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Author: Marguerita Cheng
It can be hard to distill a lifetime of accomplishments and dreams into a stack of papers for your heirs. Getting these documents together, however, will be a final parting gift for the ones you love.
No one likes to think about death and end-of-life arrangements. However, being prepared for the inevitable is not only a smart thing to do, it’s also a kind thing to do for loved ones.
Failing to put your paperwork in order means family or friends will have to rely on the probate court to determine the fate of your property. Depending on your state, that could entail hiring a lawyer, paying court fees and waiting for a judge to decide how best to distribute assets.
What’s more, heirs may miss out on life insurance benefits or overlook accounts because they don’t know they exist.
“If you do it right, there is additional (financial) return for your heirs,” says Travis Anderson, managing member of TBH Advisors in Brentwood, Tennessee.
That’s why it’s crucial for you to have important documents ready for your loved ones. Here are the 12 documents you should start preparing now:
- Will.
- Trust.
- Letter of explanation.
- List of financial accounts and beneficiaries.
- Personal inventory.
- Power of attorney.
- Life insurance policies.
- Real estate records.
- Tax returns.
- Login information for online accounts.
- Digital estate plan.
- Final wishes.
1. Will
When it comes to estate planning, a will is likely the first thing that comes to mind. This legal document lets you name an executor to carry out your wishes, heirs for your assets and a guardian for any minor children you may have.
Wills can also be used to make arrangements for pets.
“Clients frequently enjoy naming their specific pets in the will, but the provision should always include the named pets ‘and any other pets I may own at my death,’” says Lucy Marsh, a professor in the Sturm College of Law at the University of Denver. It’s a good idea to name a specific person in the will for pet care, along with a backup choice.
2. Trust
“Everyone knows the will, but the will is not the best way to pass on assets,” says Kelsey Simasko, an elder law attorney with Simasko Law in Mount Clemens, Michigan. That’s because a will still needs to go through the probate process. Instead, she recommends using a trust.
Trusts bypass probate court and also allow more control over how assets are distributed. For instance, a trust can stipulate that minor children won’t receive unfettered access to their inheritance until a specified age. That way, the money “can be used to enhance their life, not ruin their life,” Simasko says.
Even those with a trust should write a will, particularly if they are a parent to minor children. The will, rather than the trust, is where you indicate who you do – or do not – want to have guardianship.
3. Letter of Explanation
While the will or trust stipulates how assets are to be divided, a letter of explanation can provide the rationale for these decisions.
This can be especially important in instances when assets are not being divided equally. Knowing why a sibling was chosen to receive a larger share of an estate may help avoid animosity between family members.
Consider sitting down with heirs to share this information in advance.
“You can’t leave these big reveals for the lawyer,” Simasko says. If sharing this information feels awkward and uncomfortable, she suggests to her clients that they invite adult children to a meeting in her office. That way, an attorney can serve as a neutral third party to the conversation.
4. List of Financial Accounts and Beneficiaries
Maintain a list of all your finances, including bank and retirement accounts and brokerage funds. Each of these accounts can have a designated beneficiary or transfer on death provision, known as a TOD. Beneficiaries or TOD designees automatically get ownership of the asset after you pass away.
It’s not unusual for people to forget to update beneficiaries on accounts or assume they don’t need to worry about beneficiaries if they have a will. However, whoever is named beneficiary receives the asset even if the will says otherwise.
For that reason, it’s important to revisit these documents regularly. “Your estate plan changes just like your life does,” Anderson says.
5. Personal Inventory
Most wills distribute personal property in broad terms, such as designating jewelry to one person and household goods to another. To ensure nothing important gets overlooked, it’s also helpful to have an inventory of personal items available.
“It helps with personal effects and alleviates a lot of stress,” Anderson says. That may be especially true if you have items stored elsewhere, such as a storage unit, that your family might not know about.
In some states, a personal property memorandum can be used to indicate who should get specific items. “This is a great way for people to be able to say who is to have various small items, such as fishing poles, special bits of jewelry, special quilts, dishes, and the like,” Marsh says.
“Only tangible personal property – things you can pick up and hold (excluding money) – can be included on one of these memorandums,” Marsh adds. What’s more, the memorandum is valid only if it’s mentioned in the will.
6. Power of Attorney
A power of attorney form isn’t something that will be used by heirs, but it is an important document for your loved ones to have should you become incapacitated because of an illness or accident. The power of attorney will let a designated person make decisions on your behalf.
Some people designate one person to be a power of attorney for both financial and health care decisions while others prefer to split these responsibilities between two people. Depending on state law, medical decisions may be made by a medical power of attorney or a health care designee once someone has been deemed incapacitated by medical professionals.
“A living will is a backup for a medical power of attorney,” Marsh says. “The provisions of a living will specify at what point life support should be terminated.”
7. Life Insurance Policies
People may be missing out on significant life insurance benefits because they don’t realize a family member had a policy – or, it has been lost or misplaced. Make sure your loved ones get the money they are owed by keeping records of your life insurance plans and storing them with your financial papers.
8. Real Estate Records
Deeds, assessments, mortgage statements and tax information for real estate should also be included with the documents you’ve prepared for your heirs. Unless you own a significant number of rental units, your heirs will likely already know what property you own, but gathering the records for them in advance will make their lives a little easier.
Also, consider putting deeds for property you’d like heirs to split in a trust. Some people may put a child on a deed with the idea that the property will be sold and proceeds split with siblings. However, if that child wants to keep the property for themselves, “It’s very hard to go to court and force the sale of the property,” Simasko says.
9. Tax Returns
If you have your taxes done professionally, record the name of your certified public accountant or tax preparer. That person will be able to guide your family through filing final tax returns for your estate. If you file your own returns, don’t forget to print a copy for your files and record any login information for online tax preparation services.
10. Login Information for Online Accounts
Create a record of your usernames and passwords for financial accounts, email and social media platforms and store it in a location where heirs can access the information.
If you use a password manager, such as LastPass, you may be able to designate a person for emergency access to your account. Include instructions on how to access this feature with your other documents.
11. Digital Estate Plan
Given that we spend much of our lives online and on the computer, it’s become increasingly important to have digital estate plans in addition to a traditional will. Some states recognize these plans as legally binding, but even if they’re not, they can still be a helpful tool for your friends and family.
A digital estate plan outlines what will happen to your digital assets. This includes social media accounts, websites, digital photos, intellectual property, and other files and documents. Within your plan, you can even designate a digital executor and list those you’ve named as legacy contacts on specific platforms such as Facebook.
12. Final Wishes
If you’ve made prearrangements for your funeral or cremation, keep that information with your will and other end-of-life documents. If you haven’t made prearrangements but have specific wishes, list those as well.
“Burial or memorial instructions seem to be one of the most important documents to avoid family fights after a person dies,” Marsh says. “It’s actually a great relief to the family to know what the person would have wanted.”
It can be hard to distill a lifetime of accomplishments and dreams into a stack of papers for your heirs. Getting these documents together, however, will be a final parting gift for the ones you love.
Renee E. Nesbit, Attorney at Law
1415 Panther Lane, Suite 434
Naples FL 34109
LEGAL DISCLAIMER:
The information contained on this website is presented for informational and marketing purposes only and is not to be understood as legal advice. You should consult an attorney for advice respecting your individual needs. Renee E. Nesbit, Attorney at Law looks forward to speaking with you about your particular needs. Please note, however, that the mere act of contacting our firm does not create an attorney-client relationship. As a result, you should never send any confidential information to our office until a Representation Agreement has been signed by both you and Renee E. Nesbit, Attorney at Law.