Many people are intimidated by the process of estate planning because trusts, wills, advance health care directives, and the like can seem extremely complicated. While it is true that there are some financial instruments used in the field of estate planning that are a bit intricate, there are also some simple and straightforward inheritance planning tools that can be utilized. They’re not necessarily going to be the only components to your estate plan but they can certainly be used effectively under the right circumstances.
The two such tools that we will take a look at today are life insurance and pay on death or transfer on death accounts.
Estate planning attorneys will often emphasize the fact that all adults should have an estate plan in place, even those who are younger because you never know what the future holds. When you have not had enough time to firmly establish yourself financially it is likely that your family is relying on your income heavily. Your untimely death could leave them in a very difficult situation, which is why it’s is so important to carry adequate life insurance as an income replacement vehicle. You also must review your coverage periodically to make sure that it is adequate to reflect the current needs of your family as time passes, additions come along, and your responsibilities grow.
The other simple but effective estate planning tool that we would like to highlight here is the pay on death account. These accounts are offered by most banks and many brokerages, and when you open the account you name a beneficiary who would assume ownership of the funds therein upon your death. This transfer would take place outside of the process of probate so it would be almost immediate.
In addition to the ease of transfer, these accounts are attractive to many because of the flexibility they provide. You and only you have access to the account while you are living and you can make deposits and withdrawals as you see fit. Should you choose to do so you can change the beneficiaries or even close the account entirely, so you retain complete control on every level.