wills

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:

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:

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:

Are You Putting Off These 9 Adult Money Moves?

Tim Lemke — Fri, 18 Aug 2017 08:00:05 +0000

You are not a kid anymore. It's time to start acting like an adult, especially with regard to your money. Procrastination won't help you on the path to financial freedom, so it's time to grow up, and examine whether you've been avoiding these adult money moves.

1. Bolstering your emergency fund

When you are young, you may not need a lot of extra cash on hand. After all, you may feel like your life is simple enough that very few emergencies would result in financial ruin.

As you get older, though, there are more costly events that can crop up. You may own a home and face major, unexpected repairs. You may have children with unexpected medical needs. And because your overall expenses are higher, you'll be hurt more if you or a spouse loses their job.

While it's important to invest for the long-term, it's also crucial that you keep enough cash on hand to cover emergencies. At least three to six months' worth of income is a good rule of thumb. Without this savings, you may find yourself in debt or tapping into retirement savings to get by. (See also: 4 New Reasons You Need an Emergency Fund)

2. Tracking your money

When you're young and living large, you have no idea where your money is going. You are too busy having fun to worry about it. But now you're an adult, and it's time to actually assess what you are spending your cash on.

It's impossible to budget and save if you have no idea where to cut expenses. To begin tracking your money, analyze your bank and credit card statements to view all of the purchases you've made. Enter these into a spreadsheet, or use an account consolidation website such as Mint.com to help you. Once you start tracking, you'll have a good idea of where you've been wasting money and where you can start cutting down on your costs. (See also: Build Your First Budget in 5 Easy Steps)

3. Sticking to a budget

Once you get a handle on where your money is going, it's time to develop a system that will allow you to save money. The only way to avoid debt and save for the future is to keep expenses below what you earn. This may mean making tough decisions and reducing nonessential spending.

You may have to eat out less. You may need to cancel your cable TV or baseball season tickets. You may need to forgo that trip to the Caribbean. Set a budget for groceries each week, drive less, and clip more coupons. None of this is fun, but it's what adults do if they want to achieve financial freedom.

4. Getting your credit card debt under control

Early on in life, your credit card debt may just seem like a number you can hide from yourself. But at a certain point, it's something that truly impacts your ability to build wealth and obtain financial freedom.

When your debt is high, this impacts your credit score, which in turn impacts what you will pay for things like a mortgage and auto loan. In essence, debt can become a downward spiral of pain if you don't nip it in the bud early. Be an adult, and start paying down that credit card debt.

Try to go after the debt with the highest interest rates first, then go from there (otherwise known as the avalanche method). Begin using cards more sparingly and rely instead on good old cash as much as possible. Soon, you'll see your credit score rise and your overall financial picture will look much rosier. (See also: The Fastest Method to Eliminate Credit Card Debt)

5. Saving for a home

Homeownership isn't for everyone, but there will likely come a time in your life when it makes sense to build equity in real estate rather than spend money on rent. Owning a home gives you a sense of pride, a sense of stability for your family, and is a good financial move in the long run — as long as you can manage the monthly payments.

To make a sensible home purchase, traditional expertise has advised saving enough money for a down payment of at least 20 percent. So if you are eyeballing a $250,000 home, for example, that means amassing $50,000 — a sizable amount. While you aren't required to put 20 percent down, doing so can help you avoid having to pay private mortgage insurance, or PMI, until you build up equity in your home. Saving for a down payment is not an easy task, and may take many years, so it's best to start as soon as possible. (See also: 4 Easy Ways to Start Saving for a Down Payment on a Home)

6. Investing toward retirement

The notion of saving for your 60s might seem ridiculous when you're in your 20s. But you can't put off retirement savings forever, and this procrastination can really hurt you down the line. The earlier you start saving, the more money you will have when it's time to leave the workforce.

If you're into your 30s or 40s and have little saved for retirement, you need to start socking money away right now. Take advantage of your employer's 401(k) plan and any of your company's matching contributions. You can also open an individual retirement account (IRA). Max out these accounts, if possible. The sooner you start investing, the more time your money has to grow. (See also: 7 Retirement Planning Steps Late Starters Must Make)

7. Saving for your kids' education

It's hard to imagine saving for college when you have no children yet, or your kids haven't even left elementary school. But with college costing tens of thousands of dollars, and getting more expensive every year, you shouldn't put off saving for too long if you plan to help your children with some of the expense.

It's possible to begin saving before your child is even born, and there are many investment accounts, including the popular 529 college savings plans, that offer great tax advantages to those that save for education. It's not wise to save for college costs at the expense of your own retirement, but if you have the ability to put aside money for both, do it sooner rather than later. (See also: 5 Smart Places to Stash Your Kid's College Savings)

8. Getting properly insured

Proper financial planning isn't just about accumulating wealth, but protecting it. The best way to protect your assets is by insuring them at appropriate levels. Do you own a home? Make sure you have homeowners insurance to protect the structure and everything inside. Do you and your family members have health insurance to protect against illness or injury? And do you have life insurance so that your family will be financially OK if something were to happen to you?

Insurance can sometimes seem like a waste of money if you don't use it. But when something bad does happens, you'll be massively grateful you have it. (See also: 5 Reasons Why Life Insurance Isn't Just for Old People)

9. Crafting a will

Do you know who gets your assets if you unexpectedly pass away? Do you know who will take care of your children if you are no longer around? Have you given any thought to whether you'd like to be kept on life support if you are the victim of an accident? These are unpleasant things to think about, but they are important considerations.

