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Addressing the financial implications of a loved one’s eventual passing is an emotionally charged topic, yet it is a crucial part of ensuring peace of mind during one of life’s most challenging times. This blog aims to guide individuals, particularly from the child-to-parent perspective, on financial steps to consider before this occurs.
Initiating sensitive yet necessary conversations about end-of-life arrangements is of great importance. Engaging in these discussions early allows families to align on expectations and reduce the emotional burden when the time comes. This proactive approach not only simplifies the process of settling estates but can also help ensure that wishes are respected and smoothly executed.
Begin by compiling a comprehensive list of all valuable assets. This list should include liquid assets such as bank accounts and stocks, qualified assets like 401(k)s and IRAs, and physical assets including real estate, vehicles, jewelry, and any valuable heirlooms. Knowing the location of these assets and how and by whom accounts are managed can expedite the administrative processes post-passing.
Essential documents such as wills, trusts, and powers of attorney should be drafted and kept up to date. These documents play critical roles in the smooth distribution of an estate and can help avoid confusion or conflict. These documents can include a will, a power of attorney and/or trust documents such as revocable trusts. Powers of attorney appoint individuals to make financial and medical decisions should one become incapacitated. A revocable trust can offer privacy and more controlled distribution of assets, preventing unwanted public scrutiny and providing protection from creditors. More importantly, it can prevent the complex, often public and costly process of probate.
While the previously mentioned documents are extremely important, designating and updating beneficiaries is crucial. One should regularly review and update beneficiaries for insurance policies and retirement accounts. Incorrect or outdated beneficiary designations can lead to assets being distributed against the deceased’s wishes, potentially leading to family disputes or legal challenges. It is often overlooked that beneficiary arrangements on accounts will take precedence over what is stated in a will so it is important that both documents are accurate and up to date.
To streamline and reduce complexity, consider consolidating retirement accounts into one IRA. If an individual has multiple retirement accounts, consolidating them into one IRA can manage the assets more straightforwardly, and help to ensure that nothing is overlooked when transitions occur.
Each state has its own laws and regulations for estate and inheritance. Discussing the implications of state-specific inheritance laws is very important and can significantly affect the net benefits heirs receive. For instance, certain states may impose higher inheritance taxes, thereby necessitating strategic financial planning to minimize tax liabilities.
Another to consider is lifetime gifting as a strategy to reduce estate taxes. This may allow heirs to avoid hefty tax bills that might otherwise consume a significant portion of their inheritance. Explore options such as annuities and life insurance, which can be structured to optimize tax benefits and provide direct benefits to beneficiaries without the complications of probate.
Due to the complex nature of estate and financial planning, working closely with financial advisors and estate planning attorneys is highly recommended. These professionals can provide tailored advice that considers the unique aspects of one’s financial situation and family dynamics. They can also help navigate the legal intricacies that might arise, ensuring that all preparations align with current laws and personal wishes.
Preparing for the financial aspects of a loved one’s passing is a profound expression of care. It not only ensures that their legacy is honored without burdening heirs but also secures a future that they envisioned for their family. While these conversations can be challenging, the peace of mind that comes from well-laid plans is invaluable. Therefore, approach these conversations with sensitivity, plan with precision, and seek expert advice to guide you.
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Securities and advisory services offered through EWA LLC dba Equilibrium Wealth Advisors (a SEC Registered Investment Advisor).
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
In 15 minutes we can get to know you – your situation, goals and needs – then connect you with an advisor committed to helping you pursue true wealth.
EWA, LLC dba Equilibrium Wealth Advisors, is an SEC-registered investment advisory firm providing investment advisory and financial planning services to clients.
Investments in securities and insurance products are not insured by any state or federal agency.
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In 15 minutes we can get to know you – your situation, goals and needs – then connect you with an advisor committed to helping you pursue true wealth.