Imagine you are dead.
Really imagine it for a moment. What does life look like without you? What are your loved ones doing? Do they have access to your financial accounts? Is there enough money now and in the future? Can they locate the important documents? Did you prepare for death?
Is your imagination painting an organized and calm picture? Or, is it a chaotic mess of people frantically searching for information with no idea of what they should be doing?
If you are like most people, it’s probably the latter.
Death is not a fun topic to discuss. Nobody wants to imagine the world without them. Most of us go about our lives as if we will live forever, never pausing to think what actually happens after we pass, and all the administrative requirements and hassle forced upon those who survive us.
I know because I see it.
Simply ask yourself, “If I died today, would my loved ones know where everything is they need and have access to those things?”
If the answer is no, you are not alone. I’ll talk about ways you can get organized.
If the answer is yes, kudos to you. Next, ask yourself, “Could I organize and make those things more easily accessible?”
Although the odds you die or become disabled in the next year may be very low, it’s important to organize and have everything in place for those you care about. It’s about making it easy on them if something happens to you.
Nobody should need to grieve while struggling to find and organize your financial and legal wishes. If you have everything neatly laid out, they can focus on grieving and healing without the additional stress.
What Documents You Should Have to Prepare for Death
Let us get the boring, but necessary documents you should have in place out of the way before we move on to more of the best practices. If you were eating a meal, these documents would be the protein, grains, and vegetables. You need them to function properly before talking about the appetizers, drinks, and desserts to bring the meal together.
When someone refers to an estate plan, they are referring to a collection of documents that outline your wishes regarding your health and finances if you were incapacitated or dead.
These documents normally include a Will or trust, health care directive or medical durable power of attorney, and financial durable power of attorney.
The Will or trust says how you want your assets to be handled when you die.
The health care directive explains how you want your medical treatment handled and who can make those decisions if you are unable.
The financial durable power of attorney allows you to name someone who can manage your financial affairs if you are incapacitated.
It’s important to note that a durable power of attorney is different from a power of attorney. A durable power of attorney continues after you become incapacitated. A general power of attorney does not remain in effect if you are incapacitated. For example, if you were in a coma, a durable power of attorney remains in effect, but a general power of attorney would be of no use.
Wills or trusts should be created by a competent attorney – not an online form that allows you to fill in your own for $50. If you have assets, it is worth spending the money ensuring they will be handled how you intended. I am a big believer in hiring someone you can have a conversation with, ask questions, and go back and forth to design documents that fit what you want to happen at death. With complex rules, there are too many opportunities to do something wrong and blow up your entire plan. There are countless horror stories.
More could be said about estate planning documents, but this post is not about estate planning documents – it is about preparing for your death and making it easy on loved ones.
The key is to have these documents in place to make it easy on significant others, kids, family, and friends.
Digital assets are a relatively new concept. Some estate plans do not cover them.
You may have a Facebook account or a Twitter account with thousands of followers and want something very specific to happen to those accounts. Or, it could be a Dropbox account with decades of photos your family would cherish.
Many people recommend keeping a list of your digital assets along with their usernames and passwords to allow someone to access them after your death. An easy way to do this is via a password manager, such as LastPass. Legally, sharing passwords may not be allowed. Some terms of services or laws do not allow someone to login and continue your account after you pass. It’s best to speak with an attorney and have them include something in your Will or trust.
Also, be aware of the resources companies offer. For example, Facebook has a legacy contact feature. You can name someone to look after your account with limited decision making. Google has an inactive account manager.
Remember, you may not think an account will be worth very much to you or your loved ones now, but it could later. It only takes a little extra time to set up these contacts now and could save your survivors from a painful process later.
What Should Happen to You?
One of the best gifts you can leave someone is a letter or outline of what you want to have happen after you pass.
I know this because a family member did it.
I had a family member pass away over a decade ago, and I still remember the letter. I remember how much joy, laughter, and relief it provided.
My favorite part of the letter read something like, “I want my ashes put in the local body of water while bagpipes are played, and make sure you do it at high tide, so you yokels don’t mess it up by running aground!” A different word than “mess” was used. I’ll leave it to your imagination as to what word he used.
You don’t know this person, but when we read it, we could all hear his voice as we read it. The mix of occasional loving words surrounded by pointed directions and a perfectly timed swear word brought it to life. It was a gift to read shortly after his death.
Included in the letter were other sentiments and instructions. He told us what services he wanted, what type of wake, and stories from his life. It was very specific, which is incredibly helpful when a family is grieving. It’s as if he had made all his choices, gave us the blueprint, and we simply had to do it.
I have not created a letter yet, but I have thought about it. I do have some ideas written down in the final wishes of my medical directive, such as a green burial, or as close to it as possible. I want a celebration of life – not a funeral – where people are brought together by food, preferably outdoors. I should write a letter, but like you, my mortality still feels far enough away to neglect it.
The key is to write down what you want. You can tell someone, but they likely won’t remember. Brain fog often happens.
Imagine receiving a letter from a loved one after their passing. Now, imagine how impactful and helpful your own letter could be for others.
Create a Document Listing Your Accounts
Create a document with all your account numbers, where they are located, and how they can be accessed.
This is one of my favorite pieces of advice! I stole it from someone who provided the advice to me.
If you have never been an executor or power of attorney, it is a thankless job. It requires hours upon hours of working with financial institutions, lawyers, and accountants to assemble everything someone owned, making sure everything makes to the correct people, and accounting for it.
I often hear the joke (if it can be called that), “If you don’t like someone or want to punish one kid over another, make them your executor.” In reality, they can relieve themselves from that responsibility, but you get the point.
What should you include in the document?
You should break down the document into sections:
- Investment Accounts
- Other Assets
Under each section, you should include:
- Name of the institution that holds the money
- Account number
- Approximate balance
- Beneficiaries, if there are any
- Contact information for the institution or a particular individual
- A brief explanation of what purpose it serves
- Any other notes you think are important
I’ll give an example of each below.
- Bank: Ally Bank Checking
- Account number: 55555
- Approximate balance: $20,000
- Beneficiaries: none
- Contact: ally.com
- Purpose: I pay all my bills from this account each month.
- Custodian: Charles Schwab
- Account number: 4444-4444
- Account type: IRA
- Approximate balance: $10,000
- Primary: 50% to Tim Makebelieve, brother, and 50% to Serena Fakeperson, sister
- Contingent: 100% to Patricia Whatlastname, friend
- Contact: Schwab.com or 1-800-435-4000
- Purpose: I save for retirement and make an annual contribution each year.
- Asset: Home
- Address: 1234 Mountain Street Drive, Faketown, WA 98101
- Note: If you want to sell it, I recommend using Matt Someperson from ABC Real Estate. He helped me buy the house.
- Type: Term life insurance
- Term length: 30 years starting
- Start date: 1/2020
- End date: 1/2050
- Policy number: A55555
- Premium: $650 paid annually from Ally
- Death benefit: $1,000,000
- Primary: 100% to Jasmine, girlfriend
- Contingent: 100% to Olivia, mom
- Contact: 1-800-555-5555
- Type: Mortgage
- Property address: 1234 Mountain Street Drive, Faketown, WA 98101
- Account number: 5555555
- Balance: $350,000
- Monthly payment: $2,000 (includes escrow for insurance and property taxes)
- Interest rate: 3%
- Term: 30 years
- Start date: 1/2021
- End date: 1/2051
- Lender: Big Bank 123
- Note: this is paid automatically from Ally
Having everything neatly documented for heirs is helpful.
A few tips:
- Under other assets, list any special or expensive items. For instance, if you have a piece of jewelry or a set of silver worth thousands, you should specifically call it out in the document. Your heirs may have no idea that ugly painting they made fun of all those years was worth something.
- If you have hard to value assets, consider telling them the most recent valuation, past valuations, and who they could go to for help with valuing the item.
- Include a copy of the beneficiary forms. While the bank or custodian should have copies, it’s helpful to have the most recent records showing your signature.
- Under investments, consider describing your investment philosophy. If you are incapacitated, this can help someone continue your philosophy. Or, if someone inherits assets, they can better understand why you own what you own and may feel better selling it if needed. Many heirs feel an emotional connection to particular inherited investments and do not want to sell, even if it would be a wise decision.
- Tell your heirs what is paid automatically and what is paid manually. Bills don’t stop when you die. If something will not be paid automatically, they need to contact the lender to pay it.
- Include your most recent credit report from www.annualcreditreport.com. Your heirs can reference your credit report against your document to see if anything is missing.
- You can include usernames and passwords (or master password if using a password manager) in this document
- To make it easy on heirs, consider printing the documenting, keeping it in a safe place in your home, and tell someone you trust about it
The exact format or what you include in the document is not what is important. What is important is thinking through the question, “If I am not here, how would someone who has no idea about my finances continue my financial life?”
If you create it from that frame of mind, you should be in good shape and help your loved ones.
Lastly, make a calendar remind to update it at least once per year. You can delete old accounts, add new ones, and update beneficiaries. Enough changes each year, and it is a good reminder to review your finances.
Summary – Final Thoughts
Preparing for death is not fun. But, it’s bound to happen at some point.
Taking time now to prepare, write down, and make your loved ones aware of your wishes is a wonderful gift.
Although preparing your estate plan is not easy, it’s worth it. Knowing your medical directives are in place, as well as what happens to your finances, can bring peace of mind.
Even if you cannot do that today or do not feel like you have the energy to create it, anybody can write a letter and create a document listing their assets. At the very least, this would be invaluable if someone needed to find your assets if you passed away.
Do not hold off until later. Take one small step today by committing to one action you can take in the next month.
What action will you take?