In the absence of a will or other documents that outline your wishes, family members may be left to make challenging decisions. The money and assets you wished to pass on to specific relatives may not be passed on according to your plans. Writing a will may not seem like a crucial thing to do when you are young, but it becomes more important as you get older, expand your family, and accumulate assets. (See also: What You Need to Know About Writing a Will)

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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:

Should You Set Up a Trust for Your Child?

Matt Bell — Thu, 25 Feb 2016 11:00:09 +0000

When you think of trust funds, what comes to mind? Spoiled rich kids, living off the money set aside for them by their uber-wealthy parents? If so, you may be surprised to learn that you don't need to be a gazillionaire to benefit from a trust.

Read on to see if a trust might be right for your kids.

Estate Planning

Estate planning runs the gamut, from the basic to the complex, depending on your wealth and the complexity of your life. To put various estate planning documents, such as wills and trusts, into context — and to determine which ones you may need — consider the following three levels of estate planning.

Titles and Beneficiary Designations

For some of your assets, making sure they end up where you'd like them to requires very little effort on your part. You just need to make sure they are titled correctly or that you've designated the right beneficiaries. A will is generally not required. Even if you have a will, titles and beneficiary designations take precedence.

If you're married and want property to go to the surviving spouse should the other spouse die, simply titling the property in both of your names "with rights of survivorship" will accomplish that. This includes your home and car. For other assets, all it takes to transfer ownership as you'd like upon your death is to name the right people as beneficiaries. This includes life insurance, individual retirement accounts (IRAs), 401K accounts, and bank accounts. These are relatively simple steps with important implications, so make sure you've made the right choices on titles and beneficiary forms.

A Will

For everything not specifically earmarked via title or beneficiary designation — property titled in your name only, and everything that doesn't come with a beneficiary designation form (jewelry, art, a baseball card collection, your prized parakeet) — you'll need a will to get it where you want it to go. Otherwise your state's "intestate" laws will dictate who gets what. (Trust me, your state probably isn't interested in finding the best home for your bird.)

It is all the more important to have wills once you have children. This is the document in which you name a legal guardian for your kids in the event that you and your spouse both die, and you specify who will manage money for your children until they turn 18 (or 21 in some states).

Why Try a Trust?

For many people, a will is enough, especially if they don't own a lot of assets and don't have a very complicated financial life. For others, a will isn't enough; they also need a trust.

Once you accumulate more wealth, or if your life becomes more complicated (you have kids from a prior marriage, have property in another state, own a business), a trust may be in order. A trust does not replace a will; it is used in addition to a will. Here are some of its main benefits.

It Gives You More Control

Leaving a lot of money to an adult child can do more harm than good. With a trust, you can create a distribution schedule, perhaps giving them a quarter of the balance starting at age 25, and then another quarter every five years until it is all distributed. You can also name someone to manage the money while it is still owned by the trust and approve any early distribution decisions (perhaps you'd allow money to be accessed early for education or other purposes).

It Keeps Your Estate Out of Probate

Probate is a court-supervised process of validating your will, inventorying your assets, having property appraised, making sure assets are distributed according to the terms of the will, paying the bills of the deceased, and more. It is required if you have a will only, can take a year or longer, and can end up costing 2%–8% of the total value of the estate once you're done paying attorney's fees and court costs. A trust enables your heirs to bypass probate, freeing the trustee to wind down the estate without court supervision.

It Keeps Information Private

Your will becomes public record upon your death. By contrast, the terms of a trust are not required to be made public.

It Helps Customize Estate Distribution

Depending on the complexity of your situation, a trust may help you customize the distribution of your estate more easily than a will. For example, you may want to leave more to an adult child in a low-income profession than another who works in a high-income profession. Or, you may want to keep a tight rein on how inherited money is used by a beneficiary known for his or her free-spending ways.

There are many types of trusts, but the most common type is a revocable living trust, which simply means you can make alterations if your circumstances change. Creating a trust requires the help of an attorney and could cost up to $3,000 to set up versus less than $1,000 for a will. However, the money-saving benefits of avoiding probate, and the added controls available for complex situations, may ultimately make a trust less expensive.

There are many variables involved in determining whether you need a trust. If, after reading this article, you suspect you may, talk with an experienced estate-planning attorney to further weigh the pros and cons.

Have you considered a trust for your heirs?

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

12 Financial Moves to Make When a Loved One Dies

Tim Lemke — Wed, 03 Feb 2016 18:19:01 +0000

There are few things more challenging than a loved one's passing. In addition to being emotionally difficult, there is an enormous amount of work required to handle the person's estate.

No one likes to discuss the finances of your departed loved ones, but there are many key things that should be done shortly after their passing. These 12 items are the most common financial priorities during a difficult time.

1. Do as Little as You Need To (At First)

Losing a loved one is a stressful, tiring, and emotional experience. That's why it's wise to avoid making any key financial decisions immediately. Decisions about money and property should be made with a clear head, psychologists say. It's important to begin collecting some documentation and making funeral plans, but many key decisions can wait a while.

2. Find the Will — and Its Executor

If your loved one planned properly, he or she outlined their wishes in a will and tasked a trustworthy person to carry things out. This is known as probating the estate. Things can get complicated if there is no will, or if the executor has passed away or is otherwise unavailable. But start by finding out if your loved one's wishes were written down. If you are the executor, you will need letters testamentary that prove you have the right to handle the affairs of the deceased.

3. Collect as Many Documents as You Can

Hopefully, your loved one had some sort of filing system for bills, tax receipts, and other financial information. Collect as much of this paperwork as you can, including anything associated with his or her estate planning, plus credit card statements, bank statements, life insurance policies, car titles, and any similar things you can think of.

