There are tasks in life that do not rank high on the excitement scale but, never the less, need to be done. Paying your monthly bills, getting your annual physical, getting your teeth cleaned at the dentist, changing the wiper blades on your car and a host of other projects are all part of life. Avoiding these tasks creates problems down the road. Taking care of them gives you peace of mind. Another item on this list of tasks is preparing for your eventual demise. None of us know our expiration date, but when that day arrives you will leave behind people and possessions. Putting some order to your affairs now will ease future burdens and heartaches on the people you leave behind.
This process is called Estate Planning and it involves preparing documents, often with the help of an attorney, that spell out your wishes. The first and most important question is who do you want to take care of after you pass. This could include your spouse or significant other, children, grandchildren, other relatives, friends, or charities you value. Once you’ve settled on the who, what you would like to leave is the next question to answer.
The first document to consider is a Will. A well written Will clearly spells out your intentions and should conform to the laws of the state you live in. Some people may have unique situations, a special needs child or a treasured pet, and may want to consider a Trust to take care of this person or pet.
You will want to designate beneficiaries on IRAs and retirement accounts. You can also have beneficiaries on taxable investment accounts. These accounts can be registered as Transfer on Death (TOD). Similarly, bank accounts can be titled Payable on Death (POD). In many states, if you own your home, you can designate a beneficiary. Naming beneficiaries on these accounts speeds up the process of getting funds to the beneficiary and avoids probate.
There are two documents that may come into play while you are still alive but unable to take care of your own affairs. A Power of Attorney gives a trusted relative or friend the authority to handle your financial matters if you are incapacitated for a period of time. A Medical Power of Attorney or Healthcare Proxy allows someone to make medical decisions on your behalf if you are unable to make such decisions.
If you have specific items that you want distributed after your death you can list them in your Will or in a separate document. Be sure to mention this additional document in the Will. You should leave instructions on what to do with your digital assets and social media accounts. It will also be helpful to let a trusted individual know the location of your important papers and account passwords. Finally, it is thoughtful and eliminates confusion if you let those close to you know your wishes about a funeral or memorial service. Many people even prepay for their own funerals.
Nothing on this list is particularly thrilling, but the people you leave behind will benefit greatly by your actions today. They will have to deal with their emotions as they contemplate you passing along with the practical decisions of what to do next. Having a well-documented estate plan answers the unasked questions and eases the mental burdens. If you already have an old estate plan, it’s time to review it and make sure it is still accurate. For everyone else, it’s time to get going and cross this off your to do list. An experienced financial advisor or estate attorney will be able to help you organize the steps you need to take to get this accomplished.