Planning for the end of life also allows you to be in control and if done properly will make sure your wishes are followed and not those of well meaning relatives or friends or the government. Here are some ideas to help you keep control even though you are sans teeth, sans eyes, sans taste, sans everything. Always consult a lawyer and a financial expert as you build your estate plan.
Avoiding Probate
Probate assets are assets that people hold in their own
names at time of death. These assets pass on to heirs according to terms of a
will, subject to court supervision.
The probate process often entails delays and costs, but
some estate planning strategies can be used to mitigate those drawbacks by
passing assets to heirs outside of probate. These strategies include joint
ownership, beneficiary designations and transfer on death designations. (Trusts
can also be used for this purpose.)
Joint ownership. This refers to assets like bank accounts
jointly owned with another person. It is a common strategy for couples. The
joint ownership makes it far easier for the surviving spouse to make financial
decisions following the death of a loved one.
Unless spouses struggle with issues of trust, it usually
makes sense for the two to own assets like bank accounts, investment accounts
and houses on a joint basis, with the right of survivor-ship.
Beneficiary designations. Many financial accounts allow
the account owner to indicate (designate) the person or persons to whom to
transfer the asset upon the owner’s death. People can make such designations
for retirement accounts like 401(k)s and IRAs, and also for annuities and life
insurance policies.
When they specify a beneficiary, the assets will pass to
the beneficiary outside of probate. (Note that beneficiary designations take
precedence over any provisions in a will.) Many people name primary and
secondary beneficiaries, so that if the first beneficiary dies before the
owner, there is no question about who the new owner will be. Important: Retirees should review beneficiary
designations periodically—perhaps once a year— to be sure they are up-to-date
and that they continue to represent the account owner’s wishes.
The Health Care Proxy document is so important that experts
generally recommend that several people have copies on file, including:
• Family members
• The family attorney
• The primary care physician
• The hospitals most often used
Naming beneficiaries is usually a straightforward
process, but there are a few considerations to keep in mind.
For example, a common designation might be “my wife, if
she survives me, and if not, equally to my children.” A potential problem with
this is that grandchildren, if they exist, could be left out of the inheritance
if their parent predeceases their grandparent. Adding the legal term, per
stirpes, to the designation can overcome this problem. Per stirpes essentially
says that equal shares of the inheritance will pass to branches of the family.
If family members have special needs, it is wise to use
caution before naming them as beneficiaries. If they receive an inheritance, it
may cause them to lose government benefits. An attorney should be consulted
before designating beneficiaries in such cases.
Transfer on Death. For taxable accounts held at brokerage
firms, the owner of the assets may want to have the brokerage set up a transfer
on death (TOD) provision. Some bank accounts use TODs, too. A TOD acts like a
beneficiary designation, so the assets pass directly, outside of probate. This
is particularly helpful if the owner has no spouse or partner to name as joint
owner.
Many retirees want to consider their close friends and
charities in their estate planning. Wealthy individuals may set up charitable
trusts to fund specific causes.
Those with less wealth who want to make significant
contributions can invest in charitable funds offered through investment
companies. The account owner can take tax deductions at the time of donation,
and specify scheduled payouts from the fund.
Business ownership is another area for special
consideration. The owner will want to plan carefully who will run the business
upon the owner’s death. Specialized life insurance may need to be factored into
the transition, so that ownership will transfer with minimal disruption. The
assistance of a good attorney can be critical to the outcome.
Leaving Detailed Information
Standard estate planning documents do not cover all the
information that survivors will need after the death of a loved one. Wills are
usually quite general, covering disposition of major assets, but they typically
do not mention lesser assets or family treasures and keepsakes.
If controversy is likely to erupt over the disposition of
such lesser assets, the retiree may want to consider leaving a letter of
instruction with the executor.
Letters of instruction do not have the legal standing of
a will. They are, however, more flexible, and can be changed easily. Such
letters should provide needed clarification for families whose members get
along well with each other.
For contentious situations, it is wise to seek the
assistance of an attorney who can set up legal documents that spell things out.
Retirees should also leave a detailed inventory of all
bank accounts, investment accounts, retirement accounts, and insurance
policies. This is of utmost importance for couples where one member handles
most of the financial affairs.
Investment management is another important area. When one
member of a couple handles all the investments, the couple should consider
establishing an investment management plan. This plan would lay out how the
surviving spouse should handle the investments after the more-informed spouse
dies.
The investment plan should help the lesser-informed
spouse avoid becoming a target of unscrupulous individuals who pose as
investment professionals and then raid the couple’s accounts. It’s an excellent
idea to set up financial relationships and services while both spouses are
still alive, so that the surviving spouse has a trusted resource available when
the other spouse dies.
Finally, people should make arrangements for a trusted
person to have access to computer passwords. These may be necessary for
accessing accounts, closing down electronic billing services and more. It’s
wise to keep the passwords in a secure place, off the computer, at all times.
When setting up an estate plan, people also need to decide whom to inform about
the location of this important list.
As a rule, it is better to err on the side of leaving too
much information rather than not enough. In addition, those who will be
responsible for executing the estate plan should have the opportunity to read carefully
through everything that applies to them. It is important to deal with any
needed clarifications promptly so there will be no misunderstandings later on.
Families are often geographically dispersed. This can
complicate management of an estate following death. It may help to provide
family members with at least summary information about the estate plan. This
will enable everyone to act immediately, when death occurs, without having to
make a long trip to locate documents or find key financial advisors and
institutions.
Regular reviews, at least yearly, will help keep
the estate plan up-to-date. Following is a worksheet to use when conducting
those reviews as well as in organizing and communicating estate planning
information. Some experts also suggest creating a list of things that need to
be handled quickly after death—such as stopping health insurance premiums and
pension checks, and notifying the insurance company if a house will be empty
Here is a chart to start you on your journey