4. Determine If the Funeral Was Prepaid

You may find that your loved one had already made plans with a funeral home to have arrangements paid for. But if not, you'll need to determine if there is money available from the deceased to pay for the funeral. This may require opening a special checking account for the estate.

5. Get Copies of the Death Certificate

As you work through the complicated financial matters after a loved one dies, people and institutions will request copies of the death certificate as evidence of the person's passing. Obtain dozens of copies from the state, as many organizations will require an original document. Always have a copy handy any time you deal with a bank or brokerage house.

6. Get in Touch With Financial Institutions

This is often a challenge, because most people have multiple bank accounts, plus various investment accounts, pension providers, loans, credit cards, and insurance companies. Start with the the life insurance company, as the policy may mean that there will be a payout that can be used toward final expenses. Then check with banks to stop any automatic payments, such as regular contributions to charity. Brokerage companies may freeze accounts once notified of a death, so plan in advance if you think this may pose a problem.

7. Call Utility Companies

If a loved one lived alone, it will be important to call the electric company, water provider, cable provider, and phone company to stop service and avoid any additional charges. (Make sure you clean out the fridge before cutting off the electricity.)

8. Contact Government Agencies

You need to contact the Social Security Administration to stop payments, and see if you are eligible for any death benefits. If your relative served in the Armed Forces, call the Veterans Administration. There are many state and local agencies that may also need to be notified, in order to stop payments from things like pensions or legal settlements.

9. Get the Credit Report of the Deceased

It will be important to contact credit bureaus to protect against a case of identity theft. But it's also helpful to review your loved one's credit report to see if there were any major errors or cases of fraud.

10. Hire an Accountant

Dealing with taxes can be very challenging following the death of a loved one. There may be inheritance taxes, and if they worked in the year of their death, they may owe taxes or at least have required tax forms you'll need access to. Let an accountant do a lot of the heavy lifting here. (See also: 14 Reasons Why an Accountant Is Worth the Money)

11. Change Online Passwords

If you have access to the online accounts of the deceased, you may want to consider changing the passwords for access. This will guard against anyone looking to steal your loved one's identity, and prevent others from gaining access to account information they should not have.

12. Roll Over Their IRA

If your wife or husband passed away, you are the beneficiary of his or her retirement account and can roll it into yours. Or you can tap the money immediately and you won't have to pay a penalty for early withdrawals. If your spouse was over 70 ½, you may have to take a required minimum distribution.

What steps have you taken to prepare for the loss of a loved one?

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 Reasons Why You (Yes, YOU!) Need an Advance Care Directive

Marla Walters — Wed, 31 Dec 2014 16:00:11 +0000

What would you do if you were suddenly medically incapacitated? Would you want to be kept alive, given pain medications, or fed intravenously? Or, does the idea of being kept alive via medical machinery repulse you? Do you have a plan or directions for this sort of unexpected situation?

You are probably thinking the same thing that I did about this kind of "planning." I figured I could probably avoid doing anything about wills or Advanced Health Directives until much later in life. That's something only old people do, right?

But an Advance Healthcare Directive is an important legal document that spells out instructions for your care — at any age. Young people get sick, too, and terrible accidents can happen at any age. If you become physically or mentally incapacitated and cannot express your wishes for medical treatment, the document directs providers how to proceed with your medication, life support, feeding, and other essential care.

I've done some very hard thinking about Advanced Directives recently, and decided to sign one. Here is what it came down to.

1. I Continue to Hold the Power

If something were to happen to me tomorrow, whom would I trust to make decisions for me and carry out my wishes? Signing the directive would give me the ultimate power to direct my care — and decide who I want to execute them if I'm incapacitated. I am fortunate in that I have my husband and daughter to see my wishes through.

2. It Will Relieve a Burden on My Family

"The importance of having an advance directive benefits not only the individual but the family members and other professional healthcare providers that may need to care for someone facing a serious or life-limiting illness," notes J. Donald Schumacher, President and CEO of the National Hospice and Palliative Care Organization. "Equally important are the frank conversations that loved ones have with each other and care providers about the care that they would or would not want."

3. It's Easy to Sign

My doctor provided me with an Advance Directive form, but they are also readily available on the Internet. In my state, you do not have to see an attorney (or even a notary) to sign a directive. I just asked a good friend to serve as witness on the form, which is legally binding in my state. If you do see an attorney to have wills or estate planning done, the Advance Healthcare Directive will likely be part of the package. Check your state's requirements about witnesses, notarization, and so forth.

4. It's Even More Important for Young (or Single) Folks

Just because you are young does not mean it's the wrong time to sign. As Stanford University says:

"Even though a younger person may not think it is important to have an advanced directive, one of the most common reasons young people visit emergency rooms is trauma, and in such cases individuals can lose the ability to speak for themselves. Furthermore, a single person living alone may have no one to speak for him/her regarding resuscitative measures."

That's right — young or single folks need a directive as much as anyone.

5. It Doesn't Mean That I'm Giving Up

On my form, I can check that I want, for example:

To have my life prolonged as much as possible within the limits of generally accepted healthcare standards that apply;
That I want artificial nutrition and hydration;
That I want treatment to relieve my pain or discomfort.

It's not fun to think about the end of life or a possible tragedy. But signing an Advance Healthcare Directive is one way to reduce stress around these decisions and ensure your wishes are met.

Have you created and signed an advanced care directive? Tell us about your decision in comments.

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

What Happens to Your Online Stuff After You Die?

Michael Kling — Tue, 20 May 2014 08:12:16 +0000

Many people write wills for their physical property, but few even think about creating a plan for their digital estates. Without such a plan, your loved ones might be unable to access your digital files or the accounts could be deleted before they see them.

