What Happens If You’re Too Late?

Most of us hear the words, “end of life planning” and we think that is something we will do….later……preferably when we are in our eighties.

In reality, we do not know when this life will end and if the worst were to happen we don’t want to leave our family with a mess to handle. Whether our passing occurs in a car wreck five years from now, a heart attack next Tuesday or sometime near the turn of the next century the time for getting your affairs in order is now.

The first part of planning is having a will and keeping it updated. Every will needs an executor who is tasked with carrying out the terms of the will. That person should know who they are and they need to know where the will is if that time comes. Many people keep their wills in a fireproof metal box or home safe. That is a good option. Keeping it in a bank safety deposit box is another option.

Along with a will you need to have a health care directive. A healthcare directive or “living will” gives your doctors, family, and caregivers advanced directives on what sort of medical options you are willing to endure and which you feel are going “too far.” Your living will should designate the person who is tasked with enforcing the terms of the living will. That person should know where to get the living will in case of an emergency. It is generally also a good idea to present your living will to the hospital any time that you go in for even “minor” surgery in case of unexpected complications.

Along with a will and a healthcare directive you also need to prepare a power of attorney for someone to manage your financial affairs if you are incapacitated. As Americans live longer and medical care continues to advance, periods where we are alive but incapacitated (either temporarily or permanently) are likely to continue to increase.

Along with the will, the living will, and the power of attorney it is a good idea to have a list of professionals that you work with so that your executor or the person charged with administering your power of attorney can contact them in a moment of crisis. This list would include your attorney, your doctor(s), your insurance agent, your accountant, your financial planner, your stockbroker, business partners, children, etc.
Also included should be your financial accounts: bank account information, life insurance policies, brokerage accounts, annuities, the mortgage, car notes, credit card statements, deeds, safe deposit keys, and the location of physical assets like jewelry, gold, equipment etc. We need to emphasize that this needs to be in a very safe place and the person you designate to act on your behalf needs to be trustworthy.

Everyone needs life insurance. Having adequate life insurance means that your passing will not be a catastrophic financial event for your family.
Protecting your family from catastrophe generally involves more insurance than simply paying for the funeral. Most Americans do not have enough life insurance if they were to pass today. Life insurance should ideally be sufficient to pay for your burial or cremation, pay off your debts, pay off unexpected medical bills, replace enough of your income that your family is not adversely impacted, and leave a legacy. The amount of life insurance each of us needs varies by income and by what stage of your life you are in. We recommend that you seek assistance from a competent life insurance professional.

Keep your designated beneficiaries up to date. Every life insurance policy has a primary beneficiary. This should be a person or persons, NOT your estate. Leaving life insurance to the estate is always a mistake because if anything at all happens to tie up your estate, then the insurance proceeds will not go to your family until after the courts finish with your estates and they and your creditors have been satisfied.
Also make sure that you fill out the contingent beneficiary. This person gets those funds if the primary beneficiary proceeds or joins you in death. There are also beneficiary designations on 401(k)s, annuities, and some brokerage accounts. Make sure that you keep all of those up to date, because the beneficiary designation will over ride a will. You may intend for your spouse to get your insurance, but if your parents or a previous spouse is the designated beneficiary when you pass, then they (not your current spouse or children) get those funds.

If you are leaving your assets to a trust, your heirs need to know that and how the trust works. Currently the federal estate tax exemption is $5.34 million so for people with assets less than this a trust may be unnecessary expense. A trust may also be beneficial if your heir(s) are not competent to manage your affairs: if you are the parent of an intellectually challenged child for example. Take your time, work with a competent trust attorney, and thoughtfully consider whether or not a trust is wise for you and your family circumstances.

Every adult needs to have an end of line plan in place and they need to keep that plan updated as they: marry, have children, divorce, children mature, retire, settle debts, and accumulate assets. For more information on planning, click here.

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