estate planning

Ask the Readers: Do You Have a Will?

Ashley Jacobs — Tue, 22 Jan 2019 09:30:06 +0000

Editor's Note: Congratulations to Tabathia, Jen, and Randy for winning this week's contest!

Thinking about death at all can be tough, let alone planning for your own. But to ensure that your estate is handled to way you want, with as little strife to your loved ones as possible, you need to have a will.

Do you have a will? What do you think is the most important reason for having one — and what do you think is the most important part of yours? How often do you update your will?

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Tell us whether or not you have a will and we'll enter you in a drawing to win a $20 Amazon Gift Card!

This article is from Ashley Jacobs of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Money Moves Every Single Parent Should Make

Alicia Rose Hudnett — Thu, 14 Jun 2018 09:00:31 +0000

Parenting comes with a deep sense of responsibility for your children and a lifetime of having to make difficult decisions. Raising kids in a two-parent household can be stressful enough; being a single parent can be downright overwhelming.

When it comes to managing household finances, being a single parent isn't necessarily different from any other household with children. Instead, there just may not be a lot of financial flexibility — so there's more pressure to get things right early on. Take a breath and work toward reaching these financial markers to give you peace of mind.

1. Prepare your estate planning documents

People tend to procrastinate about getting their estate paperwork in place, but it's a smart idea for everyone to make it a priority. Experiencing a major life event, like having a child, should prompt you to either update your old documents or establish an estate plan.

Unless you're comfortable leaving your personal and financial decisions up to state officials, it makes sense to sit with an attorney to discuss your wishes should you pass away or become incapacitated and unable to make financial and health decisions for yourself. Since minor children cannot take control of inheritance money or make legal decisions, listing them as direct beneficiaries on your accounts and assuming that will accomplish your goals may not be the case. Every parent should also have guardianship papers in place, especially if they are raising children alone. (See also: Here's What Happens If You Don't Leave a Will)

2. Purchase life insurance

Generally, if someone is dependent on your income, you probably need life insurance. While you'll want to sit with a financial adviser or life insurance agent to discuss how much insurance you need, some factors to consider are how much it will cost to raise your children and send them to college, as well as to protect certain assets and pay off debt. You'll also want to consult an attorney or financial professional about properly selecting a policy beneficiary. While there are various types of life insurance, a term life insurance policy can be an affordable and efficient way to protect your family. (See also: Term vs Whole Life Insurance: Here's How to Choose)

3. Fund an emergency savings account

Having a fully funded cash reserve on hand is a critical component of everyone's personal financial health. In a one-income household with children, it's recommended to work toward having at least six months' worth of monthly bills and expenses saved and set aside. Once you reach six months' worth, aim for a year's worth. In a two-parent household, one adult may be able to cut back on essentials in the case of a job loss, but when children are financially dependent on you and only you for everything, that can be difficult to manage without a padding of emergency cash. (See also: 5-Minute Finance: Start an Emergency Fund)

4. Contribute to a retirement account

After fortifying your financial house with savings and the proper risk management documents in place, you should focus on saving for your own retirement. As a parent, you naturally put your children's needs and wants before your own, and there is nothing wrong with that. But it's also important to recognize that your early working years are critical to your retirement savings goals. There are no do-overs when it comes to saving for retirement, and every year you don't save is a year lost.

If you have access to a retirement plan at work such as a 401(k), strive to save 15 percent of your total income. If money is tight and your employer offers a match, start by contributing just enough to earn the full match. Over time, you can gradually increase your own contributions. If you don't have access to a workplace retirement plan (or in addition to one), you should open an IRA, which you can do at a discount brokerage firm or bank. For 2018, anyone with earned income under the age of 50 can contribute the lesser of $5,500 or their total yearly income. Make this a priority and make this a habit. (See also: 7 Retirement Planning Steps Late Starters Must Make)

5. Open a 529 account

A 529 plan is a tax-favored education savings account that allows individuals to save for future qualified education costs. Contributions are made on an after-tax basis, and the money grows tax-free. Distributions for qualified education expenses are also tax-free. Once you set up an account, anyone can make contributions to it; for example, grandparents could contribute on behalf of a grandchild. Even if you don't have enough money in your current budget to make regular contributions, saving your child's birthday, holiday, or other gift money they receive throughout the year can be a helpful way to see your funds grow.

Covering the entire cost of your child's (or children's) college education is a difficult task for any set of parents, so don't feel guilty about what you may or may not be able to accomplish with this account. Every little bit helps. (See also: The 9 Best State 529 College Savings Plans)

Being a single parent can sometimes make you feel as if you need to overcompensate in certain areas when it comes to raising your children, but it's important to not lose sight of building a strong financial foundation for your family and also for your own future.

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This article is from Alicia Rose Hudnett of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Talk to Mom and Dad About Their Money

Ashley Eneriz — Tue, 05 Jun 2018 08:00:29 +0000

Good ol' Mom and Dad. Many of us can remember our parents complaining that money didn't grow on trees and grumbling over wasted money every time we left a light on or took too long in the shower. As our parents get older, however, roles and responsibilities start to switch. Eventually, a time comes when we have to have the talk about money with our parents.

Sharing financial advice with your parents can be challenging and uncomfortable, but it is an essential talk to have. Here's how you can go about discussing money with your aging parents in both a respectful and productive way.

Set up a meeting

It can be hard to talk seriously when kids are running around or when the family is supposed to be enjoying a fun night together. Don't put a damper on a family get together by blindsiding your parents with bank statements. Instead, arrange to talk over coffee or breakfast, or even agree to meet with a financial adviser or estate planner if you think that will make the meeting go smoother. (See also: How to Talk to Friends and Family About Money (Without Making Everyone Mad))

Don't point fingers

If you start a conversation with your parents saying something like, "You don't have enough saved for retirement — what are you going to do?" they are going to be quick to put up a wall. From your perspective, it might seem like your parents have been careless with finances, but there is a chance that you don't know the whole story. Instead, approach them on mutual grounds.

Instead of being accusatory, invite discussion. Start off the conversation with something like, "I would love to discuss what you would you want me to do if there comes a time that I need to be your full-time caregiver," or, "I know you mentioned that you wanted to set aside money for your grandkids' education, and I would love to know more about it so that it is done in a way that the kids aren't penalized if they need to apply for financial aid later on."

Offer help

Ask Mom and Dad if there is anything you can do to help lighten their load. They might need someone to teach them how to access their bank info online, do their taxes, or help them prepare a will. Sometimes parents feel embarrassed about asking their kids to take over financially, and may not be ready to hand over the reins right away. You can still extend the invitation by saying something like, "If there ever comes a time where you don't want to deal with budgeting/paying bills/etc., let me know and I will gladly help out as much as possible."

Ask for access to their important financial information

There are no guarantees in life. You never know when your parents will pass away or become fully dependent on you. It is important to have a list of their financial information so that you can access it when the time comes. Here are some important things to know:

Social Security numbers.
Financial information for each bank, investment, retirement, and debt account.
All insurance information, including health, long-term care, and life insurance.
Estate planning documents such as will, trust, and power of attorney.
Real estate papers, such as deed and title.
Contact information for all financial advisers, accountants, lawyers, etc.

Create a future plan

According to AARP, 30 million households care for an adult over 50, and that number is expected to double in 25 years. Share that statistic with your parents and explain to them that while you don't like imagining them getting older, that is going to happen regardless — and you want their guidance and advice before that time comes. Ask them what living arrangements they want when they can't care for themselves and how they want their finances, assets, and property dealt with after passing. (See also: 6 Financial Steps to Take When Your Aging Parents Move In)

Make sure everything is up to date

Ask your parents if their important financial and legal documents are up to date. Does their will and power of attorney for health and finances reflect what they want it to reflect? If not, encourage them to update these legal documents as soon as possible. (See also: 6 Things You'll Encounter When Taking Over a Loved One's Finances)

Have patience and get the family involved

Don't expect to conquer your parents' financial future in one go. Depending on how complicated their finances are, it might take several talks and several prompts of encouragement to get things on the right track. If possible, have other siblings get involved in these financial conversations. Show siblings that if they keep borrowing money from Mom and Dad, they will drain them of essential money needed to pay for health care and living expenses down the road.