A digital estate plan can help ensure that every online account will be accessed or transferred to the right person. And for those with networks of online-only friends and work colleagues, a digital estate plan can help inform those virtual friends of one's actual demise.

Let's start with a look at the nature of the problem, and then we'll look at some solutions.

Terms of Service Agreements

Remember those "I agree" boxes you checked next to Terms of Service Agreements without so much as glancing at the fine print? They typically restrict "non-authorized users" (in other words, your survivors) from accessing your accounts.

Plus, they often say accounts are nontransferable. While people violate service agreements all the time without repercussions, the agreements are legal contracts and violating them is a crime, although a misdemeanor. Social media companies often say they allow heirs to delete the deceased's account and not much else. Photos, comments and stories, everything else (good and bad) is lost.

A digital estate plan will help your executor access and manage your online possessions. While they do not guarantee access (because of those service agreements), they often persuade a service provider to approve login access, especially since the contracts can change.

Creating Your Digital Estate Plan

Experts recommend following these steps.

1. Create an Inventory

Make a list of your online accounts with their usernames and passwords. Include social media sites, online bank accounts and credit cards, and utilities paid online. Remember to update them when changing accounts and passwords or at least once a year.

2. Save It

Store them in a secure location like a safe deposit box, CD, flash drive, or encrypted computer file. Password managers such as LastPass or 1Password make it easy to encrypt and securely store such data. Another popular password manager — PasswordBox — includes a feature called "Legacy Locker" that stores logins and passwords and shares them with designated people upon your death.

Don't include your logins and passwords in your actual will, which becomes part of probate court's public records.

3. Name a Digital Executor

Your digital executor can be different from your regular executor. The digital executor should be digitally adept and, like your traditional executor, be impartial and trustworthy. Be specific and name accounts the executor will be able to control, delete, and maintain.

4. Say What You Wish to Happen

Define what you wish to happen to your accounts. Do you want your Facebook account deleted or memorialized? Let your executor know if you're using Google's Inactive Account Manager. Your executor is obligated to follow your instructions.

What Google, Facebook and Others Will Do

Google recently introduced its Inactive Account Manager. You can use the tool to name a "trusted contact" to be contacted if a Google account, such as Gmail, YouTube, or Blogger, becomes inactive for any reason. If your account is inactive for a period of time, which you choose, Google sends you a text or email. If you don't respond, Google can — based on your instructions — delete the accounts or allow trusted contacts "to receive data" from the accounts.

Facebook

Facebook won't release login information but will delete or "memorialize" an account on the request of heirs. Memorialized accounts are essentially frozen in time. No one can login or add or change photos or anything else. Depending on the privacy settings of the deceased person's account, friends can share memories on the memorialized Timeline.

LinkedIn says it will shut down profiles of deceased members on request. It asks heirs to complete and electronically sign a form via DocuSign. If heirs have login information, they may want to download the deceased's contacts, although it's legally unclear if the contact lists belong to the LinkedIn members or their company.

Twitter

Twitter will shut down accounts of deceased users on request. According to Twitter's policy, heirs have to mail or fax a signed statement, a copy of the death certificate, and a copy of a government-issued ID like a driver's license.

Digital Media

When consumers purchase digital music and e-books, they technically only buy licenses to view or hear them. For instance, the iTunes terms of service agreement says accounts are nontransferable and will end if users don't meet the terms. But if agreements allow multiple computers per account, heirs could use that loophole to claim the purchased media.

Missing Login Information?

If a relative passes away without leaving login information, heirs might be able to obtain access with the proper documentation and patience.

Google says it might provide Gmail access if heirs send a copy of the heir's government-issued ID and the death certificate. But it makes no promises and warns the wait can be long.

YouTube says it might grant access "only after a careful review" if heirs provide a copy of the death certificate and power of attorney document.

Because the concept of digital wills is relatively new, it's unclear how the issue will evolve. Internet firms could change policies after more requests from grieving families. Few states have laws on digital estates but more may address the topic in coming years. Despite the uncertainty — or maybe because of it — creating a digital estate plan can help your family access your virtual self before it, too, expires.

Have you considered what will happen to your digital self — and your digital property — after you pass? What steps have you taken? Please share in comments (which are forever, unless something happens to the server, or an heir asks that they be removed).

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

Post Divorce Finances: 7 Steps to Rebuilding Your Financial House

Nora Dunn — Tue, 28 Oct 2008 04:06:55 +0000

My, how life changes when you close one chapter of your life and open a new one. Severing a conjoined life and combined finances as a result of divorce is painful through and through. The jump to a single income lifestyle paves the way to feeling the cash crunch, and if children are involved it is even more pronounced. Even if the breakup is liberating, there is still some mopping up to do after the storm.

Here are seven things you can do to set your new life up on the right foot:

Joint Banking Be Gone

Close all joint bank accounts, joint non-registered investment accounts, and credit cards. Not only is this a tangible form of evidence to demonstrate a date of separation (in locales where you need to be separated for a time prior to applying for divorce), but it also protects each party from destructive actions the other may take in anger or apathy.

Remove all Beneficiary Designations

Here is a list of items you may need to look at in terms of removing joint or beneficiary designations:

life insurance policies
retirement funds
auto insurance
credit card insurance
pension funds through work
health care plans through work

If you are required to designate a new beneficiary and are not sure who to choose just yet, simply choose your estate for now, or until you hear otherwise from your lawyer/accountant/financial planner. Although an estate designation may not be the most tax-efficient option, it will keep things simpler until all the divorce paperwork is properly nailed down and you get on your feet again.

