Have you done your estate planning homework? Make sure that you created these most important documents.
The illness and death of a loved one are always stressful; so why then would you voluntarily choose to add to that stress by failing to put a simple plan in place? Here are vital legal documents that you should have to ease your loved ones’ burden should you become incapacitated or die.
A trust or will. These are legal documents in which you name a fiduciary (a Trustee for a Trust and an Executor for a Will) to carry out your wishes, what heirs should receive your assets and a guardian if you have minor children. Note, however, that only a trust allows your fiduciary to manage your assets will you are living.
A Legacy Letter. While a will or trust states how your estate is to be divided, it does not explain the reasons why the disposition was what it was or offer advice on how you hope your children will continue to use the money they receive to support the moral values you hold as a family. This letter is sometimes referred to as an “ethical will” just to add to the confusion.
Durable power of attorney. This document is a vital part of a will-based estate plan because the agent named in this important document will be legally able to step into your financial shoes if you become mentally incapacitated during your lifetime. You will also need a healthcare power of attorney as part of your advanced medical directives.
List of financial accounts and beneficiary designations. Make a list and check it annually; it should include assets such as bank accounts, retirement accounts, and brokerage funds. If the idea of asset protection is not important to you, you can designated beneficiary or transfer on death provision, also known as a TOD. The named beneficiary will automatically receive these assets at your death regardless of their ability to manage them properly.
Personal inventory. Believe or not, more families fight over tangible personal property than money; perhaps because money can’t be challenged mathematically. Designate who should get items of value even if that’s only sentimental value. In fact, it might be nice to dust off the video camera as you walk around the house telling stories about items and why you want a specific item to go to Suzy Q versus why little Johnny gets something else. Making it personal could eliminate the arguments.
Life insurance policies. For many of us, the last time we thought about beneficiary designations on our life insurance policies is when we bought them. Your plan for this asset has likely changes over time so add this to your list of assets that need to be updated from time to time.
Real estate records. This one is almost self-explanatory and it usually represents the single largest asset we own. Not only is it important to keep deeds handy, but also your mortgage statements and property tax information.
Tax returns. Make sure you identify your tax preparer for your fiduciary; that professional will have all the answers. Add a note to your file if you haven’t needed to file a tax return; after all, many seniors no longer working don’t have the income required to file a tax return; nice to know!
Logins for financial accounts as well as digital accounts. Create a list of your usernames and passwords for financial accounts, email, and social media and keep it where heirs can access the information.
Your burial wishes. If you’ve made prearrangements for your funeral or cremation, place that information with your estate planning documents. Don’t forget to include information about organ donation, pet care and who should be notified of your death.
Distilling a lifetime into just a few documents is no easy task, but it is necessary. Your loved ones will appreciate how knowing simplifies the process plus it will provide them with the time they will need to grieve their loss.
Reference: US News & World Report (October 4, 2018) “12 Documents to Prepare Now for Your Heirs”
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