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Protecting Your Legacy

How to account for investments in an estate plan

| Jul 15, 2022 | Estate Planning |

Your estate plan can be as unique as you want it to be. Rather than just leaving umbrella instructions to divide your assets evenly among specific people, you can go into minute detail if you so desire.

Addressing your most valuable property individually can be a smart decision. That way, you ensure that your legacy has a positive impact on others while maximizing the benefit they derive from your most valuable possessions.

If you have made investments throughout your professional life, you may want to pass those financial resources on to the next generation. How do you factor those investment accounts into your estate?

Think about who should receive those resources

One of the most important considerations when deciding how to pass on certain property will be who you intend to inherit that property. Do you want to skip a generation and pass your investments to your grandchildren, so that they can continue to accrue value for decades? Do you want them to go to a specific child, with your other child receiving your real estate?

Deciding who the intended beneficiary should be will help you determine the best way to pass those assets to the next generation.

Decide between direct ownership and access

There are typically three ways to handle your investment accounts in your estate plan. The first two involve giving direct ownership to beneficiaries. You can either arrange for the account to transfer, possibly with a transfer on death designation, directly to a specific beneficiary. Otherwise, you can leave instructions for the liquidation of the accounts and the distribution of the proceeds among specific beneficiaries.

The second solution involves giving someone access to investment resources but not necessarily ownership of or control over those assets. Changing the ownership of those investments to a trust can allow you to name a trustee who will manage the investments after your death. A trust offers the secondary protection of having a trustee manage the account and ensuring that there won’t be an immediate obligation to liquidate investments, possibly when the market is at a low point that would mean taking a loss.

They can then make strategic withdrawals when necessary for specific, pre-approved purposes as outlined in your trust. You might allow family members to ask for investment-based resources to pay for college tuition, fund a business venture or assist with the down payment on a home.

Properly addressing investment accounts and other valuable property in your estate plan will ensure you leave behind a meaningful legacy when you die.