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Four Documents Everyone Needs

Have you ever considered what would happen if you died suddenly? It is not a subject at the top of most people’s mind. But it is a real possibility. Car accidents alone kill more than 3,000 people every day.

Because you don’t spend much time thinking about death, preparing for it may not have occurred to you. However, regardless of your financial situation, there are four documents that everyone should have.

Everyone needs a will, an advance healthcare directive, a durable healthcare power of attorney and a durable financial power of attorney. Preparing basic versions of these documents is easy and doesn’t cost much.

A will is a document that records what should be done with your savings and other belongings, also known as your assets, if you die. It can take any form, but to be valid it must be witnessed by two disinterested people. A disinterested person is anyone who won’t benefit from the will.

If you haven’t left instructions for how to deal with your assets, the state where you live will make the decisions for you. Each state has a set of rules for how to distribute them. Regardless of what you might want, or have told your family and friends, the state will follow their rules.

In some states, the rules may be far from what you would want. For example, in many states, your surviving spouse might have to split your assets with your parents and siblings, if you haven’t left a will indicating otherwise. If you have children, and both you and your spouse have died, the state will appoint a guardian according to their rules, and that might not be who you intended.

You can write your will without any help, but for good on-line templates consider Rocket Lawyer, Legal Zoom or another on-line resource. A will you create yourself, using one of these sites, will likely cost less than $100. This may be all you need if you don’t have much in the way of assets and have no children. If your situation is more complex, it is worth speaking with an attorney.

Keep in mind, your will will not govern what happens to your retirement accounts and insurance policies. They are controlled completely by the beneficiary designation on the account. What your will says makes no difference. Make sure you maintain the beneficiary designations with an update whenever you have a life change.

An advance healthcare directive, also known as a living will or a medical directive, documents your wishes regarding the types of care you want to receive. This may include how far you want medical personnel to go to keep you alive, the type of pain medications you wish to receive, and whether you prefer to spend your last days at home or in a hospital.

An advance healthcare directive is done on a state regulated form. You can download your state’s form from Caringinfo.org for free. However if you use one of the on-line legals sites, one should be provided for you with your will.

A medical power of attorney gives a person you name authority to make health care decisions for you in line with your wishes. A financial power of attorney gives a person you trust authorization to pay your bills, and otherwise manage your affairs while you are incapacitated. These are separate documents, and you can name different people for each. These documents are also available for free through the links above.

In addition to these legal documents, record your on-line accounts with your usernames and passwords, and save them in a safe place, such as a safe deposit box. This is so the person who has your financial power of attorney knows what accounts you have and can easily access them.

Make sure that anyone who will be responsible for handling any of your affairs knows where all your important documents are located. You should walk them through your wishes, so they will know what to expect if the need arises.

No one wants to think about death. However, if you take some time to do it now, you will save your family from agonizing over what you would want if the worst happens. Preparing a basic version of these four important documents will ease the burden on your loved ones, and it is easy and inexpensive. Make it a priority.

Image courtesy of dan at FreeDigitalPhotos.net

0 comments on “5 Questions to Ask Your Parents About Death”

5 Questions to Ask Your Parents About Death

Have you had “the talk” with your parents? No, not that talk. I assume if you didn’t have that talk, you figured things out in other ways. No, I’m thinking about the talk regarding your parent’s estate plan, or lack there of.

This is a difficult conversation. It may be the one thing that adult children as well as their parents would like to talk about less than their sex lives. Most people hate to even think about dying, let alone what happens to their stuff if they do. Over half of Americans between the ages of 55 and 64 do not even have will. Yet it is so important if things are to go the way your parents want.

Framing it this way, in terms of what happens to the stuff, trivializes all that families have to deal with at the end of a loved one’s life. The stuff is the least of the issues. Death may be preceded by a period of illness. How will your parent’s affairs be managed if they can’t do it themselves? Do you know how far your parent’s want to take their health care if their condition is grave? When they do pass, do they have specific wishes for a service, or what to do with their remains? If these issues are hard to discuss when everyone is healthy and death seems far away, think of how difficult it will be to deal with them when you are in the middle of grieving for a parent who has passed.

When my husband Jeff’s father passed away years ago, there was a pile of papers to wade through to piece together what he and his wife had. Jeff’s stepmother had not been involved in the couple’s finances, so she simply didn’t know what accounts they had and what income she could expect. It took two days to sort out the accounts, where they were and what was in them. The couple had wills and a family trust, but neither Jeff nor his siblings knew anything about them. A simple conversation about what the couple had put in place and where the documents were located would have allowed Jeff’s family to focus on saying goodbye to their father, instead of sorting through paperwork.

As with everything, preparing in advance will make everything go more smoothly. Before your folks have another birthday, sit down with them and ask them about their plans. Here are a few questions that you should have answered.

  1. Do your parents have a will and an advance health care directive? Who have they named to carry out their wishes?
  2. Have your parents given someone in the family power of attorney in the event they are incapacitated?
  3. Where do they keep these documents as well as their other financial information?
  4. What are their wishes with regard to health care at the end of life?
  5. Do they prefer burial or cremation, and what sort of remembrance would they want?

Of course these are sensitive subjects. Your parents may not want to be fully forthright about their plans, if they have put one in place, for fear of causing tension in the family. You may be able to ease their concerns by telling them that you don’t need the details of how they want their property distributed to you and your siblings. But you do need to know that they have a plan and where to find the documents if needed. Your entire family should be well aware of your parent’s wishes for health care and who will manage their affairs if they can’t manage them for themselves.