Create a New Budget

Flying solo means creating a whole new budget – a crucial step of the process. You may or may not have been actively involved in the finances while married, so creating a new budget could be an exercise in learning how much things cost, or simply reallocating income streams accordingly.

Update Your Will

Updating a will doesn’t have to be a laborious process. If it is simply a matter of changing beneficiaries, a codicil (a one page addendum that attaches to the will) can suffice.

Review Your Estate Plan

Although you will have covered most of the bases with reassigning beneficiaries and updating your will, your estate plan may incorporate some larger issues or opportunities given the new financial structure of your life.

For example, your previous estate plan may have been mindful of your ex-partner’s parents who are – or will become – financially or physically dependant. Or maybe children from a first marriage have been incorporated into the estate plan and now the structure of trusts or income streams needs to change.

Don’t Blow the Financial Settlement!

Just in case you had eyes for a new stereo system or a bigger house, you may want to seek counsel before spending any financial settlement that arises as a result of your divorce. From tax efficiency, to your overall financial plan, there could be ways to greatly help or detrimentally cripple your finances by virtue of what you do with the settlement.

If you are the one doling out the settlement, then refer to the following point to help you sort through the noise:

See a Financial Planner

Your financial planner will be instrumental in helping you with many of the above chores. Many financial planners can help with the transition and separation of accounts, but if you are uncomfortable meeting with the same planner you used as a couple, then ask around for a referral to a new planner who you can trust and establish a new relationship with.

You face lifestyle changes (in some cases drastic ones), income differentials, emotional transitions, tax plan modifications, and investment time frame readjustments. Your asset allocation plan may change, either because your investment personality is different from your ex-partner’s, or because you plan to utilize your investments differently (ie: your time horizon is longer, or you need to draw down on some investments now).

As crushing and stressful the trauma of severing your life from a loved one can be, you must try to maintain a level head throughout the process. By covering off the bases above, and keeping your eyes on the road ahead, you can survive the ordeal and move forward without falling into so many of the traps that lurk along the way. Life will go on, and in some cases, may even improve.

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

Wills: The Basics

Nora Dunn — Tue, 22 Jan 2008 08:45:49 +0000

As indicated in a previous article, planning for the future (even if the future means you're dead) is a necessary evil. Here are some of the basics of a will and what you need to know.

BASIC TERMINOLOGY

Will

This is a legal document which outlines how your assets and belongings are to be distributed when you die.

Executor

Your executor (also known as "administrator") is the person you designate in your will to carry out your wishes.

Since they have to follow your will to the letter, it is best to meet with your chosen executor, gain their approval for such a responsibility (it's a big one), and then describe your wishes to them as outlined in the will. They should also ideally know where to find the will and other key documents if and when they need to.

Beneficiary

Beneficiaries are the people who receive your assets when you die. You designate them as you see fit in your will, and you can have as many beneficiaries as you wish. Beneficiaries can also include companies, charities, and other organizations. (If you designate an organization or charity as your beneficiary, it is best to consult with them first to determine how specifically to do so).

Intestate

If you die without a will, you are considered to be intestate. This is when the government steps in, and over a tiresome period will attempt to contact anybody who might be a family member with a right to receive any of your assets. They first need to find the most appropriate executor, since nobody will be allowed to touch anything you owned until one is appointed. All accounts without designated beneficiaries (and even some that are) will be frozen and assets locked up.

If there are competing interests for who should be the executor, then intestate succession can become ugly, costly, and chaotic.

And if somebody dies intestate, even joint accounts can be frozen (not always, but in some cases), so spouses who think their estate situations are simple and not in need of wills can sometimes be in for a nasty surprise.

BASIC BENEFITS

Guardian for Children

In your will, you designate a guardian for your minor children. You can also specify certain elements of how they are to be raised, and arrange how they will be financially cared for.

If no guardian is selected, your kids don't get to pick, and sometimes the most logical guardian (for example a close friend who has been involved with the family since the beginning and would love to care for the kids) won't be respected - it goes by the book (worse case scenario: think "wicked Aunt who hates kids and never went to a family picnic if you paid her").

Income Tax Savings

Depending on where you live, there is usually a tax-friendly provision for the rollover of assets between spouses on death if it is properly specified in the will. Otherwise, there is a "deemed disposition" of assets often resulting in a tax bite before the spouse gains access to these funds. (General financial prudence dictates that you put off paying taxes until the last possible minute, in order to achieve greater overall gains using compound growth).

Trusts for Children

If you die and your kids are the age of majority, they will have full access to the assets you bequest to them. Not to challenge your parenting skills in raising a responsible child, but really - what 18 year old (or 21 year old for that matter) is going to responsibly accept a financial windfall? Heck - many seasoned adults can't handle financial windfalls; young adults won't fare any better. Your hard-earned estate that you hoped would provide financial security for your kids could end up being spent in record time with very little to show for it.

So in your will, consider setting up a trust. There are a few types of trusts (which go beyond the scope of this article), but basically you can set the terms as you wish. You can specify when and how your kids receive the money, and even how it is to be used or invested. Beware of setting too many restrictions: resentment can become a factor if the kids feel they have been unrightfully challenged, but most will eventually respect a decision to hold off divesting the funds until a later age.

Family Law Protection

Once again we trust our kids to make all the right choices in life, including their choice of spouse. However life happens, and sometimes marriages break down. If your hard-earned estate is left to your child and their partner (be they a husband or wife, or just a common-law partner), half of it could well disappear along with that marriage when it breaks down.

In your will, you can insert clauses and terms to prevent this from happening.

Common Disaster Clause

The best way to demonstrate the effectiveness of a Common Disaster Clause is by example:

John & Jane are married, with no children. They are both in a serious car accident, hospitalized in critical care. John passes away first, but Jane hangs on. However two weeks later, Jane too dies.

