Most of us are careful about managing our finances, often thinking long and hard about where and how our hard-earned money gets spent. But how many of us think about how our assets will be distributed after we’re gone? You probably have relatives, friends and charitable organizations — such as Massachusetts General Hospital — that you would like to see benefit after your passing. But without some basic planning, that decision might be out of your hands.
Estate planning is the process of designating the people and organizations that will receive or manage your assets after you die. There are three basic avenues to avoid having state law determine how your assets will be distributed:
1. Your Will
If you pass away without having executed a valid will, applicable state law will decide how your assets are distributed. These laws will distribute assets to your closest relatives even if you wouldn’t have decided to divide things up that way. In addition, no provision for charity exists under the laws of any state, even if you made substantial charitable contributions to Mass General during your lifetime.
2. Beneficiary Designation
Even if you have executed a valid will, you can distribute certain assets without having to go through the probate process. You can leave written instructions, commonly referred to as beneficiary designations, or payable-on-death (POD) accounts. Examples include funds remaining in an IRA, 401k or similar retirement accounts, the death proceeds associated with a life insurance policy you own, or other financial assets such as bank and brokerage accounts. If you don’t leave instructions, then these assets will typically become part of the probate process as well.
3. Living Trust
Assets placed in a living trust pass directly to named beneficiaries and do not go through the probate process. This is one of the advantages of this type of estate distribution.
Conclusion
If you don’t leave instructions in the form of a will, living trust and/or beneficiary designations, the government will decide who gets your assets and how much they receive, not you. Our complimentary Estate Planning Guide can help make this process easier, with checklists, tips and techniques.
For more information about including Mass General in your long-term plans, please contact us at mghdevpg@mgh.harvard.edu or 617.643.2220.
