How to Prepare for Death
- Financial PlanningIn the immortal words of Prince, “We’re all gonna die.”
Yes, we all know we’re going to die, but we definitely don’t like to think about it. Planning for death was the last thing most of my clients did, and some of them never did it at all. I get it, and I want to convince you to prepare anyway.
To do that, I’m going to stick with the Prince theme and tell you a little story about his estate. When Prince died in 2016, he had no will, even though he clearly knew he would die someday (see above). He was 57 and had an estate worth $156 million (!), but he didn’t have a will. You can probably imagine the chaos and clashes that ensued, but I’ll give you the thumbnail sketch. His six half-siblings disagreed about how the estate would be divided, and without a will, it ended up costing $3 million just to settle the estate, not to mention the six years of legal battling. That’s a lot less for the heirs to split, and I’m pretty sure it wasn’t split exactly the way he wanted.
Now, maybe you don’t have Prince’s money, but I can assure you that if you don’t get your ducks in a row you are going to cost your loved ones a lot of money and time. You might even cost them their relationships with each other. Enough said; let’s move on to the how.
How can you prepare, or help others prepare, for death?
1. Start a file to hold all of the information you will pull together as part of this process. It can be hard-copy, online, or both. Having a backup is a great idea. All of the resources you see below will go into this file. Make sure your key end-of-life people know where to find this file.
2. Financial Fact Sheet: Next, create a list of all your assets and liabilities, including life insurance and all of your possessions. You’ll want to reference where you want your assets to go when you die, and this list will make sure you don’t miss anything. For life insurance and financial accounts, be sure to write down your account numbers and company names. Links and phone numbers would be great, too, to help your executor.
3. Digital Estate Plan: Keep a list of online account names, links, and account numbers as relevant, but don’t include passwords. If someone logs in with your credentials, they’re probably violating the account agreement, and who knows what untold horrors await that person. Some providers allow you to add a legacy contact in case you die, so take advantage of that when you can. See the link in the title of this paragraph to find a list of the digital assets people most commonly own.
4. Estate Plan: Next, make sure you create your estate planning documents, to include a will, legal and healthcare powers of attorney, and a living will / healthcare directive. You may need a trust or other document depending on your situation. Your attorney can help you formalize your wishes for all of your assets as part of this process, so bring that Financial Fact Sheet with you when you do your estate plan.
5. Create your end-of-life plan (and pay for it): It’s important that your loved ones are aware of how you want things to go when you die. Do you want a big party? Burial or cremation? A casket liner and headstone? If you can pre-pay for everything, that will save your heirs from having to come up with that cash while they wait for your estate to be settled. If you can’t afford to pre-pay, you might consider a small, term-life insurance policy to cover the costs. Life insurance usually pays out relatively quickly once a death certificate is produced.
6. Plan for taxes: Check in with your financial life planner or tax professional about estate tax planning. There may be ways to limit or eliminate the estate tax you pay, so your heirs keep more of what you’re leaving them. Better them than the IRS.
7. Don’t handle all of your household’s finances on your own: If you have a spouse or partner(s), make sure they know where everything is and participate in running the finances. If not, they will be lost without you.
8. Communicate your plans to all relevant parties: You don’t want there to be any misunderstandings or hard feelings to pile on top of people’s grief, so it’s best to be transparent about your intentions as early as you can.
9. Consider being an organ donor: You’re not using your body anymore, so why not give someone else a chance? There are instructions for signing up to be an organ donor here.
10. Review and update your plan and documents once a year or when your situation changes. People move in and out of your life, you add and subtract accounts, your financial situation changes, and your wishes change over time. It’s important that your end-of-life plan keeps up with your life, so check in at least once a year to make sure.
My friends, look for that purple banana while you can, before the Grim Reaper comes knocking on your door! And in the meantime, get your end-of-life plan sorted out so you don’t leave a gigantic mess for the people you love.
