Creating a will is a pivotal step in estate planning, allowing individuals to outline their wishes for the distribution of their assets after their passing. Selecting beneficiaries and determining how to distribute assets requires thoughtful consideration to ensure that your legacy reflects your values and provides for your loved ones effectively.
The starting point for most people is to leave their entire estate to their spouse. In some circumstances—such as second or third marriages where there are children from prior marriages who need to be accounted for—it may not be desirable to leave one’s entire estate to their spouse, but in most cases, the spouse will be the primary beneficiary under the will.
Often the trickier question is what happens when both spouses are gone. In most cases, the simple answer is to leave the estate to the children of that relationship, in equal shares. However, that “cookie cutter” approach may not fit everyone. Those in need of more unique estate planning start by making a list of potential beneficiaries, including family members, friends, charities, and other individuals or organizations they wish to include in their will. They should consider the relationships they have with each potential beneficiary and the significance of their inclusion in the estate plan.
The next step is to take stock of their assets, including real estate, investments, retirement accounts, life insurance policies, and personal belongings. Determining the value of each asset and considering how to distribute them among the beneficiaries is, in many ways, the most critical step in creating a will.
In terms of how to distribute those assets among the chosen beneficiaries, take into account the dynamics of family relationships and any potential conflicts that may arise during the estate distribution process. Consider how to balance the needs and interests of different family members while ensuring fairness and equity in the estate plan. If there are minor children involved, or beneficiaries with disabilities who may need financial assistance, designating extra funds and, in some cases, guardianship for them, may be critical to ensuring their care and financial support until they reach adulthood.
It’s also important to bear in mind that a will can establish multiple tiers of beneficiaries. That is, those selected as the “primary” beneficiaries are those who have the top priority to inherit. This is the spouse in most cases, as mentioned. The “secondary” beneficiaries will inherit if all of the primary beneficiaries have already passed away or are otherwise somehow excluded from inheriting. Beyond that, there can be “tertiary” beneficiaries and so on. By designating successive tiers in this manner, one can avoid the gifts in their estate “lapsing” and instead being distributed according to the applicable intestacy rules (that is, the default rules provided by applicable law for what happens to one’s estate if they die without a will).
Lastly, one should regularly review and update their will to reflect any changes in their family circumstances, financial situation, or estate planning goals. Life events such as marriage, divorce, birth of children or grandchildren, and changes in financial assets may necessitate revisions to your estate plan.
Crafting a will and determining how to select beneficiaries and distribute one’s assets is a significant responsibility that requires careful consideration and planning. By following these guidelines and seeking professional advice, one can create an estate plan that reflects their values, provides for their loved ones, and ensures that their legacy is preserved.
