4 Steps to Get Your Financial Affairs in Order

If the last year has taught us anything, it’s that life can change quickly and unexpectedly. It’s better to be sufficiently prepared for a situation that will inevitably arrive – even if not for many years – rather than face a tragic situation where your wishes are not clear and loved ones are left with unnecessary administrative headaches. 

All that can be avoided by carefully planning ahead. Here are 4 steps to consider to get your financial affairs in order. 

Create a legal will

While it may seem obvious to create an estate plan in the event something should happen to you or your spouse, the reality is that 62% of Americans do not have a will. Many people believe they don’t have enough in assets to warrant a will, or think their money will automatically go to their next of kin. These assumptions are wrong. 

Due to the COVID-19 pandemic, however, that’s changing, and adults of all age groups are realizing the importance of putting their wishes in writing since verbal agreements are never binding. Legally, an attorney isn’t required to create a will, and now there are a variety of online services to create simple wills. In most situations, especially with more complex estates, it’s better to hire an attorney that can save your family misunderstandings and save thousands in legal fees down the road. A complete estate plan should include last will and testament, a power of attorney and health-care proxy. 

Name your beneficiaries

Beneficiaries are people or organizations who will receive your assets after your death. These designations are listed in your will but also in important financial assets such as your life insurance policy, IRAs, mutual funds and annuities. Bank checking and saving accounts don’t require beneficiaries, however, it may be smart to add one to avoid complications later on. 

Beneficiary designations should be a thoughtful decision and can include a spouse, a child, a charity or nonprofit, your estate or another person that you’ve designated. These selections should be reviewed after major life events such as marriage, divorce, birth of child or death of a spouse or other loved one. But be aware that some assets, like an irrevocable trust, are harder to change once set up. When setting up a beneficiary for a life insurance policy, be sure to consider the purpose of the policy. If your aim is to provide financially for your family, then your spouse makes sense. If your objective is to ensure that your business continues, it could be a business partner. 

Organize your financial documents

Make life easier for whomever is handling your estate and put together a list of all your assets and liabilities and where all of your important documents are located. This will save a lot of scrambling and stress during a time when family members are also grieving. List banks, mutual funds, retirement accounts, where checkbooks are located and what funds are available to fulfill funeral expenses, as well as a list of other hard assets such as cars and boats. You’ve had a lifetime to make sure your family is cared for, so take the time now to make sure relatives know how to find everything they need. 

Determine whether a trust is needed

One common question that estate attorneys get is whether a trust is needed instead of a will. It’s a myth that trusts are only for wealthy people as they provide a number of benefits for even those with minimal assets based on their special circumstances. A trust is also something to consider when you are looking for more control over your assets. While more complex and expensive to set up, unlike wills, trusts are active on the day they are created and not required to go through probate. There are many different types of trusts and many ways to fund them, including with a life insurance policy. For parents of minors, a term life insurance policy can be an inexpensive way to ensure children are cared for. 

Taking these steps well in advance will provide peace of mind knowing that you’ve done what you can to help your loved ones. As you examine all your options, be sure to consult with a trusted Rural Mutual agent to customize coverage to fit your needs. 

The information provided in external website links is for general informational purposes only and does not form any recommendation or warranty by Rural Mutual Insurance Company or its affiliates.