents and they must meet the requirements of your state's laws. You don't have to use a lawyer to help with your will. Some people, especially those with young children or who have significant financial assets, find it helpful to work with a qualified estate lawyer to help them draft a will—or update it when they want to make a change. You can change the details of your will anytime, as long as you are mentally capable.
Some of the information you’ll want to gather before making your will includes:
If you would like legal advice and assistance in making your will, but don’t know a lawyer, the information in how to find a qualified estate lawyer may be helpful.
If you own a life insurance policy, or have a retirement plan at work or at a bank or brokerage firm, you were asked to name one or more beneficiaries to receive the money directly at your death. You might have named secondary beneficiaries, too, in case the first ones died. As you near life's end, especially if your family situation has changed due to death, divorce, or remarriage, look at all your beneficiary selections. Are they up to date? Do they match the wishes stated in your will? If one person is named in your will to receive money from your life insurance policy, but another is listed on your policy as the beneficiary, the person named in the policy as the beneficiary will get the money.
By setting up your bank, brokerage, or other type of account as a Payable-on-Death (POD) account, you can name a beneficiary to receive all the money in that account directly when you die. The beneficiary, who can be a person or an organization such as a favorite charity, cannot get money from your account while you are alive. POD accounts, which also are called Transfer-on-Death (TOD) accounts, generally are easy to set up at banks, brokerage firms and other financial institutions. There may be a fee. Ask your banker, broker, or financial advisor for information about setting up your account as a POD.
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