Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific investment advice. Each Investor Toolkit update gives you a fundamental piece of investment strategy, and shows you how you can put it into practice right away.

Tip of the week: “2 tips that will help you leave a more profitable estate to your heirs.”

It’s a good idea to have some financial contingency plan in place at any age, so that someone you trust can take charge of your finances and investments if you are unable to do it yourself. From time to time, we hear from investors asking us how they might set up their finances so they can be easily managed after their death.

As you proceed with your retirement investing, it’s always good to have clear plans in place—and keep them up to date as your circumstances change. Here are two tips you can use to ensure that you put the least possible stress on your loved ones and make the most of the investments you leave to your heirs:

1. Have a clear but flexible financial contingency plan: This will let someone you trust to take charge of your finances if necessary. However, it’s important to focus on finding someone you trust thoroughly, and to give that person as much latitude as possible.
   
   The alternative — leaving fixed instructions — introduces a random element that can only hurt you. After all, fixed instructions (such as “If I get sick, convert all my holdings into T-bills”) won’t add to your wealth. But they may turn out to be wholly inappropriate, and the person you put in charge will be confined by your instructions and unable to do anything different.

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2. Consider your heirs when making investment decisions: If you have substantially more money than you’ll need for the rest of your life, and you plan to leave the excess to your heirs, it makes sense to invest at least part of your legacy on their behalf. That is, invest with their longer time horizon in mind, not yours.
   
   For instance, if your heirs are in their 40s, your retirement investing should involve holding at least part of your portfolio in a selection of investments that would suit investors in their 40s. Of course, you’d still want to invest conservatively. But you would take into account the many years that 40-somethings have until they reach retirement age.
   
   For instance, if your retirement investing includes holding your money in T-bills for the last few years of your life, it will produce a minimal return after taxes. In fact, you may actually lose money after accounting for taxes as well as inflation.
   
   After your death, it may take months or longer to settle your estate. After that, your 40-something heirs may need time to put your legacy to work, especially if they are inexperienced investors. They may have passed 50 by the time they get around to investing in a way that’s appropriate to their age.
   
   Missing out on, say, three years of even moderate returns can take a big bite out of the funds they’ll have a few decades later, when it’s their turn to retire.

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