Photo of man considering how to start with estate planning.

What happens to my money after my lifetime? 6 steps to estate planning

After a lifetime chasing financial goals and caring for the people you love, your assets should end up where you want them. Estate planning formalizes your wishes, but it’s an easy task to avoid. “You’re essentially planning for death,” says Tyler De Haan, director of Retirement Solutions at Principal®. “That’s tough to think and talk about.” 

Without an estate plan, you lose control over what happens to your assets—you leave it up to the state to make those decisions. Taking steps now can help ensure that everything goes to the people and causes you care about most. 

Estate planning is more than just writing a will. A good estate plan lays out who you want making financial and health care decisions if you can’t make them for yourself. Work with an attorney who specializes in estate planning. Your financial advisor or tax professional may be able to make recommendations, since they often work together on behalf of clients. 

Here are the top six things to consider.  

1. Answer the most important estate planning question. 

Long before you touch the paperwork, De Haan says, begin with the question: Where do I want my assets to go when I die? “Answering that,” he says, “will start you down the right path.”  

Your priority might be supporting your surviving spouse or family members who rely on your income. You may want to fund the grandkids’ education or leave money to a special cause or scholarship fund. Prioritizing wishes will help direct the rest of the planning process.

2. Check your beneficiary designations.  

Designate beneficiaries for your retirement accounts and life insurance. You’ll typically do so when you open an account or start an insurance policy; to make changes later, you’ll fill out a form. Similarly, when you open savings and investment accounts, you can set up transfer-on-death designations. For existing savings accounts and investments, including stocks, bonds, and mutual funds, you can contact the bank or firm that holds the account to establish those designations.  

If you’re a homeowner, you can title your house with rights of survivorship, leaving it to your spouse or other joint owner without having it go through probate (a public forum to resolve disputes raised by creditors or heirs). Check this beneficiary information every year or two to make sure the details are current.

Stanley Poorman, CFP®, a financial professional with Principal, says a common misconception is that estate planning is expensive. But listing beneficiaries on your accounts—an essential piece of estate planning—is free.

3. Create a will. 

Write a will that details all your wishes. Some people go to a lawyer for help, others use legal tools online. In this document, you’ll name an executor—the person who will carry out the terms of your will—and your beneficiaries. Note that beneficiaries named on accounts, such as a 401(k), will generally override anything in a will. 

A will allows you to pass on other assets such as cars, jewelry, heirlooms, and other possessions. Make a detailed list of these items and designate who should receive what.

And if you have minor children this is where you name a guardian (make sure that person is comfortable with it first).

4. Consider setting up a trust. 

A trust is a legal arrangement that provides control over your property, both while you’re living and after you die. Trusts aren’t necessary for every estate plan but in more complex situations, they can be an efficient way to pass on assets. For example, if you want an inheritance to be doled out piecemeal over a long period, instead of as a lump sum, a trust can help achieve that. Another big advantage: A trust can help you avoid probate. “Trusts are private, so you don’t have to let people know what you have and what you don’t have,” De Haan says.  A trust can also give you added control over the timing and purpose of distributions.  

5. Give to charity. 

It may be comforting now to know your money will go toward a good cause after you’re gone. There may also be income and estate tax benefits to gifting to charities. Here, you have a few options: 

  • Designate a charity as an alternative beneficiary on a retirement account or investment account.  
  • Set up a charitable trust.  
  • Use a donor-advised fund. 

6. Review your estate plans. 

Over the years, major personal and financial events can have a big impact on where you want your money to go. And when you check your estate plans in future years, you may find your initial decisions no longer align with your wishes. “Don’t set your estate plan and then forget about it,” De Haan says. Read through your estate plans every few years and update as needed. 

Estate planning is easy to put off—especially when you’re focused on major financial milestones like retirement or putting your kids through college. But the planning you do now can make a meaningful difference for your family, helping to ensure their financial footing and avoid potential conflicts when you're gone.  

Get started today with our estate planning workbook (PDF), which helps you outline your wishes and information family members will need. Or learn more in our webinar: Estate planning: Can you DIY? (use passcode: Principal).  

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