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Estate Planning Basics & Checklist – List of 5 Things To Do Before You Die

By Scott Powers

grave tombstone flowersRegardless of age and health, we all have an expiration date. We don’t know when that time will come, but inevitably death will always catch up to us.

And whether or not we want to think about our impending exit, most of us care deeply about how we leave this world and those we will leave behind.

So with the goal of organizing final affairs, here are five steps you can take to help prepare your estate and give you and your loved ones peace of mind.

1. Check All of Your Beneficiaries

Who would get your accounts if you died today? This is especially important to check if you have gone through a life changing event, such as a marriage or divorce.

I once had a family member who suddenly passed away, and her life insurance policy still listed her ex-husband as the beneficiary. He cried and wailed at the service, promised to help pay for the funeral expenses, and then was never heard from again after receiving the check. Since it was a binding contract, no court would overturn it.

Be sure to check all of your insurance policies, 401ks, IRAs, and any other company benefits that could have a listed beneficiary (some sales positions might offer the ability to bequeath residual or bonus payments).

2. Review or Get an Estate Plan

Anyone who has gone through the probate process can tell you how dreadful it can be when a loved one passes without their affairs in order. All an estate plan really does is carry out your wishes after you are gone and it can be comprised of a few components:

  • A will. This document tells the court who your belongings will be given to once you pass away. You can hire a lawyer to prepare your will, or alternately, you can prepare a will yourself.
  • Living will or health care proxy.living will outlines what type of care you want to receive at the end of your life. This includes detailing whether or not you want to be kept alive by artificial means, and would appoint the person who would make medical decisions on your behalf, if you couldn’t make those decisions yourself.
  • Power of attorney. This is a document that appoints someone to take care of legal and financial matters, including signing documents. There are different forms of power of attorney depending on the particular situation, so be sure you grasp the different types before you give this power to someone. Most attorneys will actually hold the document in their office to protect their client.
  • Guardianship. If you have young kids, this will appoint a guardian for minor children whose parents have both passed away.
  • Revocable trust. Also called a living trust, this essentially passes on assets to the proper heirs without having to go through probate court. A big benefit of this is that, unlike a will, a trust cannot be contested. I have had two clients receive large inheritances via a living trust that were contested by another family member. Both cases were thrown out because of the trust. The living trust gets its name from the fact that the owner has full control of the assets inside the trust when they are alive.
  • Irrevocable trust. In this case, the trust becomes its own entity and takes on ownership of any asset in the trust. These trusts are seldom used, but can be an effective tool when someone wants to remove assets from their estate, say for estate tax reasons.

If you have created an estate plan, it should be reviewed every five to seven years. Family dynamics change, as do federal and state laws. If you don’t have these documents in place yet, my first recommendation is to meet with an estate planning attorney. Even though a lot of these forms are boiler plate, a good professional will know how to tailor them to your best interests. They should also be able to ask you additional questions that you may not have thought of before.

3. Buy or Review Life Insurance Policies

Insurance policies are very important to keep up-to-date in the process of preparing your estate. How much insurance do you have right now? What type of insurance is it: term, permanent, a group policy through work? If it is term, when does that term expire? If it is a policy through work, can you keep it if you leave your employer? Is the amount of coverage in-force the right amount for you? These are just some of the questions that you should ask yourself to make sure you’ve taken care of every remaining insurance plan.

If you have someone who depends upon your income you should have some sort of life insurance; this is especially important if you have young kids or a spouse who is a stay at home mom or parent. Of course, age and health are two of the biggest factors in determining cost, but a small term policy is relatively inexpensive – even if you have to get the minimum term limit (usually five or ten years). The most important thing is to have something in place to cover the worst case scenario. There are a number of places to look for quotes online. I don’t necessarily advocate that term insurance is better than permanent insurance (this covers whole life, universal life, and variable universal life). Everyone’s situation is different and calls for different solutions.

