Investing can be a smart way to take existing resources and multiply them. Investing in stocks could result in regular dividend payments if the companies are successful. Investing in digital assets or real property can also eventually lead to substantial gains for an investor.
Regardless of what type of investments someone pursues, they need to consider what may happen to their resources when they die. Those investing may want their loved ones to benefit from their efforts. The three tips below can help investors optimize their estate plans.
Provide clear information about all investments
Diversification protects against economic downturns, but it can create challenges when others need to identify investment holdings. Especially in scenarios where people may have invested in vacant parcels of real property, physical assets like gold or digital resources, there may not be a clear paper trail connecting them to their investments.
Their loved ones could overlook some of their investment property during estate administration, which could lead to major challenges in the future. Maintaining a comprehensive list of all current investments is a smart move. Investors may want to provide account information and other details that can help people identify and access their investments.
Consider transfer-on-death designations
In scenarios involving investment accounts in particular, testators have a unique option available if they hope to bypass probate court. They can file a transfer-on-death designation with their financial institution. Their intended beneficiary can then assume control over the investment account without waiting for the probate courts to oversee the transfer. Direct transfers can also diminish the value of an estate to reduce estate tax risks. Keeping assets out of probate court can protect resources from creditor claims.
Consider funding a trust
The more successful an investor becomes, the greater the risk of estate taxes and other probate complications. Holding certain investments in a trust can be a way to keep them out of probate court and minimize tax liability. The investor can continue to benefit from their resources while they are alive. They can choose someone to manage those investments and how they distribute them after they die.
Creating a thorough estate plan is a smart decision for investors and others with complex financial resources. The right estate planning strategy can help people protect themselves, their loved ones and the legacy they hope to leave.