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Listen, nobody likes to talk about death. Particularly in the middle of a global pandemic when it’s literally all around us.
But I have to.
Because if there’s one mistake people make with their money that really pisses me off, it’s the failure to get a will and other essential estate planning documents in place.
Avoiding this is understandable — it’s an unpleasant topic and a daunting task in terms of paperwork. When you’re fortunate enough to be healthy, it hardly feels urgent.
But the truth is simple. Failing to create the documents necessary for the eventuality of death is, in a word, selfish. It can lead to stress, anxiety, and even financial peril for your loved ones.
Before his death in 2013, my father was in the hospital for the better part of four months, and the experience was both agonizing and illuminating. He carefully articulated his wishes and made sure that his documents reflected those wishes. Along with many other gifts that he left, his well-planned estate was a wonderful legacy, which allowed us to take care of business efficiently while mourning our loss.
But I’ve met too many people who had to settle their family’s affairs with little guidance. I’m certain that they would much rather have spent their time mourning the loss of their loved one than spending countless hours with probate courts and attorneys.
Without communicating your end-of-life preferences to your family, you’re creating enormous pressure on them to read your mind, at the exact moment when they’re not in the best state to do so. According to a 2020 survey by Caring.com, only 32% of all Americans said that they have a will or another type of estate planning document, down from 42% three years earlier.
But the coronavirus pandemic has put this essential financial issue on the front burner.
Whether or not you have a lot of money, you need to articulate what you want when it comes to big decisions about who will get your precious family heirlooms, who will raise your children, and whether or not you want a religious burial. Every adult needs to consider putting together basic estate documents.
I recommend that you consult with a qualified estate attorney, because estate laws vary from state to state. Even if you don’t have significant assets, a lawyer can help you navigate thorny issues, such as leaving money to one child who is responsible and not feeling comfortable doing the same with another who may be a spendthrift or is in a bad marriage.
Basic estate documents can cost between $500 to $1,000, which may seem steep, especially during a time of financial uncertainty for many, but these are important decisions, right?
That said, there are also online services that cover the basics, including Quicken WillMaker & Trust, which costs $89.99, and LegalZoom, which offers a bundled service for a will, power of attorney, and health care proxy starting at $179.
Creating and finalizing all these documents may take a bit of time — a few weeks to a few months — depending on the complexity of your estate and your ability to focus on the important issues raised. But think of it as crossing one of the most important life decisions off your to-do list.
Before you start, here’s what you need to gather. (Some of this information might not apply to you.)
- List of all bank accounts
- List of all usernames and passwords
- List of automatic-pay accounts with name and contact information of each payee
- List of safe-deposit boxes
- 401(k) account information
- IRA and Roth IRA information
- Pension documents
- Annuity contracts
- Brokerage account information (contact name, phone number, and email address)
- Detailed list of savings bonds (and copies of actual bonds)
- Life insurance policies (private and through employer)
- Long-term care insurance policies
- Housing, land, and cemetery deeds
- Mortgage accounts
- Proof of loans made
- Vehicle title
- Partnership and corporate operating agreements
- Tax returns from the previous three years
- Marriage license
- Divorce papers
- Military discharge information
- List of contact information (names, current addresses, and Social Security numbers) of all people named in the legal documents, as well as contact information for the estate attorney and CPA who will be handling the estate.)
With all of this in hand, these are the documents that you’re looking to create:
This crucial legal instrument ensures that assets are passed to designated beneficiaries, in accordance with your wishes. In the drafting process, you name an executor, the person or institution that oversees the distribution of your assets. If you have minor children, you need to name a guardian for them.
Letter of Instruction/Appointment of Agent to Control Disposition of Remains
This details your wish to be buried or cremated, as well as rituals that you would like to mark your passing. As New York estate attorney Juliet P. Kalib of Kalib & Kalib, explains, “In some states, there is a form to complete (with witnesses), while in others, a letter of instruction may contain the appointment of someone who will ensure your wishes are met.” This is especially important if you’re choosing a method that is contrary to your family’s tradition.
Power of Attorney
This is the appointment of someone to act as your agent in a variety of circumstances, like withdrawing money from a bank, responding to a tax inquiry, or making a trade, if you are unable to do so yourself.
Health Care Proxy
This is the appointment of someone to make health care decisions on your behalf if you lose the ability to do so. This document may also contain a “living will” or “advanced directive,” in which you can outline a variety of health circumstances and instruct your proxy to act in accordance with your wishes. “This can be helpful,” says Kalib, “especially if you think that your proxy may find it difficult to execute difficult decisions without specific guidance.” Amid the pandemic, I’ve heard of people taping their health care proxies to the inside of their front doors, to make sure any emergency service knows to contact their agent in the event of an emergency medical situation.
Appointment of Standby Guardian
This document allows for a guardian to step in when a parent is sick or dies suddenly. It can be important, especially if there is no other parent or legal guardian.
Revocable (changeable) or irrevocable (not-changeable) trusts may be useful, depending on family and tax situations. Trusts for minors can allow delaying payments to children to the time when they are considered adults, which Kalib notes may be important in the event of a sudden death. For 2020, the first $11.58 million of an estate is exempt from federal estate taxes. If an estate is above the threshold (or twice that for married couples), you may want to consider a trust.
Once you’ve gathered the necessary information, you need to communicate with your executor and agents to review the information together so you can answer any questions they may have. As you can imagine, these conversations are far easier to conduct while you’re healthy.
Next, you have to make it official. In the lockdown environment, some states allow estate document signings via video conferencing (Zoom, FaceTime), but specific protocols must be followed. Clients must have the printed documents; attorneys, witnesses, and notaries must participate in the conference and must be able to see the client sign the documents; and clients must then scan signature pages to send to the attorney.
Be sure to provide your executor with copies of documents or tell them where everything is stored.
By having tough conversations now, you’ll be providing yourself and your loved ones with some peace of mind — now and later.