Talking about money is already an uncomfortable and unpopular topic. Add your parents to the mix, and things can get hairy and emotional quick. Remember to go slow and come from a place of love. (See also: 6 Ways the Sandwich Generation Can Get Ahead)

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This article is from Ashley Eneriz of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Solve These 6 Problems Your Heirs Could Have With Your Estate

Emily Guy Birken — Wed, 23 May 2018 08:30:40 +0000

Fifty-eight percent of Americans have no will, according to a 2017 Caring.com survey. That means state laws, rather than the wishes of their loved ones, will determine what happens to the property and assets of the deceased.

But before the 42 percent of Americans who do have a will start congratulating themselves on helping their heirs avoid such challenging situations, it's important to remember that even well-planned estates can cause problems for those who inherit. Here are the potential issues your heirs may face, and how you can make sure your final wishes are followed.

1. Your heirs don't know where to find your estate plan

You may have very specific wishes regarding everything from your burial instructions to who will get your mint condition Cal Ripken rookie baseball card — but those intentions can't be followed if your heirs don't know where to find your will and other estate planning paperwork.

Unfortunately, this is a relatively common situation, since many people consider talking about inheritance to be taboo or uncomfortable. Even if your heirs know that you have a safety deposit box in the bank, they may not know which bank, or which branch, or where to find the key.

This is why it's important to discuss your estate plan with your family. Introduce your kids to your attorney so they know whom to call in the event of your death. It's also a good idea to create an "in case of emergency" folder that provides your loved ones with the information they will need about where to find your estate documents, as well as the information necessary to handle your banking, taxes, bills, and other issues if you become incapacitated or pass away. (See also: 9 End-of-Life Cost Savings Your Survivors Will Thank You For)

2. Your will is too vague

There are number of ways that a vaguely-written will can cause your heirs problems. The classic example would be if the deceased simply states that her jewelry is to be divided among her children. This kind of imprecise language can end up causing a rift among siblings if more than one wants the same brooch — or if anyone feels slighted as to how the jewels are distributed. It is best to make sure valuable items are specifically distributed in your will to ensure that your wishes are followed without causing family strife.

But a vague will can have bigger consequences than hurt feelings for heirs. For instance, sometimes a will specifies that one family member is to inherit all of the money because the deceased had a verbal agreement with that heir to share the money with another family member. (You may remember this as the beginning of the plot of Sense and Sensibility.) Without specific language in place, there is no guarantee that your heir will do what you asked.

These sorts of informal agreements are often created in order to protect assets for minors or other individuals who cannot directly inherit — such as special needs adults who rely on government assistance and would lose it if they were to come into a large sum of money. Since a verbal arrangement can be disregarded, it is far preferable to create a trust to ensure the money goes to the person you want it to. There are a number of different types of trusts that can make sure your wishes are followed, can protect the government assistance of the family member in question, and will allow for no confusion or misunderstanding. (See also: The Fair Way to Split Up Your Family's Estate)

3. Your beneficiaries don't match your will

If you put together a well thought out estate plan in your will, but forget to update your beneficiaries on your assets, then it doesn't matter how detailed your estate plan may be — your assets will be distributed according to the beneficiary designation rather than your will.

This is a common issue for many estates, since relationships often change and account holders don't think to update their beneficiary designations. Everyone should review their beneficiary designations every few years to make sure they are not leaving unintended money to ex-spouses, estranged siblings, or other family members who have drifted out of their lives.

4. You name the estate as a beneficiary

A common error in estate planning is if you name your estate as the beneficiary of your IRA, 401(k), or life insurance. If instead you name a person as your beneficiary on these sorts of products, the assets can pass to your beneficiary without having to go through probate. That means the individual beneficiary will receive their money, no matter how many creditors have claims on your estate. But if your whole estate is your beneficiary, the money must go through probate — and your heirs will get only what is left after creditors have been paid.

In addition, if your estate is the beneficiary of your IRA or 401(k), your heirs must liquidate the investments within five years of your death, and pay the required taxes. If instead an heir is named as a direct beneficiary, they may have the option of delaying the required minimum distributions until they reach age 70½, allowing the money to grow tax-free until then. (See also: 6 Times You Need to Update Your Will)

5. Your non-spouse heir cannot roll over a retirement account

Even if you name an individual as the beneficiary of your IRA or 401(k), if the beneficiary is anyone other than your spouse, there are still some pretty big tax pitfalls that could affect your heir's inheritance. Non-spouse beneficiaries of tax-deferred retirement accounts cannot roll IRA or 401(k) money directly into their own retirement accounts without triggering a major tax bill. That's because a rollover would cause the entire amount to be considered taxable income. For that reason, it's preferable for non-spouse heirs of IRA and 401(k) accounts to take the money as required minimum distributions (RMDs) over a lifetime to minimize the tax bite. This is known as the "stretch" option.

Unfortunately, stretch RMDs are not without pitfalls. If your heirs do not take the correct required amount, there is a tax penalty of 50 percent of whatever they were supposed to take, plus whatever their ordinary income tax rate would be on the amount. To avoid this problem, you can direct your IRA or 401(k) custodian to administer inherited IRAs and automatically take care of any required minimum distributions.

6. Your annuity can push your heirs into a higher tax bracket

Passing on an annuity can be a good way of providing regular income to your heirs after you die. However, annuities also come with a potential tax problem since these products are also tax-deferred. An inherited annuity has untaxed growth, and the insurance company holding your policy will issue a Form 1099 for that untaxed growth to your heir, which means it will be included in the heir's gross income for the year. Depending how much growth there is, this could push your heir into a higher tax bracket, and the annuity payments they receive during the first year may end up being swallowed up by the increase in that year's taxes.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Personal Finance Tasks That Aren't as Hard as You Think

Dan Rafter — Thu, 10 May 2018 09:00:11 +0000

The thought of making a budget or preparing your own taxes makes you want to collapse on the couch and binge watch your favorite TV show. It's understandable: Most people don't consider personal finance to be a fun way to pass an afternoon.

But the truth is, most personal finance tasks aren't nearly as difficult or time-consuming as you think they are. And if you muster up the courage to finally take them on, you can generate a nice financial boost for yourself.

These personal finance tasks aren't as tricky as you think. Give them a go. You'll feel a lot less guilty when you waste three hours streaming old episodes of Battlestar Galactica.

1. Writing a household budget

Drafting a budget is the first step toward making good financial choices. The problem? Making a budget sounds dull and difficult.

The good news, though, is that it doesn't take nearly as much time or effort as many people assume it does. Simply list your monthly expenses that never change — everything from your mortgage or rent payment, to your car payment and insurance costs. Next, list those costs that change each month — such as your utility bill, transportation costs, and grocery spending. Put down an estimate for how much you think you'll spend on these items every month.

From there, list the expenses that are more discretionary, such as eating out or going to the movies. Create a maximum spend for these items each month.

Finally, list the money that comes into your household from salaries, overtime, bonuses, settlements, investments, and any other source that pays out each month. Compare your expenses to your income. Now you know how much leeway you have in your monthly budget and how much you can devote to savings. Best of all? Doing this doesn't have to take more than an hour. (See also: Build Your First Budget in 5 Easy Steps)

2. Building an emergency fund

Financial experts recommend that you have six months' to a year's worth of daily living expenses saved in an emergency fund. That way, if you face an unexpected financial emergency — anything from a $1,000 car repair bill to a job loss — you'll have money set aside and won't have to resort to credit cards.

Building such a large emergency fund sounds intimidating. But if you take it in small steps, you'll find that building this fund isn't nearly as hard as you think.

Start with whatever you can spare each month. If you can only devote $100 a month to your emergency fund, start with that. After a year, you'll have $1,200 saved. If you can save $200 a month, you'll have $2,400 at the end of a year.

The key is to continue depositing whatever you can in your emergency fund. If you do, you'll be surprised at how quickly it grows. (See also: 5-Minute Finance: Start an Emergency Fund)

3. Making a will

Drafting a will not only sounds complicated, it's also not much fun to think about. No one wants to consider their own death. But if you own property and assets, you absolutely need a will to make sure those assets are passed on to your loved ones according to your wishes after you die.

How to do it? Start by titling a blank document with the words "Last will and testament." Then, state your name and write that you are of sound mind and legal age (this is usually 18).

Name the executor of your will — the person who will carry out what your will states after you die — and name a legal guardian to take care of your children if you should pass away.

Your will should include the names of any beneficiaries, the people whom you want to inherit your assets. Usually, this will be your children or spouse. But you can also name friends, charities, other relatives, or organizations.

