The dangers of missing or incomplete estate documents

You’ve worked hard to build your portfolio and assets — but will they go to your intended recipients after your passing? Not having the proper estate documents in place may make it more difficult for your wishes to be carried out after death.

Here are some steps to consider to help ensure your wishes are accurately carried out.

Implement a will and trust

A comprehensive estate plan involves the creation of multiple documents, but two main areas of focus include a will and a living trust. Let’s take a look at both.

A will

A will provides direction for the distribution of your property and the care of any minor children after your death. In your will, you name an executor who is responsible for administering and distributing your estate based on your directions in the will.

There are drawbacks to relying solely on a will to accomplish your estate-planning goals. For one, a will typically must go through the probate process, a court-supervised process used to transfer legal title of a decedent’s probate assets. Probate usually requires an attorney, and the process can be lengthy and expensive. Also, your probate filings, including your will, become part of the public record, which means the way your assets were distributed could be accessed by the public. It’s important to note that not all assets pass through your will. For example, proceeds from your IRA, 401(k) and life insurance will pass directly to any beneficiaries you’ve named.

A revocable living trust

A revocable living trust can also be used to transfer your assets at death. It’s called “revocable” because you, as the person who established the trust, can change the terms of the trust during your lifetime.

A properly written living trust offers these main benefits:

• Your estate can remain private by avoiding probate.
• You can plan for your own incapacity.
• You can be specific about how your assets will be distributed. For example, instead of just leaving a lump sum to a child who you believe may not be capable of responsibly handling the funds, you can arrange to have the money distributed gradually over time.

In addition to potentially not having your wishes carried out as you intend, not having a proper will or trust in place could result in higher estate taxes and the involvement of the courts, which includes higher fees and your personal affairs becoming public.

Update your asset titling

If you have assets you wish to pass on — whether it’s your home, car or other prized possession — it’s important to title your assets properly. This means reviewing titling to ensure it reflects your current situation and wishes, particularly after a life event such as a death, birth, move or divorce. Failing to title your assets according to your wishes could result in your assets going through probate. To help avoid this, update your asset titling to align with your estate strategy to help ensure your wishes are carried out as you intend.

Assign and update beneficiary designations

One of the easiest ways to make sure your assets go to the people you intend is to list them as beneficiaries. Beneficiary designations are important because they are straightforward, typically inexpensive, easier to change during your lifetime and don’t have to go through probate.

Some types of investment accounts, life insurance policies and annuities typically allow you to assign beneficiaries and usually supersede your will’s instructions. Brokerage accounts don’t automatically include beneficiary designations, but you can complete a transfer on death (TOD) agreement to identify the person to whom the assets should go. Similarly, you can complete a “successor owner designation” on individual 529 plans.

If you choose to add a beneficiary designation on your account, you’ll need to decide whom you want to name. Do your current accounts have a beneficiary or beneficiaries? If so, when was the last time you checked who is listed? Additionally, do you have a contingent beneficiary if your primary beneficiary is unable to receive the assets?

It’s important to review your beneficiaries anytime something major happens in your life — for example, when you marry, divorce or have a child. Not doing so could mean your assets could be inherited by someone you no longer intend.

Complete a medical directive/living will and health care power of attorney

While it may be unpleasant to think about, health crisis or incapacity planning is crucial. A health care power of attorney enables you to name agents to act on your behalf for medical treatment decisions if you’re unable to act for yourself. A medical directive, or living will, allows you to share your wishes with respect to health care decisions and life-prolonging procedures.

Health care decisions are personal and emotional, and putting these documents in place will give you a voice when you can’t speak for yourself and takes the burden off loved ones who might not know what you want. It’s good practice to speak with your health care provider when drafting these documents as they may share specific items for consideration.

Name a financial power of attorney

A financial power of attorney allows you to name a person or entity to make decisions on your behalf if you’re unable to do so (in cases of incapacity, etc.). With a durable power of attorney document, you designate an individual to make financial decisions on your behalf with respect to your individually owned assets (for example, your investments).

The power of attorney may be broad, or you may limit the powers you grant. This document can also provide incapacity protection if you become disabled. Note that assets transferred to your living trust are generally not governed by the power of attorney. Instead, your trustees will have decision-making authority with respect to those assets.

Not having a financial and health care power of attorney could put your loved ones in the difficult position of making significant financial and health care decisions should you become incapacitated.

How Edward Jones can help

Regardless of your net worth, you can benefit from working with a team of professionals to create an estate strategy that aligns with your wishes for the future. Without an effective estate plan, decisions about the care of your children, assets and health may likely be controlled by state law and the courts. Your Edward Jones financial advisor can work closely with you and your estate attorney to help ensure your wishes are carried out as you intend.