Article 5 min

Five Key Financial To-Dos Before the Year Ends

Setting deadlines for important financial and legal tasks can help you avoid leaving a burden for your loved ones if you were to unexpectedly pass away or become incapacitated. This article emphasizes the importance of regularly reviewing and updating key financial documents and responsibilities. It highlights five essential tasks to complete by the end of the year to ensure your estate is in order and your assets are distributed according to your wishes.

Summary

📝 Check Your Beneficiaries

One of the most crucial financial tasks is to regularly check and update your beneficiaries. Beneficiary designations, which are made for retirement accounts, annuities, and life insurance policies, determine who will receive the assets if you pass away. Failure to update these designations could lead to unintended consequences. Reviewing and, if necessary, changing your beneficiaries is usually a straightforward process that can often be completed online or by contacting your financial institution.

Takeaways:

• Regularly updating beneficiary designations is essential to ensure your assets go to the intended recipients.

• An outdated beneficiary designation can lead to costly legal disputes and unwanted financial consequences.

Key Terms

• Beneficiary: A person designated to receive assets or benefits upon the account holder’s death.

• Annuity: A financial product that pays out a fixed stream of payments over time, often used for retirement purposes.

💰 Review Pay-on-Death and Transfer-on-Death Designations

Many financial institutions offer options like "pay-on-death" (POD) or "transfer-on-death" (TOD) for accounts, vehicles, and even real estate. These designations allow your assets to bypass probate, a potentially lengthy and costly legal process, and go directly to your designated heirs. It's important to ensure these designations are current to avoid delays and expenses. Different states have specific rules about which types of assets can have these designations, so it's crucial to know the local regulations. Adding or updating a beneficiary for a vehicle or property requires submitting the correct forms to the appropriate authority, such as a county recorder for real estate.

Takeaways:

• Pay-on-death and transfer-on-death designations help streamline the transfer of assets after death.

• Ensuring these designations are up to date can save time and money for your heirs.

Key Terms

• Pay-on-Death (POD): A designation that allows a beneficiary to receive assets without going through probate.

• Probate: The legal process of distributing a deceased person's estate.

• Transfer-on-Death (TOD): A legal tool allowing the transfer of property directly to heirs without probate.

🔎 Update Insurers — and Inform Your Heirs

Keeping your life insurance and other policy information updated is vital. Beneficiaries will need to file a claim to access any payouts, and in many cases, they may not even be aware of existing policies. Studies have shown that billions of dollars in unclaimed life insurance benefits exist because beneficiaries were unaware of them. Updating your contact details with insurers ensures you remain reachable, which can prevent a policy lapse. Many insurers offer the option to add a backup contact who can be notified if you're unreachable or a payment is missed. Keeping this information current protects your heirs and ensures policies do not accidentally lapse.

Takeaways:

• Informing heirs about existing policies prevents potential lost benefits.

• Regularly updating your contact details with insurers can prevent policy lapses.

Key Terms

• Beneficiary Claim: A request filed by a beneficiary to receive insurance benefits.

• Policy Lapse: The termination of an insurance policy due to non-payment or failure to maintain requirements.

🔑 Visit Your Safe Deposit Box

Neglecting to pay the fees for a safe deposit box could result in the contents being confiscated by the state. Banks usually drill the box and surrender its contents if payments are not made for a few years. Visiting your safe deposit box annually ensures that all fees are paid and contact information is updated. Additionally, you should provide clear instructions to your executor or heirs about the location of the box and where to find the keys. This can prevent valuable items, family heirlooms, and important documents from being lost or destroyed.

Takeaways:

• Annual visits to your safe deposit box help avoid forfeiture of its contents.

• Providing detailed instructions to heirs ensures they know where to find essential items.

Key Terms

• Safe Deposit Box: A secure container within a bank where valuable items and documents are stored.

• Executor: A person designated to administer the estate of a deceased individual.

📋 Create or Revise Powers of Attorney

Powers of attorney (POA) documents are crucial for ensuring that someone you trust can make financial or medical decisions on your behalf if you become incapacitated. Without these documents, your loved ones might need to go to court to gain decision-making authority, which can be a time-consuming and costly process. It's important to not only have POA documents in place but to review them regularly. You should ensure that the designated agents are still available and willing to serve in this capacity, as circumstances can change over time.

Takeaways:

• Powers of attorney are essential for managing decisions if you're unable to do so.

• Reviewing POA documents regularly helps avoid complications during a crisis.

Key Terms

• Power of Attorney (POA): A legal document allowing a designated person to make decisions on another’s behalf.

• Incapacitated: A state where a person is unable to make decisions due to illness or disability.

Conclusion

Procrastination can have serious consequences when it comes to financial and legal matters. Setting deadlines, such as the end of the year, to review and update beneficiaries, legal documents, and insurance policies can protect your loved ones from potential financial stress and legal complications. By taking the time to complete these important tasks, you ensure that your estate is in order and your wishes are honored, providing peace of mind for you and your family.