There are several important financial documents that will ensure the future of our assets, but we need to be proactive about keeping them up-to-date.

Paul Stein from Advanced Retirement Resources encourages us to review important financial documents frequently to ensure the proper adjustments have been made.

“It’s really important to look at the estate plan that you’ve done periodically. Either if there’s a life event that has changed, a death or a divorce, but certainly every few years because we forget. It may be every 3-5 years at least. Get your documents out, read through them, and see if it still says what you want to say.”

The process of creating and maintaining an estate plan complicated. There are several types of documents to choose from, such as a will or revocable trust. Paul outlines the distinction between the two,

“There’s a very clear line between the two. The will being a very public document that pretty much anybody could get their hands on. The revocable trust has a lot more privacy involved in it.”

Kirby Stoll from the Northwestern Foundation expands on the the purpose of a revocable trust.

“The revocable trust, being a more private document, is how to pass your estate along with more privacy involved, and really changing the ownership from your individual ownership into the ownership of this entity; this revocable trust which has its own tax ID number recognized by the I.R.S.”

Paul discusses the formality of adding charitable contributions.

“A lot of people do their charitable contributions or designations within their will or the trust. Make sure that in the language of the trust specifies considering those charitable contributions that you’re making out of your retirement plans, and then have that in your retirement plan beneficiary if it’s flowing directly, rather than going through the trust.”

He shares a helpful strategy for making charitable gifts through tax deferred retirement plans.

“It’s most efficient to have retirement plans, dollars that have never been taxed, this wouldn’t include Roth IRA’s, Roth 401K’s, etc. those are tax-free to the beneficiaries, but tax deferred retirement accounts, the tax liability passes to the beneficiary. If it’s a tax-free charity, that’s a wonderful thing, then all the money that would have gone to taxes goes to the charity.”

Highlight: Adjusting financial documents

Planning for the days ahead