4. Get Yourself Organized

What kind of mess would you leave behind for your loved ones if they had to sort through your finances after you were gone? It’s a great idea to have a master list of all of your accounts and account numbers that you can send to those who you trust or would be in charge of your affairs (i.e. executor of will). Put a copy of this in with your other important documents, like your will, insurance policies, mortgage/home deed, and stock certificates. I recommend even going so far as getting a fireproof safe to store these in or even getting a safe deposit box at a bank. I once had a widow who came to my office with some stock certificates she found in a desk drawer. She thought they were worthless and almost threw them out; however, it turned out that those certificates were worth almost half a million dollars!

5. Leave a Legacy

If there is one thing most humans share, it is the desire to be remembered and to be remembered well. You don’t necessarily need millions of dollars or a name on a building to leave behind a legacy that can positively impact others. Here are a few simple ideas:

  • Allocate a piece of your estate or life insurance to a charity. Ask any fund-raising director – no amount is too small!
  • Start a college scholarship program. When I was in college I won a $500 family scholarship by submitting an essay that was judged by the family members responsible for the scholarship. It always meant a lot to me to be selected. This is something you can take year-by-year and any amount can make a difference. My suggestion would be to talk to your local school or alma mater.
  • If you don’t have much money right now, you can fit giving into your budget by donating time. One of the best things I ever did was become a Special Olympics coach. It was definitely out of my comfort zone at first, but I ended up having a positive impact on a bunch of wonderful athletes and making special connections that have lasted a lifetime. There are hundreds of great organizations that would love a bit of your time and give you the opportunity to have a positive impact.
  • Take the time to put some thoughts in writing to let people know how you feel. Recently, a cousin of mine was enjoying reading through her mother’s diary twenty-five years after her passing. The thoughts and memories that stay in your head are lost. Whether you share them now or leave them for your loved ones once you are gone, it is a wonderful gift to leave to those who love you.

Final Word

I hope this article has given you some ideas on how to best get your affairs in order.  Whether it means hiring a lawyer to put together a thorough will or going it alone, it’s important to take care of these things when you’re ready and able.

Have you written a will for yourself?  Do you have other tips for estate planning that could help others out? Feel free to share in the comments below.

(photo credit: Shutterstock)

Scott Powers
Scott has been a licensed professional in securities and insurance since 1999. He started as an advisor with New England Financial before starting his own independent firm Powers Financial Group. After recently selling his practice, he left the cold winters of New England and moved his wife and two boys to sunny southern California. As well as financial consulting, Scott spends his time acting, coaching, staying fit and volunteering with Special Olympics.

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  • Stephanie

    Depending on the financial situation, a stay-at-home parent should probably look into life insurance as well, at least until the kids hit adulthood. A sudden death causes a huge upheaval in daily life, and it can be really hard for the breadwinner to readjust. At the very least, that insurance amount can help to cover a year of child care to ease the readjustment.

    • Scott Powers

      Stephanie that is an excellent point! When my wife decided to stay at home after our youngest was born we still had a good size policy in place on her. We knew it would need to cover not only child care and funeral expenses, but also allow me to be able to ease my way back into work. Thanks for that great contribution!

  • http://Kiplinger.com Cameron Huddleston

    Scott —
    Even next of kin need power of attorney to handle a parent’s (or other relative’s) finances if they no longer can. No financial institution (bank, credit card company, insurance company, brokerage) will let you make any decisions for someone else (even if it’s your mom, dad, sibling) unless you’ve been designated power of attorney. And if you’re designated as someone’s power of attorney, you need that document to show to financial institutions to prove that you have power of attorney.

  • Scott Powers

    Hi Cameron, thanks for catching that! There was a miscommunication as this was being edited concerning power of attorney and estate executor, thus the “next of kin” line was accidently left in there. We made the necessary correction and you are right in your assessment of the power of attorney. My estate attorney keeps all copies of this document at his office and only releases it upon request (with supporting evidence as to why it is needed) to keep it from being abused. Thanks so much for contributing to the post!

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