A refrain that best describes estate planning is that it’s not about the years you have left, it’s about the years you have lived. As an AT&T employee or retiree, you’ve likely earned a variety of valuable retirement benefits, such as your AT&T pension and your 401(k) savings. Although thinking about life after you’re gone can be difficult, it becomes easier when you reframe it as planning how to successfully manage all you’ve worked hard for.
Here are the estate planning steps that will help AT&T employees and retirees do just that.
GET your beneficiaries IN ORDER
This is perhaps the easiest estate planning step you can take. Yet, many people forget to do it.
All the benefits you have earned and accumulated — pension plan, life insurance, 401(k) and IRA accounts, etc. — can be passed on to a beneficiary after you pass away.
With your AT&T pension, you can receive a payout in the form of a monthly annuity or lump sum. If you choose the monthly annuity, the survivor option is only available to spouses. But if you take a lump-sum payout and subsequently roll it over into an IRA, you have the option to name as many people as you want and add or remove names as you like. Just as long as the allocated percentages add up to 100%.
The same applies to your AT&T 401(k).
It is important that you keep your beneficiary information current. Life changes. You may experience a divorce and get remarried. Often, people name someone as a beneficiary early in their careers and then neglect to update it. That can cause major problems for your loved ones later. Even if your wishes change, AT&T is required to honor the written designation upon your death, no matter how old the information. The designations listed on your beneficiary form are the final word – they trump your will.
For any non-retirement investment accounts, you can register them in transfer-on-death (TOD) form. Not to be confused with TOD deeds, but they work the same way in that the beneficiary you name will inherit the account automatically upon your death.
CREATE A LIVING TRUST
Let’s say you have consolidated your lump-sum pension and 401(k) into an IRA. Your hope is to pass on the remaining funds after retirement to your family and/or favorite charity. What should you have in place, so you feel confident everything is properly distributed according to your wishes?
Most people already understand they should have a will, but it’s also important to consider setting up a living trust. A living trust is created while you are alive with instructions on how your assets are to be managed and then distributed by a trustee upon your death. Any asset you own can be placed in a trust, including investments, banks accounts, real estate and vehicles.
Trusts generally cost more to create than wills. But a will may have to go through the probate process while trusts pass outside of it, saving your heirs time and money.
DESIGNATE YOUR BANK ACCOUNT AS PAYABLE ON DEATH
You can also designate beneficiaries for your bank account. Called a payable-on-death (POD) designation, you can name a beneficiary who has no rights to the money while you’re alive but who can claim the money directly from the bank once you pass away.
USE JOINT OWNERSHIP WITH “RIGHTS OF SURVIVORSHIP”
Assets under joint ownership avoid the probate process provided this ownership includes the “right of survivorship.” Under this arrangement, the surviving owner automatically owns the asset – be it a bank account or investment account or real estate – when the other owner dies, completely bypassing probate. Types of joint ownership with rights of survivorship are “joint tenancy” and “tenancy by the entirety,” which is for married couples.
ESTABLISH A DURABLE FINANCIAL POWER OF ATTORNEY
You should designate a durable financial power of attorney, which gives someone the legal authority to help manage your assets in the event you are unable to properly handle them yourself. This document can prevent the probate court from having to appoint a conservator to handle your affairs. Further, a durable financial power of attorney, who may access your financial information, could help monitor your finances and protect you from becoming a victim of financial fraud or scams.
SET UP A TRANSFER-ON-DEATH DEED FOR PROPERTY
A transfer-on-death (TOD) deed is a legal document that allows real estate owners to name who they want to inherit their property once they pass away. Further, it allows the real estate described in the deed to be transferred to the named beneficiaries outside of probate. To go into effect, the deed must be properly signed and recorded.
Different states have different rules, and not all states recognize TOD deeds. For example, Michigan recognizes what is commonly referred to as a “Lady Bird Deed.” This is an enhanced-life-estate deed, which works in a similar fashion as a TOD deed. Consult an estate attorney to learn what deeds are recognized in your state and if one is right for you.
WORK WITH A PROFESSIONAL
Estate planning is not easy. Each document needs to be written and filled out properly. Then there are taxes and other laws to navigate, which can vary from state to state. Further, there are several less-than-obvious situations to plan for, such as what happens if your beneficiary passes away or becomes incapacitated. That’s why you should seek the help of an estate attorney, with input from your financial adviser. A good estate plan will allow you to give your loved one’s peace of mind during a difficult time.
Keep in mind, an estate plan isn’t only for the rich and famous, nor is it something that can wait until later in life. The size of your estate, be it a single bank account or home, does not matter. What matters is that the right decisions are made on your behalf and your wishes are fulfilled. Further, tragedy can strike at any moment.