Updated: Dec 17, 2018
It’s a new year full of new resolutions. Is end-of-life planning on your New Year’s Resolution list? Probably not, but putting off the inevitable can leave a considerable financial burden to your loved ones. If you have cared for an aging or sick relative, you’re likely aware of the kinds of expenses that can accumulate. But if you are young or in good health, you may not have thought about your own mortality. If you die without any type of planning, your loved ones will have to piece together your financial profile without clear direction. Here are 7 financial end-of-life questions to ask yourself to help you begin your planning:
1. Do I need a Will? The simple answer is yes. Everyone can benefit from having a Will. If you are over eighteen, then you should have a Will. A Will addresses what happens to your assets, which can include your bank accounts, real estate, vehicles, and even pets. It is not just for people who have a lot of money.
2. What will happen to my bank accounts? If your bank account has a joint owner or a payable on death (POD) designation, then your bank account will go to the individual named. A note of caution: Joint ownership and beneficiary designations take precedence over your Will. So you need to keep this information up-to-date as relationships change and make sure your beneficiary designations reflect your final wishes. Also, bills may still need to be paid after you die. A joint owner or beneficiary designation can be helpful in this area because he or she will have immediate access to your account.
3. Should I have life insurance? You might think that life insurance is for the elderly. But even if you are young and healthy with no dependents, life insurance can help your family after you die. If you are younger, you may choose term life insurance because it can be cheaper than whole life insurance yet offers comparable coverage. With term life insurance, you pay a premium for a certain number of years and are covered if you die within that term. Once it expires, you buy a new policy. With whole life insurance, you pay a premium each month for the rest of your life. Figuring out how much coverage you want will depend on the type of funeral you prefer and your outstanding debts. It might be a good idea to factor in your living expenses for a year or more if you might leave behind a spouse or child without your income. Even if you choose not to have life insurance, it might be a good idea to set aside money for the immediate costs your loved ones will have to handle, such as cremation and burial.
4. Does someone know where your important documents are kept? You should set aside a place for your important documents and instructions, such as your Will, funeral planning declarations, and tax returns. Your next of kin, or someone you trust, should know where you’ve chosen to store these important papers. If you tell at least two people you trust, this will help ensure that at least one person is available to help if needed. You can also leave instructions on where to find these documents with a legal or financial professional you trust. Do NOT keep your legal documents in a safe deposit box at the bank. Your documents should be readily accessible and available, even on the weekend or holiday.
5. What about your digital files? It is a good idea to keep a hard copy list of your accounts and passwords and keep that list with your other important documents. If you have considerable digital assets that you would like to pass on to someone, make sure you list those items in your legal documents, such as in a Memorandum of Personal Property.
6. Who are your beneficiaries? You should check your beneficiary designations at least annually. It is also a good idea to review your estate planning documents to ensure that your Will and/or Trust reflects your current relationships and wishes.
7. Have you talked about it with your family? It is hard to talk about death and final wishes, but honest conversations now can make life easier later for your loved ones when you die. Sometimes people have unrealistic wishes, such as scattering their ashes off some volcano in Hawaii. However, this can put undue pressure and grief on the family because they cannot afford to satisfy those wishes. It is much better to talk about those wishes now so you can be realistic about what will happen later. Take time and thought for your final preparations. This will offer a much clearer picture to your loved ones, especially if you die unexpectedly.