Finally, list your assets and whom they should go to. This can include your home, your savings, your car, or any other possessions.

Sign the will in front of at least two witnesses. Check with your state; in some, your witnesses can't be beneficiaries. Write down these witnesses' names and addresses. Make sure they sign your will, too. (See also: Here's What Happens If You Don't Leave a Will)

4. Paying your taxes

It can be tempting to hire an accountant or tax pro to do your taxes for you. The truth, though, is that most of us can do our taxes on our own.

Taxes for most people aren't overly complicated. Things only get messy if you rely heavily on freelance income, write off part of your home as an office, or have plenty of deductions that you want to claim. Most taxpayers don't fall into that category. They can file their taxes on their own, especially with the help of easy-to-follow tax preparation software.

So before you spend $600, $700, or more on a professional tax filer, consider doing this on your own. It'll usually take you less than an afternoon. (See also: 12 Things You Should Know About the New Tax Law)

5. Changing your bank

Your bank just closed the only ATM and branch near you. Its online banking function is sluggish and frequently offline. You're ready to make a change — but you don't want the hassle of closing accounts and opening new ones. Here's the good news: Changing your bank doesn't have to be a hassle.

You will have to do the research, of course. You'll have to find a new bank that has branches and ATMs close by. You might even decide to go with an online-only bank. Once you've analyzed your choices and selected a new bank, it's time to open an account. You might be able to do this online, but some banks require you to visit their office in-person. You'll usually need to make a deposit to start your new account.

Once your account is open, you can transfer money from your old bank — hopefully you can do this online — into your new account. But don't close your old account too early: You want to make sure that any checks you've written recently have been cashed before you close that account.

You'll also want to change all your automatic payments before closing your old bank account so that the payments are withdrawn from your new account. Many people have everything from their mortgage payments to their auto loan payments set up as automatic deductions from their checking accounts. Make sure you've switched all of these before closing your old account. And if your paychecks are direct-deposited to your old bank account, you'll have to make that switch, too.

Finally, if you rely on online payment systems such as PayPal, be sure to connect these services to your new bank. If you're lucky, you should be able to set up a new bank account, make these switches, and close your old account mostly from your computer. (See also: Switch to a Better Bank in 5 Easy Steps)

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Money Moves You're Never Too Old to Make

Tim Lemke — Wed, 09 May 2018 09:00:13 +0000

We often assume as we get older that money matters become more simple, and in many cases, this is true. You may be done worrying about saving for the future, and may be free of many of the expenses you had when you were younger. But this doesn't mean you're too old to make financial decisions that will still benefit you.

There are many money moves that you made when you were younger that still apply. Not all of these actions below will make sense for everyone. But age, by itself, shouldn't rule them out.

1. Buying a home

You may think that by a certain age, it makes no sense to purchase a home because you may not live long enough to pay it off in full. But there are some great financial advantages to homeownership, even for older people.

For one thing, if you want your retirement nest egg to last, you are better off putting money into something that builds equity and may increase in value. That's money that can be used in the future for your long-term care, or passed on to your heirs. Some older citizens even fund their retirement using a reverse mortgage, which allows you to draw equity from your home to pay expenses.

Additionally, when you own a home, you can make adjustments to the design and features to accommodate any health needs. For example, you could install a chairlift or add a bedroom on a lower floor so you won't have to go up steps. These are things you may not be able to do if you live in a rental property. (See also: 5 Benefits of Carrying a Mortgage Into Retirement)

2. Getting life insurance

Many older people don't bother with life insurance past a certain age, because the premiums do get more costly. But there are many cases where it makes sense.

If you are still working and your spouse relies on that income, term life insurance can come in handy. You may also have some debt — mortgage debt, for example — and want to ensure there is enough money to pay it off if you pass away. Guaranteed Universal Life policies can be good for seniors who want to ensure there's money to pay for final expenses or estate taxes.

There are many different insurance products; be sure to closely examine the costs and benefits of each to see if they make sense for your situation. (See also: 5 Kinds of Insurance Every Retiree Should Consider)

3. Shopping for health insurance

We assume that older Americans are simply covered by Medicare and that there's nothing more they need to know. But the reality is that Medicare doesn't cover everything, and it's often important to get supplemental insurance to protect yourself.

You are never too old to shop around to find the lowest premiums and out-of-pocket expenses. No matter your age, it's smart to re-evaluate your insurance periodically to ensure you have the right coverage at the right cost. This is especially true if your health situation changes. (See also: How to Make Sense of the Different Parts of Medicare)

4. Investing

If you are retired, you may be of the mindset that you already have all the money you need to live comfortably. But are you sure this is true? People are living longer these days, and you can spend as much time in retirement as you did working. Thus, it may be necessary to continue to accumulate money as you get older.

Even if you think stocks are not right for you at this stage of your life, continuing to buy bonds, real estate, and other investments can help bolster your nest egg and ensure that you can cover all of your life expenses as you age. (See also: 7 Reasons to Invest in Stocks Past Age 50)

5. Rebalancing your portfolio

At a certain age, you may feel like your investments don't need much baby-sitting. If you've shifted to a lot of fixed-income investments, it may be true that your portfolio doesn't need much maintenance. But that doesn't mean you should ignore it.

Even the oldest investors need to check in to see if they are on track to hit their savings goals. All investment portfolios can get out of whack if they are not monitored properly. An older investor may find, for example, that stocks make up too much of a percentage of their portfolio and represent a risk if the market goes down. (See also: Think Outside the Index When You Rebalance Your Investment Portfolio)

6. Building an emergency fund

You may have accumulated enough money to retire on, but did you take into account the cost of a new roof for your home? Did you count on thousands of dollars in unreimbursed medical expenses? It helps to have a separate account to cover these types of expenses, separate from the money you use to cover everyday costs.

If you are no longer working, you may still be able to fund your emergency account through income from stock dividends, interest, or capital gains. Just be sure you're not tapping into money you may need in the future for living expenses. (See also: Yes, You Still Need an Emergency Fund in Retirement)

7. Crafting a will

You are certainly never too old to outline your final wishes. If you haven't done this yet, don't delay. A will offers family members guidance on how you want to spend your last days, freeing them from making difficult choices. You can assign an executor to help carry out your wishes, and a clearly written will can help avoid fights over how to divide your assets. Many families have been broken apart due to spats regarding their inheritance.

It helps to have a will in place while you are still relatively young, but it's never too late to change a will as long as you are of sound mind. If you have a will already, it may be worth reviewing it periodically to make sure the information is accurate and up to date. (See also: 6 Times You Need to Update Your Will)

8. Saving for college

You can go back to school at any age. But you can also save money for your children, grandchildren, or anyone else who you'd like to see get a degree.

Most states offer college investment plans, known as 529 plans, that allow you to invest money for the purposes of education. You can designate a beneficiary of the funds and that money can be withdrawn tax-free as long as the money is used for qualifying education expenses. Depending on where you live, your contributions may also be tax deductible. The new tax law allows these funds to be used for K-12 schooling as well. (See also: The 9 Best State 529 College Savings Plans)

9. Starting a business

If you have skills and knowledge built up over a long life, why not make it work for you? Who says retirement has to involve sitting at home and doing crossword puzzles? Maybe you can start a quilting business. Perhaps you can launch a new career investing in real estate. Heck, you can build your own tech startup. At this point in your life you probably have the money, time, and experience to give it a go.

If you have your wits about you, you're never too old to start a new venture. Obviously, you need to be realistic about how much time and energy you want to devote to a new company, and you should avoid putting your retirement savings at risk. It's also important to have a clear succession plan in place to ensure the organization will keep running after you are gone. (See also: 5 Questions Retirees Should Ask Before Starting a Small Business)

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Liquidate a Loved One's Estate

Carrie Kirby — Fri, 20 Apr 2018 09:00:06 +0000

When someone you love dies, at first, you may only be able to think about the emotional things: How you will miss them, how different your life will be without them, and maybe, if they were suffering, a sense of gratitude that their pain has ended.

Unfortunately, most of us also have to deal with logistics when someone in our family departs this world. If you are named executor of the estate, the heirs have the right to expect you to turn over their inheritance in a timely manner. Part of settling an estate is dealing with the personal possessions of the deceased. Often this must be done before the house or condo can be sold, or the lease terminated, and the estate closed out. The more possessions the departed owned, the more difficult this task can be. Some triaging is in order.

