I don’t know where I heard this, but “death is hell, especially on the living.” As a financial planner, I’ve seen a lot of unique scenarios related to the end of life. Despite meticulous planning and the best intentions, significant challenges for beneficiaries often arise, placing strain on everyone involved, regardless of their anticipation of the inheritance. It’s my job to guide clients and their heirs throughout the process so that it can run as smoothly as possible with minimal issues.
Simplify Your Estate for Your Heirs
As a benefactor, there are a few things you can do now to make things easier for your loved ones when you pass.
Help your estate avoid probate by having designated beneficiaries on all your accounts. While a trust isn't always necessary, having beneficiaries designated can save time and money so your assets can go to your intended recipients rather than lawyers and court fees. This also ensures funds are available to your family immediately after you pass so that they can continue paying the household bills and their day-to-day expenses.
Regularly review and update your beneficiaries, especially if one passes away before you. Keeping beneficiaries current can streamline the inheritance process, saving time and effort for those left to inherit.
It's important to note that requirements for power of attorney and other legal matters can vary from state to state. However, in the context of New York, ensuring you have an active power of attorney on your accounts is crucial, especially for your spouse. This means that if you already have a power of attorney in place, it should be on file and approved. I've encountered scenarios where, during their final days, a client expressed a desire to make a substantial charitable contribution. However, when their spouse attempted to act on their behalf using power of attorney, we discovered we didn't have the necessary documentation on file, leading to a frantic rush to validate, approve, and fulfill the donation. Unfortunately, this situation could have been avoided with proper planning and foresight.
Hold a family meeting to discuss your estate plans with beneficiaries. This open communication can prevent misunderstandings, conflicts, and legal disputes after your passing, ultimately saving on legal fees and court costs, not to mention hard feelings among family members.
Know What to Expect as an Heir
If you’re appointed executor or co-executor of an estate, be prepared for a potentially extensive list of tasks ahead. Even if you don’t have that responsibility, as an heir, it’s helpful to be aware of what’s involved in closing out an estate.
Managing a complex estate often involves intricate coordination among various professionals, including lawyers, accountants, and financial planners. Even in a well-organized estate, you may need to open estate accounts, file tax returns, and deal with court paperwork. It’s likely worth the investment to hire an attorney to help you deal with these tasks to ensure everything is handled when and how it should be.
I’m currently dealing with an estate with multiple beneficiaries and custodians. There is a ton of paperwork, and it’s important to get it right, even though mistakes will be made. Frustrations might come along the way. Patience is necessary as beneficiaries navigate through the complexities.
A complex estate leaves beneficiaries with many options on what they can or need to do. Take the time to understand your choices, don’t make rash decisions, and leave options open for yourself. For example, if you inherit an annuity, one of your options might be to take the lump sum. However, if you choose another option, you can still take a lump sum later when you’ve had time to evaluate the long-term financial implications.
Inheriting assets allows beneficiaries to reassess their financial outlook and strategically plan for the future. Many consider this a pivotal moment to refine their financial strategies with expert guidance. Speaking with a professional, whether the advisor for your benefactor or your own, can help you make the best decisions for your life with your inheritance.
Preparing for the Future
If you’ve done well for yourself and plan on leaving money to family, friends, or charity, review your situation to see if certain changes may make it easier on heirs. And, whether you're planning to leave assets or expecting to inherit, understanding the process beforehand can alleviate future stress. Seek guidance from professionals like Voice Wealth Management, alongside your accountants and attorneys, to navigate this journey seamlessly.
Russell D. Rivera, CFA, CFP® is the Founder and President of Voice Wealth Management (Voice) in New York, NY. He also likes to think of himself as a Personal CFO and Financial “Therapist” for entrepreneurs, young professionals, and their families. He helps clients make prudent financial decisions regarding spending, saving, investing, and planning while giving a voice to the individual client's financial priorities and experiences.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.