The following is a bit off the cuff, but I wanted to collect some basic info in one place regarding planning for disability and death. Much of planning is state-dependent, and many of our forum members have vast experience with their own estate planning and with settling the estates of others. This snapshot is not for you.
Rather, it is the nudge for the "yeah, I really gotta get on that" person, whether it is for themselves, or a family member.
So You’re Dead, Now What?
Before death (or sometimes even more important, disability), we have the unparalleled opportunity to take care of decisions and paperwork that can make or break the relationships of those we leave in our wake. Though it is uncomfortable to talk about this stuff, there is no greater gift you can give to your kids, siblings, friends, and the local bill collectors than some time devoted to the euphemistically titled “end of life” planning, which should really be called “about every 10 years, maybe more often, depending on what’s up in your life” planning.
So let’s start with the simple stuff: in your 20s, if you don’t have any assets, nothing in particular you want to go to someone special, breeze by my missive. Your time will come. But, if you are married, maybe own a house, a couple of cars, whatever; this is the time for your very first wills (how romantic!). Also included in the catch-all of “wills” is understanding that you and your spouse have your own wills, not something joint, which for some reason is confusing to people.
Maybe you want a lawyer, maybe you can pull the simple “I love you” will together online somewhere that says I give everything to my spouse and if they pre-decease me (the lovely “common disaster” scenario fits in here) then I give it to the first name in the phone book or whoever. Think of your will as the instructions for where your stuff goes, and the executor as the person who is in charge of making that happen. If you choose your spouse as your primary executor, make sure to name a successor executor, in case of that common disaster thing. Pick someone reasonably organized, capable, who lives nearby, and who has agreed to fulfill the role. Until you have kids, wills are pretty easy.
HEALTH CARE POA
Aaaannnndddd, in case that was too easy, you also need to hunt up the advance directive/health care power of attorney stuff relevant to your state of residence (remember this if you up and move, see above about how often to revisit this). This is also one of those awesome conversations, about what you want done in worst case scenarios where you are rendered incapable of making your own health care decisions.
Read through the advance directives, adding notes to clarify stuff as needed, and select your health care power of attorney and an alternate, to be on the safe side. This is also worthwhile for that single 20-something a few paragraphs ago, who breezed through til now, as health disasters can strike whether you have any assets or not. It is far better to choose someone and give them some guidance on your wishes than to leave it up to whoever gets to the hospital first. Remember that you want to choose your Health Care POA to act as you would, so think about this a bit and talk to them about it before you add their name to the form. There’s a good resource here on the whole topic:
The health care POA and advance directives should be given to the person you’ve selected as POA (and your alternate, if you want to), as well as your primary health care provider. And keep a copy with your will.
Now, once you have kids, then you need to revise your will to include them, and establish guardianships for them if you and your spouse are dead/disabled. You also need to pick up some life insurance to cover their expenses. Who you choose for the guardianship role will probably change over the years—in the beginning it might be your parents, young-at-heart and able to take on caregiving, but later on, you may think that teenagers might be better suited to living with your younger sibling, who wasn’t very settled at one point, but now is in a good place and would be willing to take on the responsibility. Again, this is why you should revisit these documents at least every 10 years, if not sooner.
Likewise, your retirement accounts should have the right beneficiaries listed, and avoid making minor children the inheritors, this gets complicated and you’ll want to establish some oversight if your kids are going to turn out right. Minor children should not be direct inheritors of any estate assets, period. Assets must go to a trust, which would then dole out money to them in accordance with the terms of the trust and the discretion of the trustee.
Now, a brief sideways tour into storage...where to put these vital papers…this is where everyone has a slightly different situation, and it will change with time. Your choices include: with the attorney who prepared the will (this would be the original, as you can take a copy home), in your home safe (but you’ll need to provide instructions to the executor to access it), wrapped up well in the freezer, or in your safe deposit box. Some states make it somewhat easier to get into the safe deposit box, and others make it darn near impossible. Do what makes sense, both to you AND your executor. Don’t shove it in an obscure paperback book, leave it in a box of old tax records, or better yet forget where you actually “hid” it. Disasters await your unlucky heirs. Tell your executor EXACTLY where it is, and leave it in that spot.
As you get older, kids get grown, life gets more (or maybe less) complicated. As you reach whatever age says “declining mental acuity is just around the corner”, and don’t kid yourself about this, be real, start simplifying your financials. Check those retirement account beneficiaries again, re-read your will, be sure that your executor and health care POA are still the right choices, and start thinking about setting up durable POA (financial) for yourself. Durable POAs can act in your behalf with banks, utilities, brokerages, and any other entities with whom you deal. This power can be broad or restricted, and you should consider carefully who you want handling things if you cannot manage it yourself.
Keep handy someone who you can trust to tell you when you aren’t sparking on all eight cylinders any more. Make a promise to listen to them, and keep that promise. Bad judgment, fear, paranoia, and confusion can make a mockery of your carefully laid plans if you become incapacitated and don’t know it. If not a spouse, then identify a good friend, an attorney, financial professional, pastor, or whoever. Just be sure they know to speak up with their concerns about your well-being and what to do.
You can set up POAs with specific institutions, and in fact, you should probably use their POA forms for this purpose, as it is easier and less headache than getting them to accept a general durable POA. Consider adding POD/TOD (paid on death/transfer on death) designations to brokerage accounts, adding authorized representative or joint holders to utility accounts, insurance policies, and credit cards, and creating a document (perhaps updated once or twice a year) that includes your bank account information, attorney contact info, insurance policy numbers/names, utility providers, and relevant passwords for websites and personal devices. You can keep this with your will.
Speaking of making things less complicated, seriously consider consolidating your financial accounts to one brokerage, especially when you get to RMD territory. Having your IRA assets in one place makes this calculation much easier, and that’s what you want for yourself, or your caregiver, at some point.
Funerals and other grim tasks: include in your packet of important papers some instructions regarding your final wishes, and if these include a traditional funeral, you should probably price out your desired casket and whatnot and earmark funds for the service. Bereaved loved ones are not the most judicious of consumers, and you can make this task easier by giving explicit instructions and cost projections.
Disposing of your worldly possessions is another grim task borne by caregivers and heirs. Spend some time organizing your mementos and setting apart the truly meaningful from the obvious clutter. Scan and share family photographs, give kids their baby blankets and old report cards, and make legible notes/appraisals about specific items of more than sentimental value. Think hard about the chore of going through everything you own, and how you can make things easier for the person with that job. Beyond the usual stories about grown children fighting over valuable family heirlooms are the untold hours spent sifting through stacks of receipts, photographs of strangers, and tokens kept from trips long in the past. The tedium of this task, likely coupled with grief and exhaustion, is too often overlooked until you’ve had to do it yourself.
I’m not an attorney, and am not giving any specific legal or financial advice with the above notes. Your situation is unique and specific to you, and may be best served by using the services of a qualified professional. YMMV.