Two myths about wills and estate planning:
- You don’t need to worry about it until you’re somewhere north of 40.
- Even then, you only need to worry about it if you have an estate — which is to say, you have a lot of stuff to worry about in the first place.
Let’s be real. No one wants to talk about death or the reality that it could happen to any of us at anytime. It’s a morbid topic to address, but somebody has to do it. If we do not put some things in place to prepare our loved ones for our departure, we will leave them in a heap of a mess — even those of us who think we do not have a lot of stuff worth making plans for. Here’s the simple truth: if you have loved ones who depend on you for their well-being (financial or otherwise), estate planning is a must. In fact, one could argue, the younger your family, the more important this planning is.
How to financially plan for your death (so your loved ones don’t have to)
The good news is that with some careful attention to a few critical areas of your life, you can rest easy knowing your family will be secure and provided for should something happen to you unexpectedly. On the other hand, if things go according to plan and you live well into your golden years, you will have resources in place to make those years easier and more fulfilling. Careful estate planning might even mean you will have accumulated a nest egg or other nice treasures to share with your children.
Here are 6 matters that you can consider in order for you and your family to be better prepared financially and logistically when you pass away.
1. Get covered by life insurance
Let’s talk about life insurance. Many of us believe that we do not need life insurance for one reason or another. You are single, young, and have no dependents. Your kids are grown and on their own. You have plenty of savings already. But these are myths. Most of us have legitimate ways in which life insurance will benefit our families upon our death.
If anyone is dependent on you to provide for their living expenses, chances are you’ll greatly benefit from having a life insurance policy, especially if you are the sole or main breadwinner of the family. They will need a way to replace that income in the event of your untimely death. Even if your spouse has the larger earnings, he or she may need to quit or scale back on hours to care for little ones in the immediate aftermath of loss or pay for childcare. Either way, the financial security provided by life insurance is critical.
If your children are adults with their own incomes, or you have no dependents, consider that the money from a life insurance policy might help pay off any debts you leave behind or can cover funeral-related expenses.
When considering what life insurance policy best suits your needs, you have two basic options: whole life or term. For most of us, term life insurance is the better option to cover the needs of our family until they can care for themselves. Whole life insurance is a good option if you have a long-term dependent, like a special needs child, and if you don’t use it, your policy can be cashed out in retirement years.
2. Make a list of online accounts and passwords
If you can’t even remember your passwords, how in the world will your family?
Make sure that all the information your loved ones will need to access any financial accounts or insurance policies is stored in a secure, accessible place like a safe-deposit box or home safe. Think bank accounts, credit cards, and retirement accounts. Imagine the frustration of knowing your recently-departed loved one had made arrangements to help provide financial support, but because you cannot find an account number or PIN, you are left stranded without access to those resources. In the immediate aftermath of a death, your family will likely need to access cash that you have set aside or other accounts and services that you’ve set up. You can provide comfort to them by making these resources easily accessible.
3. Set up Power of Attorney
Who’s got your back?
Many people fail to express their wishes for their healthcare should they become incapacitated, either because they never knew they should, or they think nothing bad will happen to them and overlook the importance of such choices. The truth is, every adult should consider these matters and make their desires known in an advanced healthcare directive, which includes a living will and preferences for your healthcare. It also designates a Durable Healthcare Power of Attorney — a person you trust to make medical decisions on your behalf should you be unable to do so.
You should also appoint a General Power of Attorney who can handle your financial affairs if you become incapacitated.
4. Make plans for your funeral
Do you really want a $10,000 casket? Do you prefer flowers or charitable contributions?
Speak up now. You will not only get to have some input on your particular funeral or memorial arrangements, such as your favorite hymns or readings, but also save your loved ones a lot of heartache. Any pre-planning you can do while you are still living and breathing eases the burden placed on your loved ones from having to make difficult decisions in the midst of their own grief.
When a family member passes away, especially if it is sudden and unexpected, there are a lot of urgent decisions to make in a very short window of time. If you have already expressed some of your wishes about the type of service you’d like, whether you’d prefer a service in a church or a simple graveside gathering, who will deliver your eulogy, and what music will play, grieving loved ones will have fewer decisions to make. Furthermore, as unpleasant as it is to think about, there are funeral homes that encourage family members to make expensive choices about caskets and flowers and grave markers. In the midst of our grief, and sometimes our guilt, we are more likely to spend more than necessary and more that we might have on these items.
The best way to handle pre-planning for funeral arrangements is to express your wishes in writing and keep that document in a safe place with other important family papers (and make sure your spouse or other loved one is aware of it). We do not recommend prepaying expenses through a funeral home, as there is always a risk of losing that money should their business close or something else go wrong. Rather, consider establishing a payable-on-death savings account designated to a specific beneficiary and set aside for funeral-related costs. These accounts stay out of probate, and you can change the beneficiary or close the account at any time.
5. Inventory all personal items
Who will get Aunt Martha’s silver? Great Grandpa’s photo album? Over the years, you have no doubt collected any number of treasures. Some may have real financial value, others are merely sentimental. What happens to these things? If you have thoughts about how to distribute family heirlooms and items of value, it is important that you make that clear. Not only will this ensure that your wishes are honored, but you can spare your loved ones from potential rifts that can arise from all the divvying and decision-making that invariably accompanies such a situation.
6. Create your will
Where there’s a will, there’s a way.
If you think wills are only for the wealthy, so that they can choose who gets to play with their millions after their death, think again. Every adult should have a will, especially those with dependents.
If you’re married, you will want to create a will that adequately provides for your surviving spouse after your death. Most married couples choose to create mirror wills that transfer all assets to the surviving spouse first, then to dependents, other relatives, or charitable causes once both spouses pass away.
If you are single and have no dependents, you’ll still want to designate what is to be done with whatever financial assets you may leave behind. If you do have dependents, a will can protect them in a number of ways. First, you have the right to name a guardian for them in your will while they are still young. If you don’t name a guardian, the state will, and their choice may not be what’s best for your children.
You can also set up a trust for your kids through a will. Since children cannot directly inherit money and property as minors, a trust can hold those things for them until they reach adulthood. A trustee who you designate will manage that trust on their behalf, with their best interests in mind.
While there are firms and forms you can find online to help you establish a will, we recommend you hire an estate lawyer for the most secure and best document.
When we attend to these matters in advance, we gift our loved ones with more space to grieve. We lighten the already-heavy burden on them in the midst of painful loss. When they have fewer logistics to deal with in the days and weeks after the death of a beloved friend or family member, they have more time for seeking emotional support from others and moving through their feelings of loss.
Spero can help you identify and address these critical areas. We are here to grow with and support your family in each of its unique stages. We’d love to meet with you in person at one of our convenient branch locations.