Before death

If your loved one is elderly, it's a good idea to encourage and help them to dispose of clutter and organize their possessions as an ongoing project. Focus on how discarding piles of old newspapers could make their home safer, or on how those clothes from the 1940s might be appreciated by the high school theater department. A wonderful project to do with an elderly loved one is to organize old photos, because there may be people in them that you can't identify without their help. (See also: Why Holding Onto Too Much Stuff Is a Burden for Your Loved Ones)

While doing these projects, if it feels right, you can gently inquire about any items they might be saving for particular family members, which is especially helpful to know if the person hasn't created a detailed will. The process may be frustrating and time consuming — after all, they may have had this stuff since before you were born, and it can be understandably hard to part with such things. But the more you can do with the cooperation of the property's owner, the easier things will be after they're gone. You run less risk of accidentally disposing of important papers or family treasures.

Sometimes the decluttering process is prompted by a move. When my elderly cousin had to move into assisted living, my family and I gradually cleared out the house she had been living in for decades. While she wasn't able to help us on site, we were able to set aside possessions we thought she might want to keep, bring them to her new home, and have her make decisions. Many of the old photos and letters we found were great conversation starters during our visits, especially when her memory began to fail.

Immediately after death

If your loved one was living in their home up until the day they died, you may need to check on the home immediately after leaving the hospital, to make sure it's secure and safe. Of course, if your loved one had pets, they must be attended to and rehomed without delay.

Within the first week, you'll want to clear out the kitchen to prevent problems with pests, mold, and odor. Clean out the refrigerator and get the trash out of the house. Discard or give away any nonperishable pantry items.

If you have not already done so, you may also need to immediately look for items to be used in the funeral. If your loved one is not being cremated, you may need to retrieve a nice outfit for the body to be dressed in. It's common to display photos, awards, and other mementos at funeral services, as well. If you're writing the obituary, you may find useful information in the home, such as school yearbooks or scrapbooks. Any record of military service is important to gather, so that your loved one can receive the posthumous honors they are due.

After the funeral

A few years ago, my family lost an uncle who was the last of his generation. After the funeral lunch, we gathered in his home and experienced the strange feeling of being allowed to roam through his rooms uninvited. I suspect even my eldest aunts felt a bit like naughty children. We were all sad, but it was also a little bit … fun.

On your first visit to start sorting through the home of the deceased, take a deep breath and look around so you can remember how the home looked when they lived there. Remember that while the task you are undertaking will be difficult and sad, it may also be exciting, because you could uncover letters and other relics from the past that may help you come to know your loved one better than you ever did when they were alive.

Here are a few steps to make the task of clearing out their belongings less stressful.

1. Sort through it all

There are two ways to sort through the personal possessions in the home of the deceased. One way is to comb through everything yourself, which can be exhausting. The second way is to hire an estate sale company to sort through everything for you. Many reputable estate sale companies offer sorting and trash removal as part of their service. In fact, they advise that you throw nothing away, because you might inadvertently chuck something of value. I actually tossed an old automobile company shareholder brochure into the trash while sorting through my relative's home, only to have second thoughts and retrieve it. It ended up selling for $20. (See also: 12 Financial Moves to Make When a Loved One Dies)

In exchange for preparing and conducting the sale, the estate sale operator keeps a percentage of the proceeds, and may also charge fees. Such an arrangement could save you a lot of work. However, keep in mind that if you don't sort through the home yourself, you may miss items of sentimental value that you didn't know were there. The sale operator may promise to set aside any family photos and documents, but they won't know as well as you know what you would want to keep.

This happened to me. A few months after my cousin's estate sale was over, I was online researching her obituary. Imagine my shock when I found, online, images of her original baptismal certificate and her parents' wedding certificate, written in Slovak calligraphy. These documents had apparently been sold on eBay, but I couldn't find the original listing so I had no chance to contact the buyer or seller. The most charitable assumption I could make was that the estate sale company had inadvertently sold these items that obviously fell into the "sentimental value" category.

If you decide to do the sorting yourself, I have a few recommendations based on experience:

Bring a friend or family member along for help.
Drag trash and recycle bins through the home as you work.
Pack up boxes of papers to sort through in the comfort of your own home.
Don't throw away anything old before checking its value. You'd be surprised what people buy on eBay!

2. Make sure that heirs get a chance at keepsakes

Beyond any specific property named in the will, you probably want to make sure that everyone who was close to the deceased gets a memento to remember them by. This is tricky territory, because many decadeslong family fueds have started over granny's handmade quilts or even Uncle Joe's second-best TV trays. Some families may leave this task to the closest surviving relative.

But if there are a number of survivors of equal status, you might need a more formally mediated approach. After my great uncle passed, my family used an interesting method of distributing property of both sentimental and practical value: a family auction. All the heirs walked through the house and bid on the items there, with the moderation of an auctioneer. Every dollar they paid went into a pot, later divided equally among them. You can do such a private auction before an estate sale, or in place of one. Another system is to run an auction with points instead of cash, with each relative starting with the same number of points.

3. Sell what can be sold

If you decide to hire an estate sale company, interview and research the candidates carefully. The online review website Angie's List reports that Auction Services listings, which include listings for estate sales companies, make up one of its most complained-about categories. Thirty percent of those reviews score a D or F from customers.

Before a sale, you should remove anything from the house that the family intends to keep. Make it clear to the auction company what you're keeping, because they will base their prices on the amount they estimate they can make from the sale. If a sentimental item is too large for you to remove before the sale, make sure the sale company clearly marks it as not for sale.

Assuming you do want an estate sale, it's not a given you'll find an estate sale company that will agree to work with you. If the house has a lot of stuff but no high-value items, many estate sale companies will refuse to take on the job because they typically earn their money by keeping a percentage of the sale's proceeds.

In that case, you may be forced to run the estate sale yourself, list items in the local paper, or find a low-end operator to take the job on the cheap. Make sure to check the local regulations before advertising a garage sale.

4. Dispose of what can't be sold

Once you're down to items that no one in the family wants that also aren't worth enough to sell, your next step is to donate what you can to charity. Typical items in this category are: used clothing that doesn't qualify as vintage, worn furniture, and everyday dishes. The most expeditious way to get this stuff out of the house is to request and schedule a pickup with a local charity. Goodwill, Salvation Army, and Habitat for Humanity are three that commonly make pickups; your area may have these or others. If you don't find a charity that will pick up your items, you could pay movers to deliver the stuff to the nearest resale shop, or deliver it yourself.

Try to avoid dumping stuff on the curb — some cities will fine you for this. If you can't get a charity to take the items, you could list them on Freecycle or advertise them on Craigslist as available for free. Also, some newspapers don't charge to print ads for free items.

5. Pay for junk removal if you must

If you're able to do the work of getting the junk out of the house, check with your local government offices to see if you can get a large trash receptacle parked at the curb or schedule a large item pickup for free or at a low cost. You can also check with your local home improvement store; some now sell large heavy duty bags or bins that you can fill with thousands of pounds of junk and call them to pick up. The bag option usually costs only about $150-$200, compared to about $300-$850 to rent a trailer-sized trash receptacle for a week and have it hauled away full. Cost really depends on your area and the amount of stuff you're tossing.

The more expensive option is to pay a full-service junk removal company that will come into the home and remove everything you ask them to. These companies may charge $500 per truckload. On the upside, the work for you is minimal.

Once you have removed, given away, sold, donated, or thrown away every last item in your loved one's home, you're ready to bring in a housecleaner for a thorough cleaning, and list the home for sale.

This is a good time to devote some attention to the mementos that you decided to keep in your own home. Display knickknacks in a case, hang a framed photo on the wall, or get that ring resized so that you can see these precious things and be reminded of your departed loved one often.

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This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways to Safeguard Your Financial Future With Just $200

Tim Lemke — Mon, 26 Mar 2018 09:00:06 +0000

Sometimes it is a series of small decisions that can make a big difference in our lives. This is certainly true when it comes to protecting our financial assets.

Building a high net worth isn't just about generating wealth. It's also about protecting what you have and avoiding disaster. Fortunately, there are a number of things you can do to put armor around your finances that won't cost you a lot.

Check out these ways to safeguard your financial future for $200 or less.

