This article is intended for educational purposes only and is not legal advice. For guidance on your personal situation, please contact a lawyer.
If you're reading this, there's probably little reason to remind you of the importance of having a legal document in place that outlines what to do with what you had. You know it's vital, unless you want to leave it up to someone else what happens when you leave it all behind.
There are a lot of options here. Each has its advantages and disadvantages, and all have their place in a comprehensive approach to distributing your material wealth in the ways you see most fit. They can also work alone.
Ultimately, the choice of inheritance strategy should align with your own unique set of goals, ideals, and assets. Let's begin with perhaps the most common method of distributing your material wealth upon your passing.
Image source: Getty Images.
A simple will might be your best testament
Usually referred to simply as a will, a last will and testament lets you specify beneficiaries, designate guardians for minor children, and appoint an executor to oversee the process. They're not particularly costly and they can be done without an attorney, if you wish, using any of a number of readily available templates and do-it-yourself services.
Those are the advantages. There are drawbacks, too, including the necessity to go through probate, which can be a lengthy and costly legal process. There also can be limitations on how they cover assets with named beneficiaries or that are jointly owned.
That's just one more reason to consider not going alone on this, and to instead consult an experienced estate attorney.
You can trust in these alternatives
There are alternatives to wills, the simplest of which may be the widely used revocable trust. Also called living trusts, you transfer your assets into the trust and then the trustee you name manages and distributes those assets until and then upon your death.
Perhaps the biggest advantage of a trust is that it avoids probate, lowering expenses and speeding up the process. Also, as long as it's revocable, you can change it easily while you're still alive and competent to make such decisions. Oh, and it's private. Probate is a public process. Trusts generally are not.
You also can execute your bequeathing strategies through beneficiary designations on your retirement accounts, annuities, and instruments like whole-life insurance policies. These assets also pass directly to named beneficiaries while avoiding probate.
Setting up a payable-on-death (POD) or transfer-on-death (TOD) designation on your bank accounts and investments is also a way to avoid probate by authorizing the assets to simply be transferred to your designated beneficiaries. Again, consider working with an expert who knows how to avoid the potential complications around these strategies.
Image source: Getty Images.
Mixing and matching might be best in the end
You don't have to go just one route when it comes to your estate planning. Combining strategies might be your best approach. For instance, a will that states your wishes for minor children, including naming a legal guardian, might be the simplest first step, and then you can add a living trust that delineates how you want your material assets distributed.
Expert help from estate planning attorneys and financial advisors can help you craft a strategy that complies with federal, state, and local rules that may apply to your situation. They can also help you think through how you want to divide things up in the first place.
After all, you want to ensure your plans safeguard your family's financial future, give to the charities that matter to you the most, and are legally sound and incontestable.
