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Keep Calm and Plan for your Death

Legacy Planning

October 29, 2015

7 Tips to Prepare for the Unexpected‍

Yes, I know the title is quite morbid (how else was I going to get you to read it) but the reality is too few of us plan or even talk about our eventual demise. The issue is that not preparing for the inevitable can make dealing with emotional situations more challenging when they arise. If you don’t have documents in order and finances organized, your death or a loved one’s death could be time consuming and costly, due to missing documents, late fees, estate taxes, legal fees and more.

A recent survey by AARP indicates that over 40% of the boomer generation and over 70% of those under 34 do not have a will. This means people aren’t adequately prepared for the uncertainties of life. Here are some important tips for preparing for the unexpected:

‍1) Create a will/trust and Medical Power of Attorney .

‍A will is essential, as it outlines who receives anything of value, from money to a special heirloom from a great grandparent. A Healthcare Durable Power of Attorney document allows you to appoint a person (usually a loved one) to make decisions on your behalf in the event of incapacity. A revocable living trust allows you to appoint someone as a trustee to step in for you upon death or incapacity to carry out your orders. Additionally, a properly executed revocable living trust can help ensure your assets avoid going through the probate process.

‍2) Understand estate taxes.

‍Federal estate taxes are high and typically need to be paid soon after death. If your net value is more than the exempt amount set by Congress, you will owe. You may be able to reduce your estate taxes with strategies such as gifting, spending or purchasing life insurance. Your Tax Advisor can provide guidance on understanding and reducing estate taxes for your situation.

‍3) Evaluate your insurance.

Life insurance provides for designated beneficiaries upon death of the insured and disability insurance protects the insured in the event of a disability or sickness. Discuss with your financial advisor any current policies to determine whether you have adequate coverage or need to purchase a policy. If long-term medical care is needed, are you prepared to cover ongoing costs of possibly hundreds per day or are your children? You may also want to discuss long-term care insurance to ensure all potential future needs are covered.

‍4) Check your accounts for beneficiaries and co-owners.

‍We’ve all heard the story of an ex-spouse receiving a retirement account or life insurance benefit rather than a current spouse because the beneficiary information wasn’t updated. As “Father Time” marches on it is critical to continually update the beneficiaries listed on your Life insurance policies, Pensions, 401ks or IRA accounts especially as your circumstances change (marriage, children, etc). Banking and non-retirement accounts should have transfer-on-death instructions so someone is able to access the accounts after death or can be owned by a revocable living trust (to help avoid probate)

‍5) Keep a list of user names, passwords and accounts in a secure place.

‍It could be a full-time job trying to figure out types of accounts and how to access them after a death. Use a secure storage website or keep a list of email accounts, banking and investment accounts, social network accounts and bill-paying accounts. Keep this information in your safe or safety deposit box, along with copies of all important documents. Even trying to access a safety deposit box at the bank after a death could be tricky, as rules vary by state.

‍6) Create a plan for funeral expenses.

The survivors of a loved one may inherit the costs of a funeral, casket, urn, plot, memorial service, burial or cremation. While costs do vary, funerals are not inexpensive. It’s best to plan for these expenses ahead of time, so your loved ones can grieve without an added financial burden.

‍7) Pay yourself first.

‍It’s a simple phrase and common knowledge, but many people choose not to set aside a small portion of their income and place it in a low-risk account each month. Your financial advisor can help determine how much you should be saving yearly for future expenses and emergencies.

Proper preparation may ensure that you’ve done all you can to face life’s challenges head-on. Without the proper documents in place, an estate may go through probate court, which could take months or even years to settle. Lastly, it is always a good idea to double-check that all documents are properly filled out. If documents are not properly executed, signed and notarized, they may not be valid.

Don’t delay planning for your future. Accidents, illnesses and injuries can happen to anyone at anytime. Careful planning now will help eliminate costly situations later and help to ensure you and your family are covered.

To find content on estate planning and more, check out our YouTube channel.

‍Bayntree Wealth Advisors does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.

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