1. Get renters or homeowners insurance

You can protect nearly all of your belongings from theft, fire, and many other bad events by paying a monthly insurance premium that is often less than $200. Homeowners insurance can protect you from lawsuits, disasters, and other things you might not expect. If you don't own the place you live, your belongings can be protected for less than $20 a month with renters insurance.

Bad things can happen. We all want to pinch pennies, but insurance is an expense we should all try to budget for if we want to avoid financial tragedy. (See also: 5 Reasons You Definitely Need Renters' Insurance)

2. Get life insurance

If you are married and your spouse earns an income, would you be able to make ends meet if they suddenly passed away?

Life insurance will replace any lost income, and it's not very expensive to have a policy. With term life insurance, you pay a fixed monthly or annual premium to be covered for a specific amount over the course of a specific term. For example, you might purchase $1 million in coverage for a 20-year term. In most cases, you can get a very good life insurance policy for under $200 per month. (See also: Term vs Whole Life Insurance: Here's How to Choose)

3. Contribute to a retirement account

If you open a Roth IRA, you can contribute up to $5,500 each year and invest in almost anything. Since money contributed to a Roth IRA is taxed upfront, all future withdrawals are tax-free. If you have $200 a month, this will get you nearly halfway to that maximum contribution. A $200 monthly contribution over several decades could result in $1 million or more when you retire.

You may also choose to contribute to a 401(k) plan if your employer offers it. Let's say you're earning $40,000 annually, and set aside and invest $200 per month, or 6 percent of your income. And let's say your employer matches half that. That comes out to $3,600 annually, which can grow to well over a million when you retire. (See also: 401K or IRA? You Need Both)

4. Craft a will

Having a will is especially important if you have a family and a lot of assets. A will offers guidance as to who gets your financial assets after you pass away, as well as who is responsible for any dependent children you leave behind. If something happens to you, you need to know that the people who care about you will be taken care of. The good news is that it's fairly easy to write a will and it can be done cheaply.

LegalZoom and similar online services will allow you to file a will for as little as $69. Even if you go through an attorney, you may only spend a few hundred dollars. A will is a good investment, because without one, your family members may be stuck with astronomical legal bills to sort out the ensuing confusion after your death. (See also: Here's What Happens If You Don't Leave a Will)

5. Meet with a financial adviser

For $200, you are unlikely to get a financial adviser to meet with you regularly or manage your investments themselves. But, there are fee-only advisers who would charge that much for an hour or so, which is enough time to get some basic advice and determine if you are on the right track financially. Periodic meetings with a fee-only adviser can help you develop a simple financial plan and identify a few good investments. These sessions could pay for themselves easily in the long run. (See also: 7 Occasions When You Should Definitely Hire a Financial Adviser)

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Estate Planning Questions Everyone Should Ask

Dan Rafter — Mon, 05 Mar 2018 09:00:07 +0000

There are no guarantees when it comes to the number of years everyone gets on this earth. You may plan to live well into your 90s, but circumstances — and your health — can change very quickly. This is why it's important not to put off the uncomfortable but necessary work of planning your estate.

Not sure where to start? Ask yourself these five key estate planning questions.

1. Why haven't I created a will?

You might not be rich, or even old, but that doesn't mean you don't need a will. A will is for anyone who wants to leave behind assets to loved ones or specify who should raise their children if they die.

That last point is especially important. If you are a parent of young children, you need to spell out in a will who should take guardianship of your sons or daughters should you unexpectedly pass away. If you don't, the courts will make that decision for you. Don't leave this up to chance. Draft a will and include these instructions. If you already have a will but you've had a major life change since you wrote it, it's probably time to update your will.

It's best to work with a legal professional when drafting your will. A professional can help you list clearly who gets what assets. If you want to leave your home to a loved one after you die, you might need to take the extra step to create a trust, too. This can get complicated, so again, it's best to work with an attorney. (See also: Here's What Happens If You Don't Leave a Will)

2. Do I have enough life insurance?

Life insurance is a necessary financial protection for your loved ones. If you should pass away unexpectedly, would your spouse be able to afford the monthly mortgage payments? Would your children be able to remain in the home in which they've grown up?

Life insurance can help ensure that your loved ones don't have to worry about paying their bills after you die. Upon your death, your life insurance will give an agreed-upon payment to your beneficiary, who can use that money to cover anything from mortgage payments to college tuition.

There are two main types of life insurance: term and whole. Term life insurance is less expensive but still provides solid coverage. With this type of insurance, you pay a premium for a certain number of years, perhaps 20 or 30. If you die during this time, your policy pays out. Once that term expires, you'll need to buy a new policy if you want to maintain life insurance coverage.

Whole life insurance is usually more expensive, but you don't have to worry about renewing after a term ends. Instead, you pay a premium every month — or every year — for the rest of your life. There is no end limit on the premium. The policy will pay out when you die.

How much life insurance do you need? That depends on your situation. Do you have young children dependent on your income? Does your spouse work? Are all your children young adults who are earning livings of their own? You'll want more life insurance coverage the younger and more dependent on your income your loved ones are. Your life insurance payout should at least cover the debt you owe for your mortgage, car, credit cards, and education. (See also: Term vs Whole Life Insurance: Here's How to Choose)

3. What do I want to do with my home?

One of the biggest assets you might have is your home. A home, though, can be a problem after you die.

If you've paid off your home and own it, you'll have to determine what you want your survivors to do with that residence. Do you want to leave your home to a child? That can be a tough decision if you have more than one child. Or do you want your children to sell the home and split the proceeds? Make sure you specify in your will what your preference is for dealing with your home. This can help prevent tension among your survivors.

If you haven't finished paying off your house, your options may be more limited. Funds from your estate may be used to pay off the debt you owe to your mortgage lender. But if your estate doesn't have enough money to cover this, your home might have to be sold, especially if none of your survivors want to take on your remaining mortgage payments. (See also: Why You May Need a Revocable Living Trust)

4. Will anyone know how to find my key documents?

Where do you keep your most important financial documents? Do you have a designated place for everything, from your will, to your tax returns and bank statements, to instructions for your funeral?

Wherever that place is, you need to make sure that your loved ones know where to find these important papers. Having a will doesn't help if no one can find it. And making sure that your next of kin know exactly where your checkbook, bank account statements, and past tax returns are stored can ease the burden they'll face when trying to move on from your death. (See also: 9 End-of-Life Cost Savings Your Survivors Will Thank You For)

5. Who will care for your pets?

Do you share your home with a beloved pooch, cat, or parakeet? What would happen to these companions if you should pass away?

If you want to make sure that your pets are cared for after you pass, leave instructions. You can include this information in a will, especially if you are going to leave your pets to a family member. You might want to also set up a savings account or leave a sum of money that will help cover the costs of caring for your pets, as a way to ease any burden on family members.

If you have no one to care for your pets after you die, you might specify in your will that you'd like your animals donated to a pet-care organization. (See also: 6 Reasons You Need to Include Pets in Your Will)

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Here's What Happens If You Don't Leave a Will

Emily Guy Birken — Wed, 14 Feb 2018 09:30:09 +0000

According to a recent Caring.com survey, 58 percent of Americans currently do not have a will. For those with children under the age of 18, the numbers are even worse — only 36 percent of these parents and guardians have a will, meaning a full 64 percent of people who are taking care of minor children have no end-of-life plans in place.

Americans are really falling down on the job when it comes to estate planning in part because we just don't want to think about our own mortality. And it can be hard to worry too much about what will happen to our assets after we're gone since we won't be around to see it.

But dying intestate does have some pretty serious consequences, even though you won't be the one experiencing them. Here's the sobering truth about what happens if you don't have a will in place when you die. (See also: What You Need to Know About Writing a Will)

The state will make decisions about your minor children

Who gets to make decisions about your young children if you're not around? For most two-parent households, it's easy to assume that there will always be one parent around even if illness, accident, or bad luck strikes the other. But what if you are a single parent, a divorced parent, or a parent in a blended family? Or what if — heaven forbid — something should happen to both parents at once? In that case, dying intestate would mean your state of residence will be making choices about your children's well-being, rather than you.

Even though the odds are in favor of parents living to see their kids reach adulthood, having a will in place can offer you peace of mind. It allows you to decide who will take care of your kids, rather than leaving it up to others to decide. (See also: Don't Make These 5 Common Mistakes When Writing a Will)

Your stuff will go to your next-of-kin

Let's say your closest living relative is your odious brother. You've never been close to him, and he's been nothing but abusive your entire life — but the last straw was when he made it clear that he disapproved of your long-term relationship with your live-in girlfriend, who is the love of your life.

