Financial Steps to Prepare Your Family for End of Life Issues
No one likes to talk about death. No one. Talking about our own mortality can be daunting, especially if we are unprepared. But the very thing that will help us be prepared is actually talking about it and planning for it.
Financially speaking, there are several ways we can prepare that will not only give us peace of mind, but also make it much easier on our loved ones. It will also be important to have taken the necessary steps if we are the one left to make the financial decisions after our loved one is gone.
Step one is having all your financial documents in place so that you are not caught off guard. Adequate documents that outline your and your family’s wishes are necessary in order to accomplish family goals and objectives. This is true in the event of death or if physical or mental incapacity. Crucial documents include:
A records inventory – This includes: a list of your assets and where they are located; account numbers; online sources and uses of funds such as automatic withdrawals; passwords for online accounts; names and contact information for family members; where important documents are located such as those for insurance, taxes, medical history and doctors, investments, real estate, guardians, marriage and divorce, business documents, wills, trust, and powers of attorney.
A current will – Many people neglect to update their will after moving to another state or after a major change in their personal life or business affairs. Updating can often be done by obtaining a codicil that amends the will instead of starting from scratch. Do not assume you do not need a will if you plan to leave everything to your spouse. Not all state laws guarantee that a spouse will receive all assets upon a spouse’s death in the absence of a will.
Trust document – A trust agreement can give greater flexibility and control than a will alone but will be more complex and require ongoing responsibilities. An estate attorney can give guidance on the necessity of a trust when minor children are involved and/or there are complex needs.
Power of attorney – A power of attorney is not expensive and allows you to appoint a person or organization to manage your affairs in legal or financial matters if you become unable to do so. In most states, it does not cover medical decisions.
Health care directive – These documents vary by state so it is important to check with an attorney to see what form you would need. A directive, which can also be called a “living will”, is a written record that gives you control over the medical decisions made on your behalf when you are not able.
Without these documents in place and written according to your desires, family members will have to spend much time and money to predict and intervene for what was intended.
A second step is to check that the beneficiaries listed on all your accounts are as you wish. Keep in mind that insurance policies, retirement accounts and other contracts will be inherited according to the beneficiary designation and not the will. Be sure you discuss the implications of who and how you name certain beneficiaries due to the legal and tax rules surrounding inheritances.
A third step of being prepared for the unexpected is to educate yourself about your personal finances and take ownership in the decisions that affect your family. Sitting down with a financial planner who can work in tandem with your estate attorney can be one of the most thoughtful actions you can do for those you care most about.
A comprehensive financial plan created with your long-term objectives for security and well-being, outlining a strategy for achieving those objectives, will help prepare you if you were to lose a loved one - or prepare your loved ones if you were to die. Running what-if scenarios can put numbers to the analysis.
Again, no one wants to talk about it. However, if you are married, it is healthy to discuss with your spouse what is most important to each of you and develop a game plan. If you are single, a fiduciary financial planner can give an objective ear to your needs and goals and include those family members that need to be informed. We are here to help you talk through and plan for those daunting end of life issues.