Without a common disaster clause, John's assets would go to Jane, the surviving spouse. When Jane dies, her entire estate (which includes everything John brought to the marriage) would go to her side of the family (or whoever her contingent beneficiaries are if she had a will). John's entire family would be denied any inheritance (including heirlooms or other prized family items - it's not all about money).

A common disaster clause diverts this problem by stating that if both spouses die within a certain amount of time (eg: a 30-day period) as a result of a common disaster, then their estates are split in half and distributed to their respective families accordingly.

Liability Clause

This is inserted to protect the executor from being sued, for example in the case of an investment loss. This is particularly important if they are managing trust accounts.

Expert Clause

This allows your executor to retain the services of an accountant or lawyer with regards to processing the estate or receiving estate-specific advice, and the estate can pay for it. Otherwise, the fees could come directly out of the executor's pocket. And although they may be a great brother or good friend, nobody appreciates a legal bill - much less an unexpected one!

As I said earlier, it’s not all about money and cash grabs when you plan your will and estate. You are looking out for the best interests of yourself, your loved ones, and their loved ones too. Nobody likes to plan for the future in this respect, but once it's done it can be put to bed, and everybody can rest easily knowing that the future is taken care of.

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

Debunking Common Estate Planning Myths

Anthony Marrone — Sat, 19 Jan 2008 18:51:58 +0000

Given the tens of millions of Americans nearing the Golden Years, the fields of retirement and estate planning are expanding by leaps and bounds. Along with the growth of work for financial advisors and estate planning attorneys, has come the advent of self-planning. From managing your entire investment portfolio from your home computer, to preparing your own Wills, Trusts and advanced-directives using an online document-preparation service, the "do-it-yourself" sector of financial and estate planning is enjoying huge growth.

As more and more Americans rely on websites like LegalZoom to help them prepare pre- and post-mortem documents, it is important to understand the several "myths" of estate planning, and how these online sites fail to convey the risks involved with self-prepared documents.

Myth #1: You Need a Will
This is an absolute lie, perpetrated by online companies and sometimes unethical attorneys looking to generate business. Don't get me wrong, most people could benefit from a Will, but not everyone needs a Will. If you have minor children, you will want to prepare a basic Will as soon as possible to ensure guardianship of your children passes to a trusted family member or friend in the event of your premature demise. However, if you have no minor children, there are other ways to assure the meaningful disposition of your assets when you pass other then a Will.

For example, let's say Robert Jones is a widower with two adult children. Robert owns his personal residence that he's lived in for several years, has a life insurance policy, a small bank account and a rather large IRA account that pays him income on a quarterly basis. Robert also has a pension and receives income from Social Security. My advice here is that, in the absence of extreme family matters, i.e. his children are divorced, he is expecting to inherit a large sum of money from a relative, etc., there is no pressing need for Robert to have a Will. The personal residence can be re-titled (in most states) to give Robert a Life-Estate and pass the home to his two children when he passes away (outside of probate). Also, Robert's life insurance, bank and IRA accounts can all pass to his children by either naming them as Beneficiaries (in terms of the insurance and IRA) and also making the bank account payable to his children on death. Now, if we were to mix in several equity accounts, multiple pieces of real estate and different gifting ideas, Robert's planning becomes more complicated. But, for now, you can see that the idea that everyone needs a Will is simply misleading.

Myth #2: A Trust Automatically Avoids Probate
Trust planning is becoming more and more popular in the U.S., mainly because it is a creative way to meaningfully pass along large assets to your descendants while hopefully avoiding a probate proceeding. Without getting into too detailed a discussion about the different kinds of trusts available (they vary by state) it's important to note that having trust will not automatically avoid a probate proceeding when you pass. The first step after you execute your trust is to re-title your assets that you wish the trust, vis-a-vis the trustee to manage. If you pass away without re-titling all of your trust assets, then those assets which remain outside the trust will be subject to disposition according to your Will, and a probate proceeding will be likely.

Myth #3: Everyone Needs A Trust
This is nothing more than a ploy for business. Playing on the example from Myth #1, Robert Jones does not need trust-planning at all. While it is true Robert could have some type of trust to ensure the proceeds from his IRA account are managed/distributed according to his wishes, the truth is most of Robert's assets will pass to his descendants by operation of his beneficiary designations. Trust planning is advantageous in several situations, including second marriages, families who wish to provide for adult/minor children, including a child with a disability, high net worth individuals and those who hold certain types of assets, i.e. large investment funds, several pieces of real estate, etc. However, for most Americans trust planning will do little beyond cost you a chunk of money annually (trustees are entitled to annual commissions for managing your property in most states) and create more of a paperwork shuffle in managing and distributing your assets.

Myth #4: Giving Away My Money Is The Only Way I'll Qualify for Medicaid
Many online sites and attorneys advise elderly clients to actively give away their money in order to lower the available resources and qualify for Medicaid (to defer the cost of nursing care or placement in an assisted-living facility). The truth is, most baby-boomers are very independent when it comes to managing their finances, so while this type of strategy may have worked in the 1980s and 90s with the Depression-era babies, it will serve little utility as the baby boomers reach retirement age. There are several different ways to qualify for Medicaid without giving up total control to your money, and if anyone tells you otherwise they are flat-out lying. However, based on new federal regulations placed into effect almost two years ago, Medicaid will now require you to provide financial history account statements for five years prior to your Medicaid application. The lesson for those who feel they may need nursing-care and placement within the next decade, purchase long-term care insurance, and start keeping accurate details and records of your finances.

