When we die, we leave behind a legacy – the impact we have had on the world, the people we have touched, and the memories we have created. However, we also leave behind a more tangible legacy – our assets and possessions. In this article, we will explore what you will leave behind when you die and how you can plan for the distribution of your assets.
Here are 6 things you will leave behind when you die:
1. Assets
Assets are anything of value that you own, such as property, investments, and personal possessions. When you die, your assets will be distributed according to your will or, if you do not have a will, according to state law.
2. Property
Property includes any real estate that you own, such as a house, land, or commercial property. When you die, your property will be distributed according to your will or state law. If you own property with someone else, such as a spouse or business partner, it may pass automatically to the survivor.
If you have a mortgage on your property, the lender may have a claim against your estate, and the property may need to be sold to pay off the mortgage. If you have a life insurance policy, it may be used to pay off the mortgage instead of selling the property.
3. Investments
Investments include stocks, bonds, mutual funds, and other securities that you own. When you die, your investments will be distributed according to your will or state law. If you have named beneficiaries on your investment accounts, such as a spouse or children, the investments may pass automatically to the beneficiaries.
If you have a retirement account, such as an IRA or 401(k), you may have named a beneficiary to receive the account when you die. If you did not name a beneficiary, the account may pass to your estate and be subject to probate.
4. Personal Possessions
Personal possessions include any items of value that you own, such as jewelry, artwork, furniture, and collectibles. When you die, your personal possessions will be distributed according to your will or state law.
You may have specific items that you want to pass on to certain people. In your will, you can specify which items you want to give to whom. If you have not specified who should receive your personal possessions, they may be sold and the proceeds distributed to your beneficiaries.
5. Debts
When you die, your debts do not necessarily die with you. Your creditors may have a claim against your estate, and your assets may need to be sold to pay off your debts. If your debts exceed your assets, your heirs may not receive anything.
If you have life insurance, the proceeds may be used to pay off your debts instead of being distributed to your beneficiaries. You may also want to consider creating a trust to hold your assets and pay off your debts before distributing the remaining assets to your beneficiaries.
6. Estate Taxes
When you die, your estate may be subject to estate taxes. Estate taxes are taxes on the value of your estate, and they can be quite high. The federal estate tax exemption for 2022 is $12.06 million, meaning estates worth less than that amount are exempt from federal estate tax. However, some states also have estate taxes, and the exemption amounts may be lower.
If your estate is subject to estate taxes, your heirs may need to sell assets to pay the taxes. You may want to consider estate planning strategies, such as gifting or creating a trust, to minimize your estate tax liability.
Planning for Distribution of Your Assets
To ensure that your assets are distributed according to your wishes, it is important to have an estate plan. An estate plan includes a will, which specifies how your assets should be distributed, and other documents that can help ensure that your wishes are carried out.
1. Will
A will is a legal document that specifies how your assets should be distributed when you die. It can also specify who should be the guardian of your minor children and who should manage your estate.
To create a will, you should consult with an estate planning attorney who can help you draft a document that reflects your wishes and complies with state law. Your will should be reviewed and updated periodically to ensure that it still reflects your wishes and any changes in your life circumstances.
2. Trusts
A trust is a legal entity that holds assets for the benefit of beneficiaries. There are several types of trusts, and each has its own set of rules and benefits. Some common types of trusts include:
- Revocable living trust: This trust is created during your lifetime and can be amended or revoked at any time. It can be used to manage your assets during your lifetime and to distribute them after your death.
- Irrevocable trust: This trust cannot be amended or revoked after it is created. It can be used to transfer assets out of your estate and to reduce your estate tax liability.
- Charitable trust: This trust is used to support a charitable organization and can provide tax benefits to the donor.
Trusts can be complex, and it is important to work with an estate planning attorney to determine which type of trust is right for you and to ensure that it is drafted correctly.
3. Beneficiary Designations
Many assets, such as retirement accounts and life insurance policies, allow you to name a beneficiary to receive the asset when you die. It is important to review and update your beneficiary designations periodically to ensure that they reflect your wishes and any changes in your life circumstances.
4. Power of Attorney
A power of attorney is a legal document that gives someone else the authority to act on your behalf. There are several types of powers of attorney, including:
- Financial power of attorney: This document gives someone else the authority to manage your financial affairs, such as paying bills and managing investments.
- A healthcare power of attorney: This document gives someone else the authority to make healthcare decisions for you if you are unable to make them yourself.
It is important to choose someone you trust to serve as your agent under a power of attorney and to discuss your wishes with them.
5. Advance Directive
An advance directive is a legal document that specifies your healthcare wishes in the event that you are unable to communicate them yourself. It can include instructions for end-of-life care, such as whether you want to be kept alive on life support, and can appoint someone to make healthcare decisions for you.
It is important to discuss your healthcare wishes with your loved ones and to ensure that your advance directive is easily accessible in the event of an emergency.
BOTTOM LINE
When we die, we leave behind a legacy that includes both intangible and tangible assets. Planning for the distribution of your assets and the management of your affairs after your death is important to ensure that your wishes are carried out and your loved ones are provided for. By working with an estate planning attorney and reviewing and updating your estate plan periodically, you can ensure that your legacy reflects your values and priorities.