If your parents have not put any plans in place, encourage them to do so. Perhaps it can be a family activity if you haven’t done the same for yourself. Everyone can hold each other accountable to have the right documents created, and share the location of the documents with the appropriate person. If your parents are reluctant to discuss the matter, don’t let the subject drop. It may be hard to talk about death or your parents not being able to take care of themselves, but it’s better to do it while the prospect is still far away.

Photo courtesy of Unprofound.com

 

 

0 comments on “There Definitely is an Afterlife, But You Aren’t In It”

There Definitely is an Afterlife, But You Aren’t In It

We were having dinner with some friends a few weeks ago, and since one of our friends is an estate attorney, the topic of wills and other estate documents came up. Surprisingly, of the four couples around the table, two did not have a will. It turns out this is not uncommon. A survey by Rocket Lawyer, an on-line legal service provider, found that more than half of adults do not have a will or estate plan. More surprising is that over half of Americans age 55 to 64, and nearly two thirds of Americans age 45 to 54 do not have a will.

There doesn’t seem to be any confusion about the need for a will. Most people’s reason for not having done one, from the survey, is that they haven’t gotten around to it. Only 17% said they didn’t think they needed one. Everyone needs a will. Even if you don’t have much in the way of assets, you still want to have some say over what happens to what you do have. What happens if you don’t have a will?

If you haven’t left instructions for what will happen with your assets, the state where you live will make the decisions for you. Each state has a set of default mandates for the distribution of your estate, a legal word for all that you own, big or small. Regardless of what you might want or have even told your family and friends, the state will follow their default rules for distributing your belongings. In some states, the default may be as far away from what you want as you can get. For example, in many states, your surviving spouse might have to split your assets with your parents and siblings if you haven’t left a will indicating that all of your assets should go to your spouse. If you have children, and both you and your spouse have died, the state will appoint a guardian according to the rules of the state, and that might not be who you intended. While in most states, your children will automatically inherit a portion of your assets, if they are under the age of eighteen, the court will administer (for a fee) their share of your assets, making it unnecessarily difficult for your spouse or your children’s guardian to access the money they need to raise your children.

A will can go a long way toward making life easier for those you’ve left behind. To have an attorney prepare a will alone will cost around $1,000, but could be more depending on where you live. There are on-line resources for preparing a will that are cheaper. These can run less than $100, and may be all you need if you don’t have much in the way of assets and you don’t have children. You would be well served by having an attorney review these documents though, because small mistakes can have big consequences. A simple review of documents you create on-line will be cheaper than the full preparation.

There are some things that your will won’t cover. What happens to your 401(k), or other employer sponsored retirement account, your IRA (individual retirement account), life insurance or annuities are all governed by your beneficiary designation. It does not matter what your will says, these accounts will be turned over to your beneficiary. This sounds great. One less thing to worry about. However, if you don’t keep your beneficiaries up to date, it can be a disaster. In my investment advisory firm, we had a client whose husband passed away. Most of their savings were in his IRA. When he remarried he named his new wife, our client, as his sole heir in his will, but he didn’t think to change the beneficiary on his IRA. His entire IRA was distributed to his ex-wife. Our client was left with substantially less money to live on in retirement than she planned.

Children under the age of eighteen cannot receive a retirement account distribution or insurance proceeds directly, so do not name your children as beneficiaries, unless they are over eighteen. The annuity business that I managed dealt with hundreds of spouses as well as court appointed guardians who were trying to raise children who had been named as beneficiaries of life insurance policies. These guardians had to go to court every time they needed money for the kids with documentation for why they needed it. The courts are simply trying to protect the kids, but in doing so, they make raising them far more difficult.

If you have children, you may want to consider establishing a family trust. A family trust is a legal entity that can hold your valuable assets. It allows your family to have access to your assets, according to your will, without going through probate. Probate is the legal process that validates your will (if you have one) and assures all of your debts are settled and your remaining assets are distributed. Probate can take a year or more and cost money- up to 5% of the value of your assets. With a family trust, all of the assets that have been transferred to the trust are accessible by the trustees and beneficiaries without first going through probate. You can designate the trust as the beneficiary of your retirement and insurance accounts, ensuring that the money is immediately available to those who will need it.To establish a family trust, you will definitely want to consult with an attorney. The cost for a family trust ranges depending on the complexity, but one can be prepared for about the same cost as a will.

While you are thinking about wills and trusts, it isn’t a much bigger leap to a full estate plan. A full estate plan will include documents that help your family make decisions and manage your affairs while you are alive if you have become incapacitated. These include a health care directive and a financial power of attorney. A health care directive documents your wishes in regard to the types of care you want to receive, and gives a person you name authority to make health care decisions for you in line with your wishes. A financial power of attorney gives a person you trust authorization to pay your bills, and otherwise manage your affairs while you are incapacitated. In addition to these legal documents, record your on-line accounts with your usernames and passwords, and save them in a safe place, such as a safe deposit box. This is so the person who has your financial power of attorney knows what accounts you have and can easily access them.

No one wants to think about dying, but there is definitely an afterlife. It is the life the people you love will have to live without you. If there is one true gift that you can leave them, it is an easier transition into that life. A little time putting in place a will, and if appropriate, a family trust can help them avoid the stress and frustration of dealing with a rigid legal system, whose intentions are good but where the results may not be in their best interests.

Photo courtesy of Unprofound.com