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Financial Tips to Prepare for Uncertainty

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by Enlighten Financial Service

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10.26.2021

There are many things to consider when it comes to managing your money and your financial future, and one of the most important (and complex) factors is figuring out what to do with your wealth after you’re gone. Although there are no right or wrong ways to go about this task, there are certainly smart and unwise ways of doing so. This guide will cover the main ideas and strategies involved in planning your financial succession plan, as well as some of the pitfalls and risks associated with each option.

1) Why Create a Financial Wealth Succession Plan?

The traditional one-size-fits-all advice you’ve likely received to accumulate wealth for retirement is pretty simple: 1) Start saving early 2) contribute regularly 3) hold on for dear life. However, that financial wealth succession plan doesn’t always align with someone’s individual circumstances or goals. For example, if you just had your first child, you might be looking at making some changes—like scaling back at work—to create more flexibility in your schedule to spend time with family. If that’s true for you, there are things you can do to make sure your assets are inherited by whom (and when) you want them to be. Here’s why it pays to start thinking about how you want to pass along your savings—even before those savings have hit their peak value.

2) Draw Up a List of Possessions/Assets

You should start with drawing up a list of your possessions/assets. This list will help determine what you own, how much it’s worth, and how it is distributed. It can also serve as a good reminder for loved ones who may be left behind when you’re gone that they still have some work to do with finalizing your affairs. Start off by jotting down everything in pencil or pen. For every category, ask yourself these questions: How much did I pay for it? What are my receipts? Who else knows about my possession? Where do I keep all my important papers relating to this item or asset? Next, multiply every item on your lists by its value at that time (don’t worry—this doesn’t require any math). Include items you have yet to purchase but plan on purchasing in the future.

3) Where Should I Put My Documents?

This is typically done through what’s called a revocable living trust, which allows an individual to decide who will receive their property (assets), money, and possessions in case they become incapacitated or die. It also lets that person decide how their assets are distributed after death, as well as any limitations on those distributions. To transfer ownership of your home or property (and avoid probate), you need to transfer its title to your trust, which becomes the owner on record with county records. Your beneficiaries—your children, grandchildren, friends—will be your trust’s beneficiaries for distribution purposes. If something happens to you, then your successor trustee—who could be one of those beneficiaries or someone else altogether—is responsible for getting whatever you left behind into their hands. By using a revocable living trust instead of just leaving everything outright to another person, you ensure your estate goes where it should under state law without having to pay expensive legal fees.

4) Will My Child Inherit Money From Me?

A financial wealth succession plan will prepare your child for all possibilities. Let’s face it: we don’t know what tomorrow holds, and we don’t know how long we’ll be around. Ideally, you want to leave behind as much as possible for those who need it most—your children—and you may consider creating a trust or similar legal vehicle to help them through life after your death. To do so requires planning. You can’t just cross your fingers and hope for the best!

5) Who Will Be the Executor/Personal Representative?

When someone dies, it can be difficult to decide who will take over as executor/personal representative. This person must be trustworthy enough to manage your estate as you would have, but he or she also should not have an interest in inheriting any part of your estate. In many families, there is one person who always handles these duties, but it’s important to document those choices so everyone is on board with them. The easiest way to do that is through writing down what you want done with your assets, creating an inventory of assets (including all bank accounts, property records, credit card statements), designating specific people as personal representatives or co-executors—and drawing up official documents for each individual involved. Remember: Beneficiaries are people who inherit from you after all debts are paid off; they have no legal rights during your lifetime.

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