For many, the subject of death is a taboo topic. Conjuring up images of scenarios where your loved one is no longer present can be traumatic. Due to the unpleasant nature of the idea, many put off making decisions to protect their financial future in the event of a loved one’s passing. They often realize, later, that failing to plan for the event results in additional stress and headache during a time period that would be better reserved for the grieving process.
Those who are able to put aside the emotional distress surrounding the idea of death long enough to approach the issue from a rational perspective are doing themselves a favor. Planning ahead for the legal and practical matters, which are certain to arise, can mean that remembering your loved one can be your main focus, rather than being plagued by thoughts of how to manage calls from debt collectors, or of how to obtain the funds from a retirement account. The following are some steps to take toward ensuring that the inevitable occurrence of your loved one’s passing flows as peacefully as possible.
Start the Conversation, Communicate About the Future
The first step in most cooperative endeavors is to establish end-of-life communication and decision making. For some, it may be taken for granted that the spouse will be available to care for us, should we become incapacitated, or to operate as executor upon our passing. For others, the idea of leaving our spouse with the weight of these responsibilities is an undesirable scenario.
You can provide your spouse with the gift of forethought in determining what responsibilities he or she will be left with. For spouses that are to be named as executors, ensure that they are aware of the levels of responsibility that come with the position. Executors are the go-to person for making all decisions, including those which other family members attempt to bring up in probate. There are also options for arranging extended care, should we become incapacitated, which involve hiring a professional service to take on the task.
Take Inventory of Personal Assets
As we age, many of us end up with a multitude of financial securities. An old bank account will still have an associated life insurance policy. An opened and forgotten IRA has been sitting with a few hundred dollars for several years. Those penny stocks we bought in our 20’s are still waiting in our online trading account.
A prudent step in planning for end-of-life needs is to take the time to carefully research and compile each, existing, account. For miscellaneous, liquidatable accounts, it may be a good idea to cash out or consolidate them into a more conveniently accessible medium.
There is also the matter of physical assets. Houses, cars, land, and valuables are often available for distribution. While most states have laws to ensure that all material items are transferred directly to the spouse upon death, there are sentimental aspects to consider. Does your loved one have a special baseball card that he would like his grandson to receive? Or, does your spouse have an old quilt, passed on through generations, that needs to go to the eldest daughter? Specifications of the distribution of material goods can ensure that the time of grieving is accompanied by loving, and heartwarming, gifts from the departed.
Ensure Beneficiary Accuracy
After establishing a list of active accounts, the next step is to ensure that the specifications for beneficiaries are current and applicable. Within our modern society, it is very often the case that we have spent alternating periods of being married, divorced, single, and married again. Most of us wouldn’t want our ex-spouse to have any claim to our assets, anymore.
The easiest way to ensure that your assets will be transferred is by listing your current spouse as the direct beneficiary. Visit websites and make phone calls, as applicable, for each account, in order to document– or verify the documentation – of your specified beneficiaries. There are also options, with many accounts, to establish seamless procedures for transfer of assets. With home mortgages, for instance, you can avoid adding your spouse to the loan with only a bit of paperwork, thus naming him or her as a successor to the property. As a successor, your spouse will have the right to simply take over the mortgage upon your passing. Additionally, Transfer-on-Death (TOD) deed options may be worth exploring.
Calculate Financial Needs
If there is ever a best time to get out from under debt, that time is now. While both spouses are still healthy and cognizant, the team can work together to head off some of the burden of debt that remains when one team member passes on. After calculating all debts – and making applicable plans for elimination – do some number crunching in the direction of income.
Many retirement plans provide income calculators on their websites, where you can punch in numbers – like expected contribution amounts, balances, and years until distribution – and estimate what payment amounts can be expected. Combine this expected amount with any other distributions, such as life insurance policies or social security payments, and determine what your spouse’s monthly income is expected to be. Then, tally up all remaining debt payments, and subtract those from the expected income. This will provide you with an idea of whether your spouse will have enough monthly income to sustain life-as-normal after your passing. If not, this is a good time to plan for how to make up the difference.
Solidify End-of-Life Plans
None of these specifications designed during your hard work of pre-planning will be set in stone until you document them. With a living trust, specifications for long-term care and distributions for assets can be revised as the need arises. A legal will can also be altered, simply by rewriting and endorsing it with witnessed, notarized, signatures. The primary difference between a living trust, and a will, is that the will only goes into effect upon death.