If you die without a will, he will inherit everything, even if you want your assets to go to her.

The state assigns inheritance based on degree of familial relationship, since there is no other fair way of determining what you would have wanted. So even though you swore you'd never speak to your brother again, he will still be your sole heir if you die intestate.

This is a particularly tough problem for unmarried life partners. Without either a will or the legal status conferred by marriage, the death of one member of such a couple can be devastating to the surviving partner. Such survivors can lose out on everything from financial assets their partner intended them to have, to the very roof over their heads if the house they shared is part of the decedent's estate.

Even uncoupled individuals need to worry about this aspect of dying without a will. A never-married individual with no children may wish to leave all their worldly goods to a favorite charity. But without a will, the estate will go to your nearest relative, who might be someone you have never met. Better to have a will in place and know that your money will enrich the charitable institutions you care about, rather than have an estranged relative be glad you're dead. (See also: 6 Times You Need to Update Your Will)

An executor will be assigned to your estate

After you pass away, someone needs to be in charge of the logistical details of your estate. That position is known as "executor," and their duties include:

Managing your assets until they can be distributed to your heirs.
Terminating your accounts and credit cards.
Notifying banks and government agencies of your death.
Paying debts.
Paying continuing expenses with estate funds.
Paying your final income taxes.
Supervising the distribution of your property.

When you write your will, you get to choose who will serve as executor to your estate. This is an important decision, since your executor will need to be trustworthy, will need to know you well enough to know where to find your important documents, and will need to be able to handle the sometimes considerable time commitment necessary to carry out all of the duties associated with the job.

Without a will in place, however, the court will appoint someone to the position of executor. While the court will generally appoint a surviving spouse or other family member as executor, this can potentially be disastrous if the court-chosen executor is unable to handle the responsibility. (See also: 9 End-of-Life Cost Savings Your Survivors Will Thank You For)

Probate may take longer

Probate is the legal process of determining the deceased's assets and liabilities and transferring title of those assets to the legal heirs. All estates over a certain dollar threshold must go through probate, but having a will in place can help speed up the process somewhat since it will take less work to identify and assess the deceased's property when it's already been specified in the will.

There are several reasons why you might want to spare your heirs a prolonged probate process. To start, the cost of probate can be expensive. While small estates can avoid probate — and the definition of small depends on which state you live in — estates over a minimum dollar threshold will have to go through the process, and the cost of probate will be taken from the estate. This means dying without a will can cost your heirs.

In addition, probate procedures are all public record, meaning anyone can learn more about your estate than you might want them to know.

Finally, the process of probate can be incredibly frustrating. Just ask the siblings of legendary musician Prince, who died without a will in April 2016. More than a year after his death, the court is still trying to determine the specifics of the musician's $200 million estate, including everything from who is a legitimate heir to who owns Prince's back catalog of music.

Your will, or the court's way?

Your assets will be distributed after your death, whether or not you write a will. But without a will in place, it will be the courts deciding who gets guardianship of your children, who gets your assets, and who will take care of the logistics of your estate. Rather than put your loved ones through a difficult process that doesn't reflect your choices, take the time to write a will, and keep it updated throughout your life. Your family will be glad you did.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Why You May Need a Revocable Living Trust

Carrie Kirby — Mon, 15 Jan 2018 09:30:09 +0000

If you are named the executor of someone's will, be prepared for a hassle. In most states, you will have to go through the probate process, which includes filing court documents and possibly attending hearings. Or, you could get lucky: If the deceased set up a revocable living trust, the process of executing their estate will be much easier.

When I handled a relative's estate this year, the revocable living trust she had set up years earlier made the process so smooth that all I had to do was meet with an attorney and sign checks to the beneficiaries. It was less hassle than getting a mortgage or buying a car. (See also: 6 Things You'll Encounter When Taking Over a Loved One's Finances)

But what is this mysterious document that makes the estate process so much easier for those left behind? Let's look at the details.

What is a revocable living trust?

A revocable living trust is an estate planning tool that people can set up to make the transfer of responsibility seamless both in incapacity and after death. They are "revocable" because you can revise them as your wishes or circumstances change.

When you set up a trust, you designate someone close to you as your successor trustee, giving this person the authority to manage your finances if you become incapacitated or die. You transfer all or some of your property into the trust. You also list your wishes for how to distribute this property after your death, much like you would with a will.

If you become incapacitated or die, the trustee simply needs to provide each of your banks or investment brokerages with a copy of the trust and their identification, and they will have the ability to write checks, sell investments, and make any other financial decisions as if they were you.

Why would I set up a revocable living trust?

When you die, the trustee will have the freedom to carry out the wishes you wrote in your trust without court supervision. This makes the process a lot less onerous. It also preserves the privacy of your heirs, since unlike with court proceedings, the amounts you bequeath and who you leave them to are generally private. In a way, setting up a living trust is a favor you do for your executor and for those you wish to leave bequests to.

But a living trust can also help you while you are among the living. For instance, if you have a stroke and are unable to manage your finances for six months, the trustee could step in and make sure your mortgage payments and other bills get paid out of your checking account. Once you recover, you could take control once again.

If you don't recover and end up passing away, your trustee will already have their name on your accounts, making the process of writing checks to beneficiaries easy.

How would I set up a revocable living trust?

The first thing you would do is visit an attorney, preferably one who specializes in estate planning. The attorney can write the trust document, and walk you through the process of transferring your assets into the trust. You'll also have to choose who you want as your successor trustee, plus a backup in case they can't do it when the time comes, and notify those people. If you don't want to name someone you know as trustee, you could turn to a company to carry this out for you.

Your attorney can advise you on which assets should go in the trust and which should not. For instance, placing an IRA or 401(k) account in a trust can cause problems and/or confusion with what taxes are owed.

Will having my assets in a trust be a hassle?

You won't notice any difference in your day-to-day financial life once your financial assets are transferred to your trust. It's all still your property. Since you are the trustee, you can write checks, sell stock, or make any other financial moves you would have previously done.

Some other assets, however, might be more trouble to add to a trust. Some attorneys advise against adding your home and car to the trust, especially if you think you will sell these and buy new ones during the course of your life. If you do end up adding such assets, you might have to occasionally provide a copy of the trust or fill out extra paperwork.

When do I need to worry about this?

Of course, you never know when life will end, but most people are advised to start thinking about a living trust after the age of 55. If you start one before then, and hypothetically live another 50 years before your successor trustee takes over, you may end up wanting to change your trustee. Estate laws and the size of your estate may change so much that your trust doesn't make sense anymore.

Even if you wait until you are older, the process, which does take some money and effort, may not be for everyone. If your estate is small or you plan to leave all of your assets to your spouse, it may not be necessary.

What if I change my mind?

As stated earlier, "revocable" means you can always change your mind. If you decide you don't want your assets in a trust anymore, or want to create a different kind of trust, you can transfer ownership of all the assets in the trust back to your own name. Once the trust is empty, you create a dissolution document stating that the trust no longer exists.

Will a living trust shelter my assets from nursing home bills?

If you need long-term nursing care, you might be surprised to learn that Medicare will generally not cover it. You will be expected to liquidate your assets and pay for your own care. And only when your own assets have been exhausted will you qualify to have Medicaid pick up future bills.

If your assets are in a revocable trust, you are still expected to use them to pay nursing home bills. There is another kind of trust that can shelter assets from these expenses, called an irrevocable trust; however, this is a complicated strategy and requires careful consideration and consulting with an attorney who specializes in such planning.

Once I have set up a trust, is my estate planning done?

You may be surprised to learn that even after detailing how you want your assets to be distributed in the trust, you will still need to create a will. This is generally called a "pour-over will," and the point of it is to cover any assets that you may have neglected to transfer to the trust.

It's also important that parents with minor children have a will, since this is where you appoint guardians to raise your kids in your place if you die. (See also: 6 Times You Need to Update Your Will)

Estate planning can also involve decisions such as purchasing insurance policies and naming beneficiaries for those policies and for your retirement accounts. Some people also include prepaying funeral expenses in their estate plan; planning the funeral in advance is certainly a big favor you can do your heirs. (See also: 9 End-of-Life Cost Savings Your Survivors Will Thank You For)

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This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Times You Need to Update Your Will

Aaron Crowe — Thu, 07 Dec 2017 09:30:06 +0000

If you have a will, you're already one step ahead of most people. According to a recent survey by Caring.com, 60 percent of U.S. adults don't have a will or a living trust.