Myth #5: I Should Name My Estate As Beneficiary of My IRA/Life Insurance
Don't do this. I cannot think of any benefit here, especially because estates generally pay higher taxes than individuals, this type of planning will have serious tax consequences for your estate. The reality is a lot of people name their estate (i.e. Estate of Robert Jones) as the primary beneficiary of their IRA/life insurance/annuities, etc. This is bad for tax-planning purposes, and also because now those assets are forced to pass through your estate (rather then directly to your intendend beneficiaries) and will be subject to probate. This is a bad idea all around.

I hope you enjoyed my first post, and will look forward to many more posts which intersect the areas of personal finance, taxes and estate planning.

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

Estate Planning: Why Me?

Nora Dunn — Wed, 16 Jan 2008 01:31:21 +0000

A friend of mine mourned the loss of her husband, who died of a heart attack at age 56. Although most people understand their mortality by the time they reach their fifties, this man didn't believe in insurance or planning for the future, and hence died with no coverage, very few assets, and no will.

For years prior to his death, my friend fought a losing battle with her husband, encouraging - even begging - him to consider a will, powers of attorney, and insurance. His never-changing reply was "What do I care? I'll be dead anyway. Everything will go to you and that's that".

But amidst her grieving, as she rifled through the last of his belongings, filed his last tax return, and consolidated his finances into hers, she was left with nothing but bills. Lawyer's fees, accountant's fees, taxes, probate, funeral bills, a mountain of debts he wasn't forthcoming about, and a whopping tax bill reflecting years of mismanagement of his assets and taxes - all adding up to a substantial sum of money. And with each new bill, actual resentment towards her late husband brewed.
After three years of toiling to resolve his estate (which appeared uncomplicated at the onset) and paying off the ensuing bills which ended up being over $100,000, my friend wanted a divorce from her late husband.

I cannot stress enough how important it is for everybody to consider their estate plan and to prepare a will. Even young single people can benefit from having a will - or at least their parents and siblings can, especially if there is any sort of division of loyalty among family members. Governmental legislation has a formula they apply for the division of assets (and debts) in the event of there being no will, but it certainly is not ideal. And even the simplest of estates can become muddled in confusion and resentment if not dealt with properly.
For example: You have a spouse and two small children. Legislation will designate the first "x" dollars of your estate value to your spouse, and then will divide the remainder equally between your spouse and children. The children's inheritances will be paid into a court system and held until they are 18 years old, with many restrictions as to how that money can be used prior to then.

What is your Estate?

Your estate is everything you own when you die; from the shoes on your feet, to your retirement accounts, to insurance policies.

What makes up an Estate Plan?

Things that should be reviewed as part of an estate plan include wills, powers of attorney (although they come into effect while you are still alive but incapacitated), and insurance policies.
For business owners, a succession plan is crucial. Otherwise, your employees, customers, and suppliers will be left "holding the ball" if you disappear unexpectedly. Your children or spouse may lose out on inheriting something they could be interested in, as there are muddy waters around corporate succession if there isn't anything documented in the charter papers about it. Also, if you have a business partner and they die without properly planning their own estate, their share of the business could be left to an uninterested and incompetent spouse by default. Or worse - their share of the business goes to minor child to be held in trust. In both cases your own share of the business is in jeopardy.

Okay, I want to start planning. What next?

Firstly, you should take a snapshot of your current estate situation; consolidating information into one easy document or notebook. Things to document include:

Bank account information (bank addresses, account numbers, etc)
Security Deposit Box location
Financial assets (institution, account numbers, approx value)
Financial debts (institution, account numbers, approx value)
All other assets (car, house, jewellery, incidentals)
Insurance policies (location of policy, type, company, policy number, amount)
Memberships (gyms, auto association, miscellaneous - your executor needs to know this information in order to cancel services or gain access to automatic insurance benefits)
Pension information (company, amount, survival benefits, who to contact)
Location of powers of attorney
Numbers of people (friends and family) to be notified
Contact info for lawyers, accountants, financial planners, and other key team members

Ultimately this information will be kept with your will when you have one, but for the meantime it is a launching pad for you to start planning your estate.

Planning Your Estate

Once you have an idea of what you own, you can formulate a plan for how you would like it to be doled out to those you love. Sometimes it's easy: "everything goes to my spouse". But even the simplest of situations can become complicated: what if your spouse goes with or before you? Determine not only the beneficiaries, but also the contingent beneficiaries for everything.
Consider who your executor will be. (And of course, then decide who the contingent executor will be).
It is common practice not to choose parents as executors, as more often than not they don't succeed their children. Instead, choose somebody close to your age or younger. (For people in their 20s and 30s without a spouse or siblings, you could initially nominate a parent, but may eventually want to designate your lawyer to the task.

See a Professional

Many people are enticed by the simplicity of a hand-written will, or using one of the numerous inexpensive legal will kits that are widely available. I cannot discourage this more! These boilerplate home-made wills are fraught with terminology that is vague, leaving loopholes for potential ugliness to crop up when your loved ones need it the least. There are improperly drafted wills that have literally torn families apart, or left them in waiting for literally decades for resolution due to a clause that had to go to the courts for interpretation.
The best way to avoid this can of worms is to accept the short-term pain of using a lawyer for the long-term peace of mind of having an iron clad will in place. Most lawyers will also keep a copy of the will in their offices, so if yours gets lost or burns in a fire, there is always an accessible copy.

I Don't Want to Plan my Will Now! It's Gonna Change…

Yup. If life rolls the way it should, it will toss you lots of curve balls that mean changes to your will. Moving in with new spouses, booting old spouses out, serious family quarrels (and not just spats - I mean serious!), and close friendships are all legitimate reasons to review your estate plan.
The good news is that you don't have to completely redraft your will to change small clauses or beneficiaries; more often than not an addendum at the end will suffice, thus minimizing legal fees and complications.

