We all hope to leave something behind after we're gone. For some people, that takes the form of leaving an inheritance for family, money for a grandchild's college education, a legacy for a favorite cause, or even some sentimental items for friends. For others, it's simply trying to minimize the challenges—financial and emotional—facing those loved ones. One of the biggest benefits of having an estate plan is knowing you've done what you can to make things easier for them.
Pondering your incapacity or mortality, and what might happen to your loved ones when you are no longer with them, can be tough to face. It's what keeps most people from starting the estate planning process. Taking this step now—and regularly reviewing your estate planning documents after you've crafted them—can provide confidence for you and your loved ones that your wishes will be carried out.
Here are five estate planning questions to help you get going:
1. Who makes decisions if I can't?
If you become incapacitated and can't make decisions for yourself, who will make them for you? Who will manage your assets? It's hard to imagine putting that burden on your loved ones' shoulders in such a challenging situation, which is why you should spell out your thoughts in a durable power of attorney, a healthcare proxy, and a living will. If you don't have these documents, your loved ones would have to petition the courts for guardianship or conservatorship, and that would be on top of worrying about your health.
Here are the basics:
- A living will allows you to say which medical treatments you would or would not want to receive if you couldn't make your own choices.
- A healthcare proxy lets you put someone in charge of making healthcare decisions on your behalf.
- A general durable power of attorney designates someone to manage your day-to-day financial and legal affairs. This person can be authorized to receive income, write checks, pay expenses, file your income taxes, and more.
"Before choosing the people in these roles, consider all the things that they would be responsible for," says Daniel Soo, an executive wealth management advisor with TIAA. "Think carefully about whether they have the time and the expertise to handle them. It also helps to have a trusted advisor, like TIAA, to provide support along the way."
2. Who gets my savings and possessions?
Think about the things you have to share—whether it's money you've saved, your home, or heirlooms you've collected. Estate planning provides a way to make sure your possessions are shared the way you intend.
- Your will is typically the primary component of your estate planning documents, outlining your general wishes, and the executor is the person who carries them out. So it's important to choose an executor for your estate.
- Not all assets get transferred through a will. Life insurance and retirement accounts are typically passed through the beneficiary designations on those accounts.
- Similarly, property that you own jointly typically passes to the surviving owner.
- If you have transferred assets to a trust—either revocable or irrevocable—those assets will not pass under your will but will pass per the terms of your trust.
Keeping all of your estate planning documents updated—including your will, beneficiary designations, and titles of large assets—and having a plan to control, manage and protect your assets are important steps to take to make sure that the people you want to receive benefits actually do.
What happens if you pass away without having done any estate planning?
"In that case, the laws of your state will decide who inherits your property," Soo says. "It will likely go to your next of kin, which could be your spouse, a parent, a child, or a sibling. This will be an emotional time for your loved ones. There could be differences of opinion unless you've made your wishes clear. Talk to your loved ones about the choices you're making so they will understand the reasons behind them."