But simply creating a will isn't enough; you must also update it every time you reach a major life milestone. After all, your assets and beneficiaries can change several times long before you reach old age. If you were to pass away before those changes are reflected in a will, your assets may not be distributed to your heirs in the way you had intended. (See also: What You Need to Know About Writing a Will)

If you've recently gone through one of these big life changes, it's time to sit down and update your estate plan.

1. Marriage

A will that designates what goes to your spouse will make things easier on them when you die. Joint property ownership is automatically turned into complete ownership by the surviving spouse after one spouse dies, and that can't be changed by a will. However, the surviving spouse will need a will to direct what to do with the house after they die.

Also, some things may not automatically go to your spouse as a beneficiary if you haven't updated your will. For instance, say you receive an unexpected inheritance just before you die, such as the house of a long-lost relative. Is that joint property with your spouse? Not if it isn't listed in your will. Such assets could go to probate, which is why it's better to have an updated will.

What if you and your spouse both die at the same time and neither of you have a will? Other trusts such as life insurance policies and retirement plans will have named beneficiaries. The home will automatically go to those people without requiring a will. But everything else will end up in probate court if there are no wills. (See also: Don't Make These 5 Common Mistakes When Writing a Will)

2. Divorce

A marriage adds a person to your life who should be added to a will; in a divorce, you may want to remove that person from your will. Do you want to leave your grandmother's jewelry to your ex-wife? Many people would say no.

You may also want to update your will after a change in relationship with any other member of your family. Maybe the executor of your will who you named years ago is no longer of sound mind and capable of doing such duties. Or maybe someone you've left a large asset to has died. These are all reasons to update a will.

3. Children

When a child is born, it creates a potential new heir. A will can declare who you would want to be the guardian of your minor children upon your death. Otherwise, if you don't have a will and have young children, your surviving spouse may have to go to court to be appointed guardian of the children's property, according to Sherman Silverstein, a law firm in New Jersey.

If a husband and wife die simultaneously without wills, the state may take over the care and support of minor children, and name relatives or someone else to take over their care, according to Silverstein. That's why it's important for both parents to have wills.

If there are certain assets you want give to your children, you also need to spell this out in a will and make sure it's regularly updated. Without one, state law may divide your property between your surviving spouse and children against your wishes. If property is left to minor children, a guardian must be named to administer the property for them. It could be someone who is raising the children or someone else. (See also: The Fair Way to Split Up Your Family's Estate)

4. Death of an heir

If an heir dies before you do, anything left to them upon your passing could be in flux if your will isn't updated. Without any named heirs, property may pass to the state instead of to friends and relatives.

If your spouse dies before you while any of your children are still minors, you'll want to update your will so that you can direct relatives and friends to select a guardian that they agree upon in case of your death. You also may want to direct the probate court to make the selection in the case that the relatives and friends you named can't agree on a guardian.

5. Real estate purchase or sale

Buying or selling a house is a major life event and can be a reason to celebrate. It can also be a reminder that it's time to update your will.

As stated above, joint ownership of a home will pass on to your spouse if you die without a will. But other circumstances, such as your spouse also dying, can create the need for a will when you own property.

If you're moving out of the state where you executed your will, check with an attorney in your new state to see if the will is still valid. State laws for wills can vary, and you shouldn't assume yours meets the requirements in your new state.

6. Major adjustment to investment portfolio

If your estate has had a substantial increase or decrease in value, then it's time to update your will. This can include your stocks increasing substantially in value, the sale of a major asset, the founding of a business, or anything else that has a big impact on your finances. You may want to change how much you give to one beneficiary over another, for example, or leave a new business to your daughter who is interested in it.

Whatever life events come at you — and whenever — it's a good idea to review your will every year. A will is meant to disburse your assets according to your wishes. And those wishes may not be so easy to follow if your will has old information.

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This article is from Aaron Crowe of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

When Dropping Your Life Insurance Is the Right Decision

Dan Rafter — Tue, 14 Nov 2017 09:31:05 +0000

Life insurance is a crucial way to protect your family if you should suddenly pass away. The payout from a life insurance policy can help your loved ones continue to pay a mortgage and other large bills they may not otherwise be able to afford.

Life insurance is so important that few people ever decide to terminate their policies. But are there times when canceling a life insurance policy actually makes sense?

The surprising answer? Sure. It all depends on who continues to rely on your income and who doesn't.

Your children

When deciding whether to cancel a life insurance policy, don't focus solely on your age. Yes, the odds are higher that once you get older (past retirement age), you won't have as many people relying on the money you are making today. With fewer people depending on you financially, it might make sense to cancel your life insurance policy and save the money you are spending on premiums.

Life insurance is most important when you are worried about providing your children with a financial safety net. When your children are young, they need the financial protection that a life insurance policy provides. After all, they won't be working or generating their own income.

But when your children become adults, they might no longer need the payout that your life insurance would provide them if you should die. Canceling a policy designed to protect your kids is usually a sound financial move once these children become adults who are working and providing for themselves.

Your spouse

What if your life insurance policy is also a form of protection for your spouse or partner? That might change your decision to cancel, even as you get older.

Say you die at the age of 65. Would a payout from a life insurance policy provide that extra bit of financial protection to your spouse or partner? Would it help ensure that this person won't struggle with finances after you die?

If the answer is yes, canceling your life insurance policy may not be the right move. You may want to hold onto that policy, even as you inch closer to retirement age. (See also: When Should Single People Get Life Insurance?)

Getting a better plan

There are other reasons to cancel your life insurance. Say you are no longer happy with your current plan; maybe the monthly premiums seem too high.

If you shop around and can find a plan that provides enough coverage at a lower price, canceling your existing policy is not only OK, it ranks as a smart financial move.

Just be sure to compare your existing policy with your potential new one carefully. Yes, a new policy might be cheaper — but it might also not provide the same amount of coverage. Make sure to do your research before canceling any life insurance policy.

You've already paid for your biggest expenses

Life insurance is supposed to be a financial safety net for your loved ones in case you suddenly die. But what if you've already paid off your mortgage? Your spouse or partner won't need a payout from your life insurance policy to cover that bill. What if you've already paid for sending your children to college? Life insurance isn't necessary to help cover this big expense, either. So why not cancel your policy if those big expenses are already in your past?

You can take the money you were spending on life insurance premiums and save it for retirement, add it to your emergency fund savings, or invest in the stock market.

Of course, this type of plan only works if you actually will take the money you were spending and do something financially savvy with it. But canceling a life insurance policy when the big bills are paid can be an effective way of putting your dollars to better use.

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 End-of-Life Cost Savings Your Survivors Will Thank You For

Carrie Kirby — Thu, 02 Nov 2017 08:30:05 +0000

I recently had the honor of helping an elderly family member during her final years and carrying out her wishes after she passed on. My relative was a savvy planner — she had worked for years as an executive secretary, one of the most responsible jobs available to women of her generation. It came as no surprise that she had carefully planned for some of her end-of-life expenses.

After handling the financial side of my loved one's final years, I made the following decisions to make things easier — and more affordable — for those who must someday do the same for me.

1. Make an estate plan

If I learned one thing from handling my relative's estate, it was this: A revocable trust will save your executor time and money. A revocable trust is a legal entity to which you can transfer all or some of your property, such as investment and bank accounts or real estate. When you first establish the trust, you are the trustee; meaning you control the assets in the trust, and you also name a successor trustee who would take control of the trust if you become incapacitated or die. You can also name beneficiaries in your trust, just like a will, to receive the remaining assets after your death.

The beauty of a trust is that many assets do not have to go through probate once you die; in contrast, many assets only listed in a will do still have to go through probate. Because my relative had set up a revocable trust, within months of her death, her heirs had deposited their checks, and the whole process was wrapped up with very little legal expense. If she hadn't set up the trust, I would likely still be working through the probate process and running up attorney fees.

Your estate plan can also include life insurance and a will to cover any assets you didn't transfer to the trust, such as personal property or your car. (See also: The Fair Way to Split Up Your Family's Estate)

2. Consider long-term care insurance while you are still young enough to get it

When my loved one was no longer able to live independently at home, I was naive enough to think that Medicare would pay for her to live in an assisted living facility or a nursing home. Not true! Medicaid pays for many seniors' nursing home care, but only once they've depleted most of their own assets and income. Each state has strict rules that generally prevent seniors from giving their money away in order to qualify for Medicaid support.

