It’s always a little uncomfortable to talk about death, since we all like to think we have lots of time left. In Paul Bowles’ words, we tend to “think of life as an inexhaustible well.” However, none of us are going to be around forever, and it’s a good idea to be prepared. Family members have enough to deal with when someone passes away, so a kindness you can do them today is to make sure your estate planning is in order.
Fortunately, it’s not that cumbersome. Nor is it something that only the wealthy should concern themselves with. Here are a list of mission-critical tasks that everyone can complete.
1. Designate Beneficiaries
Who should receive the money in your retirement account, if you pass away? Designate them as beneficiaries on 401k, 403b or any other retirement accounts (IRAs, Roth IRAs). This should be pretty easy to do—usually on a website, or paper form.
Not sure if you designated beneficiaries?
If you have a 401k, 403b, or TSP: ask your HR person at your company where you can locate this information.
If you have an IRA or Roth IRA: Contact the institution that holds your money and ask them.
It’s a good idea to set yourself a reminder to review this each year. Make sure that
a) all beneficiaries are still alive
b) you still want them as a beneficiary
c) their contact information is correct.
If you don’t name or update beneficiaries, it might cause problems for the person in charge of your estate. In extreme cases, the money might even go to the state.
2. Draft a Will
This is the document that lays out your wishes for how you want your estate handled upon your demise. You pick the person who will act as your executor: the person who deals with the probate court if necessary, and the person that settles your debts and distributes your property to your beneficiaries. Since this is no small task, you will definitely want to appoint someone that you trust, who is task oriented and willing to handle this process.
Most importantly, if you have minor children, the will outlines and specifies who will become guardian (raise) your kids after you (and your spouse) are gone. You should keep a copy of the will in a safe place and be sure to send a copy to the person you named as your executor.
You can hire an attorney to help with your will. We also recommend online services such as legalzoom
3. Draft a Living Will
This document is often called healthcare directive, advance directive, or healthcare power of attorney. It contains your wishes regarding your care, should you be incapacitated or in a situation where you cannot speak or make decisions for yourself. Being in a coma is a good example of this. You’ll designate a person who can instruct the doctors and make healthcare decisions for you and on your behalf. Clearly this person needs to be someone you trust and who is capable of making difficult decisions. A living will is a document you need to keep handy. Additionally, you should give a copy to the person you named as your healthcare power of attorney.
We recommend reviewing your will and beneficiaries once a year. Life changes quickly: People have kids, relationships end, your beneficiaries might move, and so on. It shouldn’t take more than a few minutes to update this, and it might save your family members a lot of trouble.
Now, after this serious memento mori… go hug your loved ones!
Blooom and its representatives do not provide legal or tax advice. This information is meant to be general in nature. You should seek the advice and counsel of a qualified attorney and/or tax expert for your own estate planning.