I Don't Have any Family. Why Bother?

If you die and don't have any family members at all who the government can contact to wrap up your estate, then the government gets to keep everything.
Now I'm not anti-establishment or anything, but why not instead make sure that your favourite charity, community sports league, or even quirky café down the street benefits instead?

Although morbid in nature, estate planning doesn't have to be a morbid chore. In fact, envisioning how the future for your family, friends, and favourite charities could be simplified or improved with a properly planned estate can actually be a comfort - especially once it is in place and you can forget about it.

We're here to live life now; but let's not forget where we came from and where we're going.

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

Is it Time to Talk with your Parents?

Nora Dunn — Sat, 15 Dec 2007 23:17:11 +0000

It’s no secret that talking about money and financial matters in general can be a topic not many like to broach. And with friends and acquaintances, it’s understandable that you may wish to keep a few cards close to your chest.

With your parents (and other family members) though, not talking about money can be detrimental in more ways than one. Because life happens when you’re busy making plans, and some of the most important decisions might need to be made when you feel under pressure and unprepared.

It can be difficult to contemplate, but the fact is that even though your parents may be in good health right now, the potential for a health crisis to occur only increases with age. Planning ahead won't prevent the situation, but it can help you be prepared to make better decisions at a time when emotions could cloud your judgement.

By developing a strong financial plan now, as well as setting in place legal mechanisms for the responsible administration of their finances, your parents can ensure they'll get the needed and costly medical, home or institutional care without eroding overall family finances, especially if they should become unable to make their own decisions.

I had a great uncle (think “eccentric rich uncle”) who was getting on in age and suffering mentally and physically with dementia. He also didn’t have a will or power of attorney. When he became ill and institutionalized, the state took over his finances and property, and although they made the best decisions they could on his behalf, it was all according to the book and they had no leeway for suggestions from his family and friends who knew of his wishes. The entire situation could have been easily averted if he had his finances in order, proper legal documentation, and had discussed it all with his family. As it happened, he died in a place he hated, and the few bequest wishes he had were never respected.

Although the issue of finances may be awkward, it is in everyone's interests to ensure that your parents are properly taken care of. If you’re not part of a family who openly communicates about finances, try raising the topic casually, and perhaps by raising small issues first. This will help both you and your parents feel more at ease with some of the trickier conversations that may eventually have to happen.

You may even discover your parents have been waiting for you to take the first step.

Once you are comfortable getting down to brass tacks, it would be best to assemble a complete picture of your parents' financial situation:

Income

Where do your parents derive their income, and do any conditions apply? For example, company pension plans may have strict limits on the amount and duration of income to a surviving spouse.

Assets

Get a picture of their assets (and liabilities for that matter). Locations of necessary paperwork, accounts, and safety deposit boxes is also key.

Many assets also allow for beneficiary designations within the account setup; ensure that these beneficiary designations are consistent with their wishes.

Expenses

Identify all your parents' current expenses and determine whether their income (along with any government aid) will be sufficient to cover projected home or personal care costs.

Insurance

Do your parents have extended health care plans? Should they consider critical illness or long term care insurance? Have they properly provided for each other with life insurance (if needed)?

Consider estate plans:

Will

Without a will, there is an increased potential for litigation and unexpected family quarrels, and the very real possibility that their wishes won't be properly respected. Ask your parents if they have up-to-date wills. Leaving things until “later” or ultimately “the system” will cause untold amounts of grief in the end. I have seen improperly drafted or vague wills take literally decades to resolve; meanwhile all assets are held by custodians and nothing is distributed. You’re not trying to swoop in for the loot by discussing wills with your parents; you are attempting to make sure their wishes are carried out. If you don’t know what they meant in drafting “xyz clause”, then nobody will.

Executor

Have they designated a Personal Representative (also referred to as an executor or liquidator) in their wills? This is the person (or trust company) who is responsible for winding up their affairs and distributing assets and bequests. And if the executor is you (all the more reason to be having this conversation –many executors don’t even know they were so designated until it’s too late and they are in the thick of it), make sure you know all the logistics like where exactly their will, insurance policies, legal documents, and financial papers are located. It is also worth asking who their contingent executor is; it is always prudent in making wills to designate a contingent executor, and if that person is you, it is still a grave responsibility not to be taken lightly.

Enduring power of attorney

This gives a designated person the power to make financial decisions on each parent's behalf, if that parent becomes incapacitated. Most couples designate each other as their power of attorney, with a child or other family member as their contingent power of attorney. If you are the primary or contingent power of attorney, there is a lot that goes unsaid in the legal wording of this document. Make sure you know exactly what your parents’ wishes are with regards to their preferences for personal care when they are incapacitated, as well as maintaining their financial affairs. As power of attorney, you will have carte blanche with their affairs and you need to know how to deal the ins and outs in a manner consistent with their needs and desires.

Living will

(Sometimes called a health directive) - provides explicit directions about the personal and medical care to be provided for each parent should they become incapacitated. It is also referred to as a Power of Attorney for Personal Care, and should be addressed with the same degree of gravity as the Enduring Power of Attorney.

Talking about all this stuff doesn’t have to be the soul sucking depressing experience that it may seem to be at the onset or on paper. Sure – you have to discuss a number of “what if” scenarios that we all would rather not imagine, but the peace of mind you and your parents may feel by virtue of knowledge and understanding is not to be underestimated. Preparing for the unknown gets us one big step closer to understanding it.

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