Retirement Specialist With Over 40 Years Of Retirement Planning Experience
To develop a comprehensive plan, you will need certain key documents and the guidance of a professional team. The advisors you choose and the documents you require may vary with your specific situation. These are some of the “people and papers” typically involved in the estate planning process. Naturally, you must give careful thought to your beneficiaries — family, friends, and/or charitable organizations. After all, the estate conservation plan is ultimately for their benefit.
A will enables you to specify how your assets should be distributed and to name the executor who will administer your estate. In general, it is better to name a single executor, with a contingent executor if the named executor is unable to carry out his or her duties. Be sure to discuss your wishes with your executor. You can also use your will to designate guardians for minor-age children or adult children with special needs. If you die intestate (without a valid will), the state could decide how your assets will be distributed. Typically, assets would go to the surviving spouse and children, but state laws and distribution formulas vary. When the deceased dies intestate and leaves no spouse or children, the situation becomes more complicated.
“A last will and testament is the cornerstone of estate planning. Yet two out of three U.S. adults have not taken this basic step.”
In general, the beneficiaries named in your last will and testament will inherit items you designate for them. However, with certain types of contracts — including most retirement accounts and insurance policies — the beneficiary designation form typically supercedes any bequest in your will. It’s important to carefully consider the people you name on all beneficiary forms and resolve any conflicts with the beneficiaries named in your will.
Here are some key considerations regarding beneficiary designations:
In documents naming beneficiaries, you may see the Latin terms per stirpes and/or per capita. These terms refer to the way assets are distributed if a named beneficiary passes away before you do.
Per stirpes (also called “by representation”) literally means by the roots, but it might be clearer to imagine the branches of the family tree. If one of your beneficiaries predeceases you, his or her share would be divided proportionately among his or her heirs upon your death.
Per capita literally means by the head, indicating equal shares for each member of a group. If one of your beneficiaries predeceases you, the division of assets would depend on how you defined the group of heirs. For example designating to my children per capita would produce a very different distribution than designating to my heirs (or issue) per capita.
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