Death is often seen as a taboo topic, but it’s something that we all have to face at some point in our lives. It’s important to be prepared for the end of life, both for ourselves and for those we leave behind. Here are some of the things you need to do in order to make sure your loved ones are taken care of after you’re gone.
What is an Estate
An estate is a term used to describe the total sum of all a person’s assets and liabilities at the time of death. It can be a complex process to administer an estate, so it’s important to plan for it ahead of time. Here are some reasons why you should plan your estate:
- To ensure your loved ones are taken care of after you’re gone.
- To make sure your assets are distributed according to your wishes.
- To reduce the tax burden on your loved ones after your death.
- To ensure that your final wishes are carried out.
You can prevent your retirement and other assets from being dispersed by designating beneficiaries on those accounts. If you die or are unable to make decisions, estate planning is what allows your loved ones to take over. This includes creating lists of both assets and liabilities, as well as accounts that are still open.
Estate planning is about more than just drafting a will, but a will is definitely an essential part of the puzzle. To plan thoroughly, you need to take stock of all your assets and make sure they can be transferred easily and smoothly to the people or organizations you want them to go to. But estate planning isn’t finished until others know your plans and made sure they fully understand your intent and your plan.
Here’s how to start planning your estate.
1. Get Your Inventory in Order
Make an inventory of all your valuable possessions. These can include big items such as the house, car, jewelry, appliances, art, and electronic, but also smaller items like televisions, power tools, or even lawn equipment. If there’s someone you know who would appreciate receiving a particular item after your death, make a note of it beside that item on the list. You may be surprised at just how many valuables you have once you sit down and really think about it.
2. Do the Same to Your Non-Tangible Assets
In addition to your physical assets, you should also make a list of your non-physical assets, which are things like bank accounts, investments, and entitlements that only exist on paper. Make sure to write down the account number of each one as well as where you put physical documents, like safes or deposit boxes. Write down the contact details of any entities, firms, or individuals who hold your possessions in your stead.
3. List Down Liabilities and Debts
Lastly, make a list of active credit cards and debts in your name. This could comprise things such as mortgages, car loans, and college loans. For each debt, write down the account number, where to find the paperwork related to the debt as well as the contact details of each lender.
Make sure that all the credit cards in your inventory are on the list, including which cards are used frequently and which ones are not. Checking your credit report helps with this, and doing so will remind you of any forgotten cards.
4. Create Duplicates and Copies
After you finish your lists, make sure that they are dated and signed. Make three copies in total; these will go to the person who will administer your estate, to your husband/wife (if applicable), and to you for safekeeping.
5. Look Over Your Retirement Plans and Accounts
If you assign beneficiaries for your policies and accounts, these will be given directly to these people or entities when you die, regardless of what you say in your will. If you have designated beneficiaries with your retirement accounts, those will be prioritized.
Make sure your life insurance policy, 401k, and other accounts have the correct beneficiaries by contacting your employer’s plan administrator. This is vital if you’ve gone through a divorce or remarriage.
7. Review Your Insurance Policies and Update Them Accordingly
If you have life insurance or annuities, it’s crucial to touch base with the companies handling your policy and confirm that your beneficiary designations are correct and updated.
8. Designate People to Transfer Accounts to
Assets left through a will pass through the probate process, which is also the case if someone dies without having written a will. This expensive and lengthy process involves your assets being distributed according to court instructions.
However, many probated accounts needlessly go through the process. If you’re the holder of these types of accounts, you can prepare transfer on death (TOD) designations. This allows your beneficiaries to take charge of the assets without having to go through probate. To get this done, reach out to your custodian or bank.
9. Choose a Trustworthy Estate Administrator
When you die, the individual you select to be your estate administrator or executor will handle your will and follow it. It is essential that this person is reliable and has clear judgment to make choices on your behalf.
Most people think their spouse is the first choice, but more often than not, that is not the case. Before you decide on your spouse, consider how people generally experience turmoil after the loss of a loved one, and weigh out how your loved one’s emotions may be overwhelmed after your passing. If you are concerned that this might happen to your spouse, you should choose other people who can make objective decisions.
10. Write the Will
A will allows you to control how your assets are distributed, thus putting a quick end to future disagreements among your beneficiaries. You can also use a will to assign guardians for any minor children and/or pets under your care, as well as designate how you would like your assets distributed upon death. Additionally, through drafting a will you have the ability to make donations to charities after your passing. You can ask for help from probate attorneys or even software to draft this, and this is not as expensive to write if you ever decide to get professional assistance.
After you sign and date your will in front of two witnesses who are unrelated to you by blood, have the document notarized. Next, make sure to tell others close to you where they can find the document. Make copies if necessary, too—you can even have it digitized.
11. Look Over Your Documents Regularly and Update When Necessary
Updating your will may not seem like a priority, but protecting your assets and family should be. Reviewing your will every two years insures that it’s always accurate, no matter how much life changes. In addition, if ever you experience something major (like divorce or another loved one’s passing), or if you ever decide to change something on a whim, make sure to make the needed updates.
12. Loop Your Administrator In
After you finalize your will, you have to sign it with witnesses and have it notarized. Be sure to give a copy of the original to the person administering your estate. If you have it in another place, such as a safety deposit box or at your attorney’s office, you should also keep a copy in a safe place at home. This is because only the original document that you signed in ink with your own hands can be filed for probate.
13. Consolidate Finances and Plans
You may want to think about combining your 401(k) retirement plan accounts from past employers into one IRA. The benefits of consolidation include more investment options, lower fees, and less paperwork.
14. Finalize Other Documents for Your Passing
If you want things done a specific way after your death, like who gets your digital assets or whether they should be deleted, or how your funeral should go, it’s important to plan ahead and formalize these requests in writing. If you’re married, you and your partner should have your own will. Be sure that everyone who needs to know about these arrangements has access to your written plans.
Final Thoughts
Though it may seem daunting, estate planning is a crucial task that all adults should complete. Not only does it ensure your wishes are carried out after you die, but it also helps to ease the burden on your loved ones during what is already a difficult time. By following the tips in this article, you can make the process much simpler for yourself.
