Who Should Inherit Your Wealth?

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One aspect many people avoid when developing and implementing a financial plan is the will. But designating who will inherit your wealth is one of the most important factors when planning finances.

There is no fool-proof path to take when it comes to bequeathing. This is especially true if you want to name multiple children, grandchildren, or charities. A legally binding plan that lays out who inherits your assets is vital. But how do you go about this, and how do you keep your will from being contested?

Rights of Survivorship for Spouse

Usually, married couples own most of their assets jointly. Therefore, if one dies, the ownership of the asset is automatically transferred to the surviving spouse. This is referred to as “jointly with rights of survivorship.”

The exception would be if assets were purchased in an individual’s name or joint property was without survivorship rights. But usually, opening an account or buying a property with a spouse means that the spouse will inherit the asset upon a spouse’s death.

Designate secondary beneficiaries with a will or trust. And remember to update life insurance policies and accounts if you are widowed or divorced.

What to Know About Choosing Beneficiaries

When choosing a beneficiary, there are some things to keep in mind. The bequest may change the recipient’s income significantly. If the person is on Supplemental Social Security Income, disability, Medicaid, etc., this could negatively impact their benefits.

Always ensure that the beneficiaries on your estate-planning documents align with those on your assets to avoid disputes. Examples of assets include:

• annuities
• life insurance policies
• retirement savings accounts
• other assets

The beneficiaries should mirror the estate-planning documents.

A trust as a beneficiary might be ideal if you are leaving assets to minors. It also works for adults with questionable judgment. If you have a dependent with a disability, a trust would be the route to take.

Deciding What the Children Inherit

Splitting the estate equally between children is usually the easiest way to go. But there might be times this isn’t fair.

For example, if you’ve been supporting one child, you might want to leave more assets to a child who has not been as favored. That’s because equal and equitable distribution are not necessarily the same.

If a child committed a lot of time and resources to caring for you, you may want to leave them more assets than those who didn’t. Or you may decide that one child needs more financial support than another.

But remember, if you leave different amounts to different children, there might be hurt feelings. If you communicate your reasonings while you’re still alive, it may help reduce friction. There won’t be any surprises.

Setting Up a Trust

One alternative to a will is setting up a trust. There are two kinds of trusts: revocable and irrevocable. Each trust serves a specific purpose. A trust is an entity that manages your assets according to the terms. When you die, the trust is passed on to the beneficiaries or can continue to be managed by the co-trustees.

Bequeathing through a trust avoids the probate process.

Difference Between Trustee and Executor

If you have a trust, you’ll have a trustee to manage it. A trustee can also be the trustor.

An executor is only in charge of administering a person’s estate after their death. They can be named in a person’s will. And they will handle the dissolution of the decedent’s assets. An executor doesn’t decide who receives the assets; they only ensure that the decedent’s wishes are carried out.

Leaving Wealth to Charity

Leaving assets to a charity can be done in several ways. You can make a charitable bequest. Simply put, in your will, that you want to leave a certain amount of money to a favorite charity. State if it’s a general purpose or if you want the money applied to a specific cause.

Another way is to name a charity as an account beneficiary. This is when you leave a life insurance policy or retirement account to a charity.

You can also establish a donor-advised fund or charitable foundation. These allow legacy gifting schemes.

Reasons Wills Are Contested

A will is your final statement. It’s important that it be enacted to your wishes and not a probate judge’s. The only people who can contest a will include a spouse, children or people included in your will or codicil. They can also be from a previous will but excluded in the current one.

There are several reasons for contesting a will. They include:

• execution problem (the will not properly executed)
• testamentary capacity (will maker not of sound mind)
• fraud and undue influence (fraudulent activity or undue influence from a beneficiary)

It’s essential to take steps to prevent a will contest.

How to Avoid Contested Will

To avoid a will contest, obtain qualified legal advice. It’s become popular to “do it yourself,” but an attorney should at least review a will. By using an estate attorney, you'll be assured your will is properly executed and a valid legal document.

Make an estate plan while you are in good health. It’s not fun planning a will, but if you wait too long, your wishes may not be enacted.

You can add a no-contest clause (called an in terroreum clause) in your will. This clause disinherits anyone who contests the will. Be aware that this clause isn’t valid in all states.

Don’t write your will with another family member helping you. This will avoid the “undue influence” will contest; only work with an estate attorney.

Share your intentions with your family so there aren’t any surprises.

Once you have a will, review it yearly.

If you’re concerned about your will being contested, then consider setting up a trust. An estate attorney can help you with that.

Consider Communication With Heirs

Good estate planning enables you to manage affairs during life and after death. You want to control the distribution of your wealth. And that means having your will carried out to your wishes. It starts with a qualified estate attorney.

Don’t delay working on your will. You want to enact one while you’re still of sound mind.

And keep the lines of communication open with your heirs so there are no surprises. This will help in avoiding a contested will.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.