Key Takeaways
- A good ending to someone’s life leaves minimal stress and confusion for others.
- Estate planning is always easier with fewer possessions and financial accounts.
- A net worth statement describes the assets and debts of a deceased or incapacitated person.
- A digital assets inventory should be prepared to allow others access to online accounts.
- A letter of last instruction is a “to-do” list for family members and personal representatives.
Estate planning is the process of determining the distribution of assets upon your death and managing your finances and health care decisions if you are incapacitated. The goal? Giving what you have to whom you want, when you want, at the lowest possible cost (e.g., taxes and administrative fees).
A good estate plan includes legal documents (e.g., will, trust, living will, and durable power of attorney) that are properly drafted, regularly reviewed and, if necessary, updated. In addition, assets that are properly titled, no conflicts between asset titles and bequests made in a will, and communication of end-of-life wishes with loved ones and personal representatives (e.g., executor, trustee, health care proxy).
This article discusses 12 strategies to simplify estate planning beyond preparation of legal documents.
What is a “Good Ending” to a Life?
There are several key components of a “good ending”:
- Dying in peace, ideally without a prolonged period of decline
- “Burying hatchets” with estranged family members and friends
- Having advance directives (durable power of attorney and living will)
- Sharing important data with trusted loved ones and personal representatives
- Little or no confusion after you die (funeral, obituary, location of financial documents)
Planning strategies, like those listed below, provide peace of mind, can help family members at a time of grief and stress, and can assist personal representatives of an estate and even first responders.
1: Simplification and Downsizing
Many people have lots of “stuff” and “asset sprawl” (think four growth funds and three IRAs). Estate planning will always be easier with fewer items to manage—as is everyday financial management (fewer investment account emails and statements). Consolidating assets also makes it easier to rebalance a portfolio and calculate required minimum distributions (RMDs). Specific action steps include:
- Selling, gifting, or donating unneeded possessions
- Consolidating similar financial accounts (e.g., IRAs)
- Consolidating investments with a single financial institution
- Limiting new possessions and financial assets
2: Net Worth Calculation
A net worth statement (assets – debts) provides a “snapshot” of someone’s finances for personal use and use by personal representatives to settle an estate. For example, if assets total $700,000 and debts total $200,000, including a mortgage, net worth is $500,000.
Ideally, net worth should be updated annually with a printed copy of the calculation placed with other key financial documents. It should also be shared with trusted loved ones and personal representatives to easily identify assets and debts. Assets without joint ownership with right of survivorship, POD (payable on death) and TOD (transfer on death) designations, or beneficiary designations are subject to probate.
3: Emergency Contact Information
Emergency contact cards such as the this downloadable form from the Red Cross should be kept in a wallet, cell phone pocket, and/or refrigerator. They are invaluable in the event of an accident or illness when trusted contacts need to be notified.
A more comprehensive tool is the File of Life, which also includes personal health information such as the name and phone number of your doctor and the dosage and frequency of medications. They are typically available for free through local health departments or law enforcement.
4: Financial “Notebook”
This does not have to be a literal notebook but simply a “one-stop” place for financial data, which could also be stored in a plastic tote or on a computer, external hard drive, or cloud server. Include the following:
- Contact information for financial advisors and attorney
- Information about insurance policies, financial accounts, and retirement savings accounts
- Information about real estate, including mortgage papers and the deed to your home
- Information about vehicles including registration and service records
- Information about outstanding debts
- The location of important papers (e.g., home filing system, fireproof box, safe deposit box)
5: Digital Assets Inventory
Digital assets are personal information stored electronically on a computer or online that requires a username, password, and often two-factor authentication such as a texted code. Examples include electronic device access, email accounts, financial accounts, social media accounts, and online accounts with retailers, organizations, and publications.
Digital assets can be difficult or impossible to retrieve if someone is incapacitated or passes away. Take the time to use a password manager program or prepare a digital assets inventory and share access details with trusted parties.
6: Beneficiary and Personal Representative List
It’s important to keep beneficiary designations up to date and to name contingent beneficiaries in case the primary beneficiary predeceases you or disclaims assets. This Beneficiary and Personal Representative Designations Worksheet can help you list all your designated beneficiaries and personal representatives for your estate in one document. Information to complete this form can be gleaned from legal documents (e.g., a will), life insurance policies, and retirement savings accounts.
7: Untitled Property Planning
Untitled property is just that: tangible possessions that do not have a title (like a car), a beneficiary designation (like an IRA), or another way to pass on to others (e.g., joint tenancy with right of survivorship). In other words, your “stuff.” Decide what is “fair” and consider the interests of family and friends.
Then make a written list of who gets what and share it with family and/or your personal representative(s). Also consider lifetime gifting. Some families hold “prize” drawings or use consensus and trade-offs to determine intra-family property gifting.
8: Letter of Last Instruction
This is basically a “to do” list for family and personal representatives. It is not legally binding but provides valuable information. There are many online templates to get started. Items to list in a letter of last instruction include:
- Names of people to be notified about your death
- Others to be notified (e.g., Social Security, pension, credit cards, final employer)
- Funeral and/or memorial service preferences
- Information about prepaid funeral services
- Information about automated bill payments
- Obituary content (e.g., tribute bequests) and distribution list
- Disposition of untitled property
9: Personally Authored Obituary
Two advantages of writing your own obituary are: 1. It is one less thing for others to do at a time of grief and stress and 2. You get to choose exactly what is said about you. You may want to prepare two obituaries: a short version for newspapers and a longer obituary for online tribute websites. The later can be saved digitally and shared widely. Like letters of last instruction, there are various online obituary templates that can be used as a starting point
10: Pre-Planned and Pre-Paid Funeral
Some people choose to pay a funeral home now for anticipated future services. Again, it is one less thing for others to do at a time of grief and stress, and you get to choose the details (e.g., burial vs. cremation). Be sure to read the fine print in the contract carefully. For example, will services be provided if you do not die where you made the arrangements? A “plan B” to pre-plan and pre-pay for a funeral is to write a letter of instruction with funeral/memorial details and use a designated POD account for final expenses.
11: Lifetime Gifts and Philanthropy
You can’t take it with you! With this in mind, some people make lifetime gifts of property and financial assets to family members and/or charities to simplify their estate plans. Benefits include:
- Decreases taxable estate for estate taxes and accumulated assets for income taxes
- Reduces future probate administration costs
- Downsizes and simplifies (personal possessions and financial assets)
- Can watch gift recipients use/enjoy their gifts
- Transfers future growth of assets to heirs
12: Communication With Surrogates and Heirs
Conversations with family and personal representatives are important to let them know what you want (e.g., no extraordinary care and a desire to be cremated) and to make sure they know the location of key documents and information. A useful way to discuss “hard” topics is “I messages” that express personal feelings and needs. An example is below.
“I am worried when I think about the end of my life because it scares me. What I need to know is that you will carry out my wishes not to have a feeding tube or artificial life support.”
Final Thoughts
A “bad ending” includes financial infidelity (i.e., hiding assets or lying about finances), no prepared financial statements, no funeral plans or funding, no digital assets inventory, and no written or oral communication about final wishes. Don’t have a bad ending to your life! Consider incorporating the strategies discussed in this article for emotional peace of mind and a minimal burden on others.
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