Seven Simple Steps to Estate Planning
No one likes to think about when our time will be up, and our final breath is taken. Although we all know death will come someday, many of us avoid thinking about it, and how it may affect our loved ones. I understand the reluctance to embrace the final unknown. Personally, I hope to hang around as long as possible. But the one thing you never know is when death will knock on your door. If you are unprepared, your loved ones will be burdened with making final preparations at a time when they are deeply grieving over losing you (hopefully!), or perhaps feeling remorseful due to shortcomings in your relationship.
Either of these scenarios can lead to overspending since decisions may be more emotional than rational. With just a little time and planning, you can save those you care about frustration, money, and time by devising a plan to manage your health care and property if you become incapacitated during your lifetime, or upon your death. The more you do in advance, the fewer decisions others have to make once you are gone.
Consider life insurance
Life insurance can help to cover your family’s expenses when they no longer have income from your regular paychecks. If you have no one to support, you may not need life insurance. But if you want the financial security that life insurance offers, there are several methods for determining how much coverage you need. One is to simply multiply your current gross income by 10. Another way is to estimate the cost to pay off your debts like mortgages, car loans, and college funds for your children. Then, calculate half of your current gross income and multiply that figure by the number of years your children and spouse will need support. Add the two numbers together to come up with a goal for insurance coverage.
Term life insurance carries a fixed premium for the life of the term, and can be surprisingly affordable, even for large coverage amounts. Be sure to do your research, and comparison-shop. To get you started, visit www.lifeinsurance.org which provides a general overview about life insurance coverage, ideas on shopping for life insurance, and key questions for assessing your insurance needs.
Plan your memorial service or funeral
Although it may feel morbid, start by making decisions in advance such as whether you want to be buried or cremated; plan your service if you want something special, such as a specific location, music or hymns, or write your own eulogy; write your own obituary and update it occasionally; or divide up personal property by leaving a list with someone you trust, or give away items during your lifetime. Finally, talk with your family and friends about your plan so it will be honored.
Prepare advanced directives for medical care
Advanced directives are written instructions stating how you want your health care to be managed if you are unable to speak for yourself. Without one, your health care will be out of your control, and in the hands of those who may have different values or beliefs than you. An advanced directive may also help to prevent conflict among family members over how your medical care should be handled.
Establish a Power of Attorney
Consider designating an agent to manage your finances and legal affairs if you become incapacitated. Laws vary by state but these documents typically let you designate or restrict when a Power of Attorney can be used.
Write a will
Write a will or hire an attorney to do it for you if your situation is more complex. Without one, complete strangers will decide how to split up your estate based on the state law where you live. Also, unless parents appoint a guardian for minor children in a Will, their future will likely be decided by the court if both parents die in an accident. Custody actions can be costly, adversarial, and time-consuming for your survivors. As circumstances change in your life (marriage, divorce, birth or adoption of a child, moving to a different state, acquiring new property, etc.), it is a good time to review your Will to decide if it should be updated.
A trust can provide for the financial care of children, or disabled family members. Trusts can also be set up to minimize taxes for large estates, and protect against creditors. There are a wide variety of trust plans to meet different needs.
Use other tools to transfer property at death which may eliminate the need for a probate. Some examples include insurance proceeds or investments with named beneficiaries; making gifts during your lifetime; bank accounts with Pay on Death designations; and joint ownership of property which passes to your joint owner upon your death.
Get Started Today
To get started, you may have access to free legal help through an employee assistance program (EAP). Or, research the internet by typing “estate planning resources” or “estate planning basics” into your web browser. When ready, consult with at least two estate planning attorneys to explore options for your situation. Always ask for a free consultation or how much it will cost to meet for an hour or two.
Want more financial tips and tricks so you're more prepared for the future? Call LSS at 888.577.2227 to schedule an appointment with one of our Financial Counselors or GET STARTED ONLINE. Take action now!
Author Barbara Miller is a Certified Financial Counselor with LSS Financial Counseling and specializes in Bankruptcy Education and Counseling.
*Please note that none of this information is intended to be legal advice, but simply food for thought as you prepare for your final life event.