The last thing you want to do is leave a bureaucratic mess for your loved ones when you die. This will cause the family stress during a difficult time. That should be more than enough reason to get this done in advance!
US News & World Report’s recent article, “12 Documents to Prepare Now for Your Heirs,” says that when people don’t have their paperwork ready, it can be a huge headache for the family. A family can be left with all kinds of paperwork to sort out while dealing with grief. Even worse, heirs may forfeit life insurance proceeds and tax deductions or overlook accounts they don’t know exist. That’s why it’s critical to have important documents ready for loved ones, additionally, we at the Family Estate Planning firm have added an additional document (a revocable living trust), as many times this is the foundation of a sound estate plan to avoid probate and allow an orderly administration.
Here are the documents you should start preparing right away:
A will. This is a legal document in which you name an executor to carry out your wishes, heirs to receive your assets, and a guardian if you have minor children.
A revocable living trust. This legal document is what acts like a family contract in which, you as the trustmaker, name a trustee to carry out the instructions you provide in the trust. The trustee has a “fiduciary duty” to follow these instructions, administer trust property and make distributions to your beneficiaries. If your assets are aligned with the trust (owned by the trust or have the trust designated as the beneficiary), your loved ones will avoid probate, have the assets administered and distributed in a private manner, and increase the likelihood that family harmony will be maintained and your assets are protected and preserved for your family.
A letter of explanation. Your trust and will stipulate how assets are to be divided. However, a letter of explanation can provide the reasons for these decisions. This can be helpful, if the trust and estate is to be divided unevenly between children.
List of financial accounts and beneficiaries. Keep a list of all your finances, such as bank and retirement accounts and brokerage funds, each may be owned by a trust, or have a designated beneficiary or transfer on death provision, known as a TOD. If the trust owns the property there will be no probate. Make sure you keep asset and ownership beneficiary designations up-to-date.
Personal inventory. Most wills distribute personal property in vague terms, like designating jewelry to one person and household goods to another. To be certain that nothing significant is overlooked, create an inventory of personal items. This inventory can also list items that may be stored in another location, unbeknownst to your family.
Power of attorney. This form is an important document for your family, if you become incapacitated because of an illness or accident. A power of attorney allows a designated person to make decisions on your behalf concerning assets that you own alone that are not titled in the trust like IRAs or 401(k)s. There is one form for financial decisions, and another for health care.
Life insurance policies. Your family can miss significant life insurance benefits, if they don’t know you have a policy, or it’s been lost or misplaced. Keep records of your life insurance plans and place it with your financial records.
Real estate records. Add deeds, assessments, mortgage statements and property tax information to the documents you’ve prepared for your heirs. Collecting the records for them in advance will make their lives easier.
Tax returns. List the name of your CPA or tax preparer, if you have your taxes professionally done. He or she can help your family with filing final tax returns for your estate. If you file your own returns, print a copy for your files and record any login information for online tax preparation services.
Logins for accounts. Create a list of your usernames and passwords for financial accounts, email, and social media and keep it where heirs can access the information.
A digital estate plan. Some states recognize digital estate plans as legally binding. However, even if it isn’t, it can be a great resource for your family. A digital estate plan states what will happen to your digital assets, like your social media accounts, websites, digital photos, intellectual property and other files and documents. Within your plan, you can name a digital executor and list those you’ve named as legacy contacts on specific platforms, such as Facebook and Twitter. Be aware of the terms of service contracts and restrictions for certain accounts and platforms.
An ethical will. This letter describes what you’d like remembered as your legacy, such as passing down values. An ethical will can be used to share memories or to impart wisdom.
Your final wishes. If you’ve made prearrangements for your funeral or cremation, place that information with your will and other end-of-life documents. Your final wishes should also include information about organ donation, pet care and who should be notified of your passing.
Distilling a lifetime into a baker’s dozen documents is not an easy task, but it is necessary. Your loved ones will appreciate your doing the heavy lifting, and it will give them the room they need to grieve their loss. Work with and experienced estate planning attorney to make sure you have all your affairs in order.
To learn more about this and other estate planning topics visit our website today and schedule your consultation!
Reference: US News & World Report (October 4, 2018) “12 Documents to Prepare Now for Your Heirs”