Goodbyes are never easy, particularly if the relationship was a cherished one. Such was the case for me and my beloved hard drive. Its capacity for capturing great conversations, thoughts, and images felt irreplaceable. My heart sank as the computer technician conducted its last rites.
But thanks to technological advances, a mirror image of my hard drive’s legacy resided only a download away. The online backup reduced my anxiety and helped me resume my daily activities. Preparing for the inevitable allowed me and my hard drive to appreciate our time together and live life with no residual regrets.
How would life be different if we applied such a healthy, forward-looking mindset to our human relationships through estate planning? After all, as with hard drives, our limited shelf life requires that we make the most of each day while also planning for a peaceful transition. Having loved ones struggle with managing unorganized financial affairs with no assistance only prolongs grief and blemishes fond memories.
Unfortunately, a lack of an estate plan is common for many households. According to a 2012 survey by Rocket Lawyer, 41% of Baby Boomers and 71% of people age 34 and younger don’t have wills. Giving legal direction regarding your finances, property, and children upon your death takes the guessing game out such important matters. Who knows your desires better than you? Otherwise, you leave the courts to untangle your affairs at the expense of your loved ones.
Preparing a will requires that you name individuals who are responsible for settling your estate (executors), taking care of your minor children (guardians) and managing the trusts you establish for the benefit of others (trustees). Having an up-to-date list of your financial assets and liabilities, including digital accounts and passwords, helps smooth the settlement of your estate. (Some people prefer a living trust to direct their estate rather than a will, in order to avoid probate — a legal process that validates the will.)
Other important estate planning documents include a durable power of attorney, durable power of attorney for health care, and a living will.
Durable powers of attorneys (POAs) give another person the authority to manage your financial, personal or health care affairs on your behalf in the event of mental incapacity (brought on by such conditions as dementia or a terminal illness). Health care POAs should also include Health Insurance Portability and Accountability Act (HIPAA) provisions governing an individual’s privacy and access to medical records. A living will gives special consideration to your preference regarding medical treatments that may prolong your life.
Some financial assets and property transfer outside of the will. Financial assets such as life insurance and retirement assets transfer by beneficiary designation. Bank accounts and some investment accounts can transfer by establishing these accounts as a payable on death (POD). How property is titled determines whether the property is considered a probate asset or a non-probate asset. It is important to review these documents regularly to keep up with life changes such as marriage, children, and divorce, and to ensure that assets transfer according to your wishes.
Lazetta Rainey Braxton is a certified financial planner and CEO of Financial Fountains. She assists individuals, families, and institutions with achieving financial well-being and contributing to the common good through financial planning and investment management services. She serves as president of the Association of African American Financial Advisors. Braxton holds an MBA in finance and entrepreneurship from Wake Forest University and a BS in finance and international business from the University of Virginia.