End-of-life planning is not at the top of our to do list, especially when we are healthy. Unfortunately, death is inevitable. As Kilroy Oldster said, “death is the great equalizer of human beings.” We all experience death, it’s unavoidable.
For many of us, it is an uncomfortable and even taboo subject matter to approach. Here is where a financial advisor can play a significant role in helping you plan for that moment, ease your anxiety, and help your loved one act on your wishes efficiently and accurately.
Below is a list of critical items necessary for proper estate planning. In no way is this a comprehensive list, but this will cover the most important aspects of end-of-life planning. It is imperative that these items are resolved to create a less stressful time while everyone is grieving. More importantly, this will provide a greater sense of comfort to the person dying, knowing that everything they worked for will be in the right hands upon their death.
1. Will/Revocable Trust
A will is a legal document that allows you to specify who you want to receive your property after you pass away. This includes physical assets — like your home, vehicles, and possessions — and your financial assets, like your bank and investment accounts. The people or organizations you name to receive your property are called beneficiaries. If you have minor children, you will name their guardian in your will, along with who will care for any pets. You can also bequeath any personal items to specific individuals. Like a will, a revocable living trust is a legal document you can use to manage and distribute your property after you pass away. But unlike a will, a revocable living trust is a legal entity, meaning it can “own” property. Once you set up a trust, you’ll transfer your assets to it, so the trust is the owner. Then you can be the trustee — the person overseeing the trust — so you’re still able to use and manage the property. Both the will and trust will require you to name someone who is responsible for following the instructions in your will and distributing your estate to your heirs after you die. In a will, you will name an executor and for a trust, you will name a successor trustee.
2. Name an executor of your estate
Naming an executor is an essential consideration when dealing with estate planning. For many estates, naming a spouse or child makes the most sense. However, if designating a family member or friend, make sure to discuss the details of the estate first. Estates with complex assets (multiple real estate properties, highly valued artwork, etc.) or stressful family dynamics will benefit from having a professional executor. Professionals handle all aspects of probate and will work with lawyers, accountants, financial institutions, etc. in resolving the estate. They will also look for tax advantages and reduce your estate if needed. Aside from not having to deal with the tedious estate process in a time of grief, an advantage of having a professional executor is that they are a neutral party and have a legal obligation to manage the estate in the best interests of the beneficiaries regardless of family member demands or disagreements. An alternative option is listing a professional as a co-executor, so family members still have some control of the estate process.
End-of-life planning can also include arranging your own funeral and/or burial and communicating how you prefer everything to be handled upon your passing. This provides you with the ability to let all your loved ones know your desires and ensure that after your passing, you are treated as you wish to be treated. This will alleviate a lot of stress, financial obligation, and potential conflict.
3. Update beneficiaries
It is of utmost importance to update or declare beneficiaries if you or a loved one is diagnosed with a terminal illness. Naming beneficiaries allows assets to avoid the lengthy probate process and supersedes a will, which cuts down significantly on time and costs. Beneficiaries should be reviewed at the time of any major life event such as births, deaths, marriages, and divorces.
4. Health care decisions and Advance Directive
Most of end-of-life planning is focused on what happens after you die. However, an important consideration is your health care at the end of your life. An advance directive is a legal document that guides your doctors and family members when they need to make medical decisions for you when you cannot. This will include what medical treatments and life-sustaining efforts you prefer. In your advance directive, you should also list your medical power of attorney. Your medical power of attorney should know and prioritize your wishes if you are unable to advocate for yourself.
5. Plan for health care expenses
Another consideration in planning for this type of event would be budgeting for health expenses. An unexpected diagnosis can create a sudden shift in planned expenses. Many people are living on a budget based on their current income or retirement income, such as Social Security and pensions. However, healthcare costs due the diagnosis of a terminal illness can quickly eat away at your current budget. These costs can be astronomically high based on your life expectancy, your insurance, the severity of the sickness, and the medical care that will be required during this time. This is an unforeseen expense that needs to be discussed going forward. It may be necessary to cut down on some current monthly/yearly costs to have assets last until the end. It is advisable to get in touch with a financial advisor to touch on these points to develop the financial plan . This will include analyzing all assets, income, and expenses and will aid in figuring out how much you can comfortably spend throughout this time without running the risk of outliving your assets.
6. Organize legal documents
Keeping legal (important) documents in order is another key aspect to planning the end of your life. Often this step is overlooked, or someone may pass away before they get to this step, so it is crucial to get this done as soon as possible (it is a good rule of thumb not just when you are declared terminally ill, but during all stages in life to ensure these matters are handled if you die prematurely). All important documents should be stored together and in a secure location, such as a deposit box at the bank or in a vault at home. Anything else with similar security standards would work as well. One person should always know about the location of these documents so in the event you pass away, they can be accessed by someone you trust. This would most likely be your DPOA, or Durable Financial Power of Attorney. This will be the person to claim a legal right to managing your finances and properties. The documents the DPOA should have access to include your Will, Trust, Social Security and Medicare information, sources of income and assets, attorney information, and other items of this nature. These should be reviewed annually to make sure everything is in order. This will make everything much less time consuming once you have passed. It is also strongly recommended that you keep all your passwords securely saved, so other family members or trusted contacts can have access to this information in the event of your passing. It is crucial that this step is completed, so your financial affairs can be resolved.
Any end-of-life planning you can accomplish now will give yourself and those around you peace of mind and clarity in the future. It will create a foundation to distribute assets properly and create more time to spend with loved ones with less worry. Speaking to a lawyer, accountant, or your financial advisor is a great way to get your legal and financial concerns organized and alleviate stress, allowing you to spend your remaining time however you would like. Keeping the paperwork in order will benefit everyone involved and create a seamless transition of assets to pass on to beneficiaries and family members after death. Death is a normal and expected part of life. End-of-life planning is usually not top-of-mind but making it a priority will only benefit you and your loved ones.
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