What this means is that if you need to spend your final months or years in a home, and you didn't buy long-term care insurance, you will pay for it out of pocket, possibly spending everything you hoped to leave to your heirs.

It's a tricky financial decision, because long-term care insurance is expensive; you'll pay $1,000 a month or more (potentially much more) for a policy that will cover the high expenses of nursing home care. And of course, you could pay insurance premiums for years and never spend a day in a nursing home.

The American Association for Long-Term Care Insurance pinpoints the mid-50s as the best age to buy this product. That's for two reasons: One, premiums go up based on age, and in the 60s they start going up 6 to 8 percent per year. Two, you can lock in a discount for good health when you first apply, and you are more likely to experience age-related declines in health after your 50s. (See also: Is Long Term Care Insurance Worth It?)

3. Prepay funeral expenses

It sounds downright eerie to sit down in an undertaker's office and plan your own funeral. But it's a kind thing to do for your next of kin. One reason to pay for a burial plot or urn storage and service now is that this spends down money that might otherwise be paid to a nursing home. If you're in a home for years before you pass, there might not be any money left for your funeral, leaving your heirs in the position of having to pay for it themselves.

The other nice thing about prepaying these expenses is that, if you're a no-nonsense frugal person, you can buy your casket at Costco or arrange to rent one for your viewing and save your heirs from feeling guilted or upsold into paying for a more lavish send-off than you would have wanted.

By planning when you are of sound mind and body, you also give yourself the luxury of making price comparisons and shopping wisely; something your heirs may not be emotionally ready for or have the time to do once you're gone.

4. Make charitable gifts while you're still alive

Especially if you have a robust income in your later years, don't make your favorite charities wait until you're gone to receive the support you'd like to give them. You can cut the taxes you owe on any income you receive by making charitable gifts each year.

This move can also save your executor a little time and money. When my loved one passed, her attorney wrote letters to all the charities she wanted to leave money to, and eventually I had to write the checks. It wasn't a big deal, but it's one more little thing you could do yourself to spare your heirs the trouble. If your estate is large enough that your heirs might have to pay estate tax, giving money away in your lifetime could make a big difference. (See also: 5 Ways Giving to Charity Is Good for You)

5. Consider passing wealth to the next generation during your lifetime

Only the heirs of very large estates — currently over $5.49 million — will need to pay estate tax. But if this is your situation, you could save your heirs the tax by making regular gifts of up to $14,000 per person, each year.

6. Make your will very clear

First of all, leave a will. If you don't have time to work with an attorney to transfer your assets to a trust, which does take time, for now at least write that will so that your heirs have something to go on if you die unexpectedly. If you don't leave a will, your estate will be settled by the court, a much more expensive and time-consuming process for your heirs.

Make sure that your heirs have the final and correct versions of all documents and that there are no older wills floating around. This could save endless legal fees, especially if you have written someone out of your will. Don't let any relatives or acquaintances expect an inheritance they're not getting. People who expected money in a will but didn't get it could sue your heirs, making their lives miserable and wasting the inheritance on legal fees. (See also: What You Need to Know About Writing a Will)

7. Make provisions for valuable property

Have you ever heard stories of homes sold with cash or jewelry hidden in the walls or buried in the backyard? It has happened to families I know, when elders hid items of value and forgot where they were hidden.

Even if valuables aren't literally hidden in the walls, they may be lost in the shuffle. In many an estate, sorting through a lifetime's worth of possessions is a huge burden on the heirs. Your heirs may simply turn your home over to an estate sale service and let them deal with it. If that happens, valuable items might get sold for less than they are worth. There is also the risk of hiring an unscrupulous estate sale planner who sells valuable items without giving the family a fair cut. Valuable keepsakes could even be thrown away along with old paperwork and used clothing.

If you have jewelry or other items of high value, it would be a wonderful idea to gift them to family members while you are still alive, or sell them to a reputable dealer if that is your wish. If not, keep your belongings organized and labeled, and let loved ones know where any valuables are kept.

8. Sell your home if you're no longer living in it

If you have moved to a senior community or assisted living facility, have relatives assist you in selling your home as soon as possible. This will save you — and later your heirs — the expense of keeping up the home while no one is living in it.

After your death, when the heirs are busy with your funeral and settling the rest of the estate, they may not have time to sell the home for months. In the meanwhile, costs can really add up: insurance, heat, electricity, lawn service, snow removal, maintenance. And if something happens to your empty home such as pipes bursting or squatters moving in, it could dissipate the value of this asset you worked so hard to acquire.

9. Spend it yourself

If all this advice bums you out, here's an antidote: Enjoy what you have earned while you are alive. Take a trip. Hire some help. Get that new car you've been wanting. You don't owe your heirs a thing. While you don't want to leave them with debts, dying broke is a wonderful thing because it means you literally didn't leave anything on the table.

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This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Money Moves to Make After Buying Your First House

Christa Avampato — Thu, 28 Sep 2017 08:01:06 +0000

You bought your first home. This is an exciting conclusion to what was likely a long and winding road. As you are unpacking your boxes, settling in, and decorating your new digs, there are some smart money moves you should make immediately to keep the good times rolling.

1. Adjust your last will and testament

Now that you have a new home, you need to update your will. In this time of excitement, updating a will might feel like putting a damper on the fun, but it's critically important. You need to be responsible for protecting the future of your loved ones and your home. (See also: Don't Make These 5 Common Mistakes When Writing a Will)

2. Get rid of PMI as fast as you can

Private mortgage insurance (PMI) is a necessary fee for most people who buy a home with less than a 20 percent down payment. This can be a significant expense, sometimes costing thousands of dollars each year. Do whatever you can to get to that 20 percent equity mark so that you can drop the PMI payments.

3. Make a plan to pay a little extra every month

At the beginning of a mortgage, you are mostly paying interest and very little principal with every monthly payment. That ratio of interest to principal will decrease eventually, but it will take a few years.

To more quickly pay down your mortgage, set aside a little extra every month for your mortgage payment. Why? Anything you pay above your monthly payment goes directly against the principal. (Just be sure those extra payments are going to principal; check with your mortgage lender.) The faster you reduce your principal, the faster you will pay off your home. A lower principal will also make it easier to refinance the mortgage down the line if you choose to do that in the future. (See also: What's Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?)

4. Replenish your emergency funds

Many people use a substantial part of their cash savings, if not all of it, when they buy their first home. It’s crucial that you begin to rebuild this emergency fund as soon as you can.

An emergency fund is necessary if you lose your job for any reason, have unexpected bills, or if you need to do emergency repairs on your home. Experts in the consumer finance field have varying opinions when it comes to how much to set aside in an emergency fund, but many suggest having three to six month's worth of expenses saved. Some more conservative advisers even suggest saving up enough to cover one year of expenses. Consider your lifestyle and personal risk profile to find the best target amount for you.

5. Reconsider your life insurance policy

Now that you have this beautiful new home, you will need to make sure the mortgage can be covered by your life insurance. You don’t want your heirs to struggle to figure out what to do in the event that an unforeseen circumstance occurs.

How much insurance do you need? Generally, the guideline for life insurance is 10 times your annual income plus any large debts like a home mortgage. Talk to your insurance company and/or financial adviser to get their perspective, and make any necessary adjustments. (See also: 5 Reasons Why Life Insurance Isn't Just for Old People)

6. Change your locks and install deadbolts

Safety is a huge part of homeownership, and it has financial implications. As soon as you have the keys in your hand, contact a locksmith to get all of the locks on your doors and windows changed, and install deadbolts on doors where you currently don’t have them. The previous owners likely gave copies of their keys to neighbors, friends, family members, the dog walker, or people who did work on the home. You don’t want those people to have access to what is now your house. You may also want to consider a home security system.

All of these safety measures may provide a financial deduction on your homeowners insurance. Contact your insurance company to find out if you qualify for a reduction in your rate. (See also: 7 Times to Update Your Homeowners Insurance)

There is a desire to rest on our laurels after completing the purchase of a home. You should definitely bask in the glow of new homeownership, but this is also a time to remain financially vigilant. Remember that when it comes to your personal finances, remaining responsible and forward-thinking is the key to lasting success.

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This article is from Christa Avampato of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: