We are all going to die. There are some issues with both living too long, and dying too soon. Living too long could create a situation where you out live your money. Dying too soon could leave your loved ones without enough money to provide for their basic needs. Planning early will give you more options as all of your options get more expensive as you age.
The problem is not knowing we need a plan, the problem is knowing where to start. There are a few advisers you are going to want to meet with as you go through the planning process. You will want to meet with your attorney, accountant, insurance adviser, and financial adviser.
It is difficult to think about your mortality, however planning is not for you, it is for the ones you leave behind. Here are 6 areas to focus on when you go through the process of planning your inevitable passing.
Have the Difficult Conversations with Your Loved Ones
You might still have many years of a fit and healthy body and mind. Before you know it these things can change quickly. Without a plan paying for medical care associated with physical or mental incapacity can be devastating to your loved ones. Adding financial complication to their pain can add unnecessary stress.
It is important to create a plan if these unfortunate circumstances arise. Getting all of your personal and financial documents in one spot will be helpful for your partner or dependents to know how to take care of your needs.
Assigning roles with your partner and/or dependents will help them understand their job during incapacity or death. It will also guide them when they need to work with an adviser for further help. If a loved one feels they have to do it alone, they can be overwhelmed very quickly.
Update or Create your Will
Without a will you have no control over your estate. After death the state will be in charge of deciding how your property is distributed. In community property states property will be given to your spouse. You will not have control over any aspect of the transfer.
By having a will, you will be able to ensure any property you have goes to the intended person or charities.
It is very important to craft a will if you have dependent children. Planning for care after your death is important, because if both dependents pass at the same time the state decides who takes care of your children. You will want to meet with an attorney, or other service like Legal Shield to start this process.
Plan your Funeral
Making prior funeral arrangements will ensure your final wishes are carried out. Dying is expensive, and it is important to make sure you have planned funds, insurance, or prepaid for your funeral expenses. If you do not plan your funeral in advance you are leaving the burden on a family member.
Here are a few things to consider:
- Choose Burial or Cremation
- Select Casket or Cremation container
- Choose location/type of service
- Choose viewing info (Open/Closed Casket)
- Decide hymns, music, or speakers
- Choose Funeral Home
Plan your Wealth Transfer
Dying is expensive. If you do no estate planning before you pass, you can expect for 40% or more of your estate to go to the government for taxes. This figure is based on all of your personal property owned. This might mean your loved ones need to liquidate your personal property to pay for the tax bill.
There are a lot of ways to transfer your wealth and property to loved ones.
- Give gifts starting at least 7 years prior to your death
- Purchase life insurance to transfer inheritance tax free to the recipient (can be used to pay taxes and not have to sell property)
- Transfer business ownership prior to passing
- Leave Cash to Charities
Planning early will help your loved ones keep what you worked so hard to obtain.
Plan your insurance
Insurance was created to protect the insured against catastrophic loss. If you want to reduce your risk or use insurance products to transfer wealth, you will need to plan early. Insurance premiums increase as we age, and planning early can save you a lot of money. What type of insurance do you need to plan for?
- Life Insurance – By putting life insurance in place you can create an instant estate to pay for basic expenses, dependent care, schooling, tax free wealth transfer, retirement for a spouse, funeral expenses, etc.
- Health Insurance – having a good health insurance plan in place will ensure you do not have to dip into your retirement savings to pay for a catastrophic medical event.
- Long Term Care Insurance – Can pay for a care facility if you become incapacitated and need to be cared for in a medical facility.
- Annuities – Diversifying a portion of your retirement into annuities can ensure your basic living expenses are taken care of, in case you live too long. Ask your insurance advisor how these products can protect you against out living your money.