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Three Key Questions to Ask Before Completing a Will

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In previous blogs, we focused on the importance of updating important financial documents like wills, power of attorney and advance health directives. But understanding which of your assets should be passed along in a will versus which should be allocated via beneficiary designations is important. Taking the time to get these items in order shows selflessness and love for family, friends and the organizations we support. This is the latest part of a series dedicated to providing clarity about the importance of creating, storing and sharing end-of-life wishes regarding property and other assets.

Both wills and beneficiary designations are integral parts of an estate plan. It doesn’t matter if you have $50,000 of property and assets or $5 million, understanding the difference between these “pass-along” vehicles is important. Let’s explore three key questions regarding wills vs beneficiary designations.

1. Are there assets that do not belong in a will and therefore avoid probate?

Yes. There are some assets that traditionally do not appear in a will. Most financial accounts (such as life insurance, bank accounts, IRAs and investment accounts) allow you to name people who will receive the proceeds of the accounts after your death. These beneficiary designations enable a direct transfer of the money without involving a will, which means that these assets avoid probate, leading to faster distribution of funds (days vs weeks or months). Additionally, jointly-owned financial accounts also avoid probate, even if a beneficiary is not identified.

2. If that is the case, what types of things should be identified in my will?

There are specific assets that do not allow for the naming of beneficiaries (usually real estate, cars, boats, furniture and contents of a home, for instance). In this case, the will is the place to identify these items and who will receive them after your death, as well as any related special instructions. Importantly, one of the instructions is the identification of an executor, the person responsible for carrying out your wishes as described in your will, such as distributing assets to beneficiaries. The executor is also responsible for logistical issues like paying off creditors, filing final tax returns and making sure beneficiaries get funds from financial accounts. For these reasons, the executor needs to be someone you trust implicitly. Also, the will is the place to designate if a charity should receive a percentage of your estate or a flat dollar amount. Although wills need to move through probate, having completed the will should help speed the process, since your wishes are explicitly spelled out in an executed, witnessed last will & testament.

3. If money assets are identified in my will and as beneficiary designations, which document overrides the other after I die?

Regardless of what your will says, whoever is named as the beneficiary on your financial accounts is who will receive that asset. Your will only provides instructions for how you wish to distribute the remaining assets in your estate, of which the financial accounts listing beneficiaries are excluded. Therefore, a beneficiary designation supersedes what is in your will. Here’s an example of how the beneficiary designation is presented on bank and investment websites:

Beneficiary section listed on Ally Bank

Online Will Options 

Fortunately, creating a will, especially if your estate and financial situation is relatively uncomplicated, is fairly simple. In 2022, there are many online choices, including LifeLegacy, which offer a basic digital will, advance directive and financial power of attorney that can be completed in less than 15 minutes if you know what assets you have and to whom you’d like to pass them. LifeLegacy even offers a charitable giving component, allowing you to choose a charity or charities to designate as participants in your estate. Costs for completing a legally-sound online can vary drastically with some platforms offering no cost options and others charging upwards of $250.

Almost every household should have some form of last will & testament. Putting it plainly, this document, once updated and notarized, can save your family from heartache and stress during a difficult time and is a final selfless act of love.

Author: Craig Simms

Author: Craig Simms

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Wills and Beneficiary Designations as Planned Gifts

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