There are many myths out there that people believe about financial and estate planning. One common myth we hear is “we don’t need to worry about estate planning until we’re older”. A second is “I don’t have enough of an estate to worry about”.
These myths are far from true! Myth number one is easily debunked. We all know that death and dying (accidents, cancer, etc.) do not discriminate. Therefore, it is necessary to think through your wishes and assess if you have the proper documents in place to execute them. And myth number two? Regardless of the size of your estate, if you do not take time to put your affairs in order you will be leaving a big headache for your heirs. We all want to make things as easy as possible for our loved ones after we pass.
The good news is if you are reading this now, you are taking a step in the right direction! The following are our top five steps to help you financially prepare for death.
- Name Powers of Attorneys
It is recommended that everyone, regardless of age, have these documents in place. You will specifically need an Advanced Health Care Directive and a Financial Power of Attorney.
The advanced health care directive includes your medical care wishes as outlined in a living will and a durable health-care power of attorney, appointing someone to make medical decisions if you cannot.
The financial power of attorney designates someone to handle your financial matters if you are incapacitated.
- Create Your Will
It’s hard not to be repetitive here, but again, a will is something every adult should have. In fact, one could easily argue the younger the family, the more important a will is.
If you have dependents, a will is where you name a guardian for your children. If you don’t, the state will decide, and it may not align with who you would pick. Also, since minors cannot directly inherit money or property until they are adults, you will want to set up a trust to hold them and direct how they are managed and distributed.
If you are married, spouses will often create “mirror” wills that transfer all assets to each other first.
Although there are many online resources to create basic wills, working with a professional estate planning attorney is recommended. Your family’s legal protection is not a DIY project.
- Consider Insurance
If your death will create a financial burden for someone, life insurance is a must. Life insurance should cover any debts that would be outstanding after your death as well as income replacement for your family.
Term life insurance is typically a good choice for many people. It is affordable and bought for a specific period of time to cover a specific need. Policies are available in many increments – 10, 20, or 30 years. Ideally, the policy will not be needed at the end of the term because your children are now independent, your mortgage is paid off, or you have enough savings for your spouse to live on.
Universal or whole life insurance should be considered if you have a special needs child, for example, that will depend on you for their lifetime.
- Organize Accounts and Passwords
Do you remember all of your online passwords? If you can’t, how will your family ever figure them out without you?
Make a detailed list of all your bank accounts, credit cards, passwords, PINs, insurance policies, etc. and keep it in a secure place such as an at-home safe or a safety deposit box. Updating this document regularly allows accounts to be easily found when needed. It will be a huge time saver and convenience for loved ones.
- Plan for your Funeral
Arranging your funeral now will not only take the burden off the ones you’ve left behind while they’re grieving, but it will also ensure your exact wishes are carried out. Do you prefer donations made to charity in lieu of flowers? Do you want to be sure an excessive amount isn’t spent on a casket?
Put your wishes in writing and keep it with your important papers. You can also start savings account made payable-on-death for your funeral and designate a specific savings account for those expenses. It is often recommended to do this versus pre-paying funeral expenses with a funeral home. There is always the possibility that the funeral home goes out of business, and you could lose that money.
These five steps will help you prepare your finances prior to death. It is always recommended to work with a professional when reviewing and preparing your estate plan. Smith Barid Attorneys at Law are estate planning experts in Savannah, GA. We are happy to help you prepare your finances and estate. Please contact us today with any and all questions.