Aretha Franklin, the Queen of Soul, died at 76 without a Will for her $80 million estate. The damage to her 4 sons, one with special needs, is hard to calculate while the IRS deliberates on the true value of her estate.
Her sons wait while the tax man deliberates how to value things like royalties from her smash hit “Respect” and then how to distribute them among the four brothers.
Aretha’s story serves as a pointed reason to properly manage your assets. You may wonder what “properly managing” your assets entails.
There are several tasks you should execute. It is similar to recurring events in the calendar. The tasks are broken down into “One-time”, “Yearly”, and “Monthly” tasks.
Here are the most important (and often missed) one-time tasks with your assets.
1. Create a will
This is that all important document that Aretha Franklin missed. You need to create one. 57% of adults don’t have one, and run into the same issues as the Queen of Soul.
In a will you specify - how to transfer your assets to beneficiaries after your death.
Many ask whether they need a lawyer to draft a Will. The answer is...it depends. If you have a medium size estate or more, then a lawyer is worth every penny. Smaller estates can draft a Will online in 20 minutes.
2. Create an estate plan
A person's estate is all the property owned at death. An estate plan may contain one or more of the following.
A revocable living trust
A person may set up a living trust to hold certain of all their property (like their house) during their lifetime, and then give those assets to beneficiaries at their death. Assets held in the living trust do not go through probate, which is why most people set them up.
According to Fidelity Investments, a Trust or Trust fund, “is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.”
We normally conjure images of the rich when we think of trusts. However, anyone can create one.
Trusts are most often used in estate plans to minimize taxes, skip the probate process, and protect your assets. They can also determine how much and how often money is distributed to minors or guardians. Finally, they can allow you to pass assets quickly and privately.
There are numerous laws regarding trusts and consulting a lawyer is best practice.
3. Update your legacy documents with major life changes
Your Will, Estate Plan, Living Trust and Trust together make up a series of “legacy” documents. They won’t change drastically unless you have a major life change like:
- Had a baby
- Gain an asset
- Lost/Sold an asset
- Beneficiary death
- Adopt a child
- Deciding to add or remove a beneficiary
It is important to have your full estate plan with all associated documents accurately reflect your desire for your estate. Again, for a small estate, you can do it yourself. Medium to large estates are usually best left to consulting a professional.
Once a year
We all have those annual or semiannual bills that tend to throw everything off. Resolve that by setting up reminders when occasional expenses are due.
1. Property taxes
The most important yearly task is paying your annual property tax. We all dread the yearly invoice from our local government. When the taxman comes, it is best to resolve it immediately.
An excellent idea regarding property taxes is to set aside 1/12 of the most recent tax bill every month. It won’t be exactly what you pay, but it will be exceptionally close. You can also arrange it to pay property taxes and home insurance into an escrow account. Then, it is a forced savings that pays those occasional premiums. On a month-to-month basis, it will be another bill and not a weird savings account.
2. File tax return
Next, filing your taxes every year. It is one of the most important asset maintenance tasks you do.
- To file your taxes, start by collecting all of your tax documents (W2, 1099, K1 et al). Having a consolidated place to gather documents and keep track of your gains over the course of a year is advisable. Kubera is excellent for both tasks (and net worth tracking).
- Next, choose a tax professional or tax filing software.
- File your taxes.
- Double check for tax breaks, credits, and accuracy.
- Collect a refund or pay the difference.
3. Pay insurance premiums
Third, check for insurance premiums that need to be paid annually or semiannually.
It is best practice to pay insurance premiums in full upfront, because most will charge a “convenience fee” to make monthly payments.
4. Renew vehicle registration
Lastly, one time a year you need to renew your vehicle registrations.
Make sure to pay this bill on time and put the stickers on your license plate to avoid a nasty ticket from your local police department.
Once every month
It is easy to overdo financial monitoring. However, checking your net worth and associated accounts monthly will help you stay on top of your personal finances. Here are the two most important tasks to do monthly.
1. Update net worth values
First, update all the values of your separate accounts in your net worth tracking app. It’ll give you a quick snapshot of your current financial health.
Seeing the full picture of your current finances is a healthy practice. That means including every asset like how much uncle Jim still owes you, the net value in your brokerage accounts and bank accounts.
2. Rebalance according to financial goals
Once you see the value of your diverse assets in a single location, it is easier to plan for next steps.
At this point, you can assess whether you need to rebalance your asset allocation depending on your money goals.
That may include something as simple as rebalancing your brokerage allocations or something as complex as diverting extra cash toward an apartment syndication. It depends on your stage of life and goals like cash flow versus appreciation.
Regardless, seeing all of the values in a single location helps assess the best course of action.
This is a list of every one-time, yearly, or monthly task to do with your assets. Doing all 11 will keep you and your loved ones safe and avoid unfortunate situations like Aretha Franklin’s four children face.
At the same time, it will reduce your taxes, skip the probate process, and keep you financially healthy.
Kubera helps you protect your wealth by keeping track of your net worth and storing important documents. It helps you be on top of your checklist to manage and safeguard your assets. It also ensures safe transfer of this critical information to your beneficiary, if something unexpected happens. Read the story behind Kubera.
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