Creating an end-of-life for estate planning: Part one

Planning for end of life is one of the kindest things individuals can do for those they leave behind. There are many financial and administrative tasks which must be dealt with when someone dies, and if there is not instructions on what to do when they are gone, loved ones are faced with the difficult task of trying to sort out affairs when their emotional capacity for dealing with such matters is very low.

Here is a partial list of items individuals should complete.

Create a will or living trust

Having a properly drafted will or trust can save heirs a lot of money and stress. While a will does not avoid heirs from having to go through probate, it does provide instructions on what assets are to go to where and how they are to be distributed. 

It also spells out the care of any minor children they may have. To increase the likelihood of wishes being carried out, the will should be signed by the individual and one or more witnesses. A living trust can accomplish the same thing as a will and potentially prevent heirs from having to go through probate. 

Complete advance healthcare directives

An advance healthcare directive, also known as a living will, is a legal document in which a person specifies the actions which should be taken regarding their health if they are no longer able to make decisions for themselves because of illness or incapacity. 

Another form of an advanced directive is a healthcare power of attorney. This authorizes someone, an agent, to make decisions on their behalf when they are incapacitated. It is suggested to complete a living will and a healthcare power of attorney to provide comprehensive guidance regarding care. Each state has its own regulations, so make sure to check the requirements where individuals reside to ensure documents are valid.

Review beneficiary designations

A common mistake people make is not updating their beneficiary designations upon a major life event such as the birth of a child, marriage, divorce or the dissolution of a business partnership.   

To make sure money goes to whom individuals want, check the beneficiary designations on all of the life insurance policies, annuities, IRAs, 401(k) account, Health Savings Accounts and any other account with a beneficiary designation. Make sure to name a contingent beneficiary as well. 

Additionally, if individuals have a Transfer-On-Death (TOD) or Payable-On-Death (POD) arrangement, make sure those beneficiary designations are up-to-date. TOD and POD arrangements allow a person to avoid probate on investment and savings accounts. Individuals should also verify if beneficiary designations are “Per Stirpes” or “Per Capita.”  

Create a list of your
assets and liabilities 

To help heirs understand what the individual owns and what they owe, make a list of all assets and liabilities. Include contact information for the appropriate people and provide detailed instructions on how to manage or dispose of assets. Include information such as: company names; account numbers; advisor names and contact information; a recent statement and advice on what to do with each asset and liability.

Make a list
of your expenses

To prevent heirs from having to wait around for bills and account statements to arrive in the mail, make a list of all your expenses. Let them know what the monthly, quarterly, semi-annual or annual payments are, who they need to make payments to and what they should do with each expense item.

Having this information may prevent heirs from being stuck paying penalties and late fees on accounts. Provide heirs with the company or organization names, account numbers and contact information. It is helpful to include a recent statement for each account.

Location of
important documents

Provide the location of important documents along with any pertinent instructions regarding these items. These documents may include: will(s), trust(s), advance directives, personal property list, insurance policies, power of attorney, social security cards, titles of vehicles, boats, campers, ATVs, birth certificates, death certificates, passport, driver’s license, storage unit location, safety deposit box location, keys and combinations, cemetery plot deed, stock certificates, marriage certificate and license, divorce papers, adoption records, military records, pet records, leases, home improvement records, tax returns, property tax records, user manuals, warranties, employment records, membership cards, lease agreements and notes payable and receivable.

Chris Nolt is an independent, fee-only registered investment advisor and the owner of Solid Rock Wealth Management, Inc. and Solid Rock Realty Advisors, LLC, sister companies dedicated to working with families around the country who are selling a farm or ranch and transitioning into retirement.  To order a copy of Chris’s new book: Financial Strategies for Selling a Farm or Ranch, visit Amazon.com or call Chris at 800-517-1031. For more information, visit solidrockproperty.com and solidrockwealth.com.