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End-of-Life Financial Planning Checklist

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Benjamin Franklin once said that nothing was certain in this world except death and taxes. Even though it may be unpleasant, preparing for both of these events is important to your overall financial health. When it comes to making decisions about how you want your finances to be handled after you’re gone, you can’t afford to put it off. If you haven’t put much thought into end-of-life planning, here are some steps you may want to take to ensure that your family is protected. You can also work with a financial advisor who can help you think through all the aspects of an estate plan. 

1. Make a Will

A last will and testament is the most basic document you’ll want to include in your estate plan. Writing a will gives you the opportunity to specify how you want your assets to be distributed after your death. If you die without a will, you’re considered intestate for legal purposes and it’s left up to the probate court to divide up your property according to state inheritance laws.

You can also use a will to name a guardian for minor children or appoint someone to be the executor of your state. Again, if you don’t have a will the probate court will assume these responsibilities.

The process for making a will varies from state to state. Some states require a will to be in writing and be witnessed by one or more people while others may consider videotaped or oral wills to be valid. Even if you have a relatively small estate, writing a will is a smart move if you’re concerned about what will happen to your property after your death.

2. Consider a Living Trust

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When it comes to estate planning, a will alone can only do so much. In some cases, it may be necessary to set up a living trust. Unlike a will, a trust takes effect while you’re still alive and you can use it to manage your estate both before and after your death. Examples of the types of assets you can put in a trust include real estate, vehicles, stocks, bonds, antiques, artwork, jewelry and bank accounts.

There are several reasons why you may want to set up a trust in addition to writing a will. If you plan to leave a substantial part of your estate to charity, you can set up a charitable remainder trust to manage those assets. A special needs trust allows you to set aside certain assets for the care of someone with a mental or physical disability. If you have young children, you can set up a trust for their benefit with specific instructions as to how and when they’re able to access the money.

Depending on your situation, setting up a trust may yield some tax savings for your beneficiaries. Another advantage of a trust is that any assets that you transfer into it are exempt from the probate process, which can save you money on probate costs and keep the contents of your estate private. There are certain ongoing costs associated with establishing and maintaining a trust so you may want to run the numbers with a qualified estate planning attorney to make sure it’s the right fit.

3. Review Your Beneficiaries

Naming a beneficiary for certain types of accounts can ensure that your assets go to the right person when your time is up. If you have life insurance policies, annuities, college savings accounts, 401(k)s, IRAs, brokerage accounts or certificates of deposit you should take the time to double-check who is listed as your beneficiary. Keep in mind that if you have an account with a specified beneficiary, you can’t use a will or trust to leave the assets to someone else.

If you have joint bank accounts set up with your spouse, you should check with the bank to see if they’re set up to allow the right of survivorship. This means that if one of you dies, the money in the account passes directly to the other spouse without having to go through probate. In some states, the right of survivorship is automatic but in others, you may have to request a specific notation on the account. Having your accounts set up this way means you or your spouse won’t have to navigate a mountain of red tape to access your cash later on.

4. Evaluate Your Insurance

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Life insurance is designed to replace lost income if something should happen to you or your spouse. If you bought life insurance several years ago, you may want to review your policy to make sure you’ve got enough coverage. How much life insurance you need really depends on your income, your spouse’s income, your assets and your liabilities.

In addition to life insurance, you may also want to consider buying long-term disability insurance and long-term care insurance. Long-term disability coverage is designed to replace lost income if you or your spouse is unable to work because of a disability. Long-term care insurance covers the cost of medical care if you or your spouse develops a serious chronic health condition. While you may not think these types of insurance are necessary right now, having the right policies in place can pay off big later on.

Planning for end-of-life situations is no picnic but it’s essential to protecting your finances and your peace of mind. The more prepared you are now, the better off you and your family will be when the inevitable occurs.

5. Consider Other Assets and Arrangements

You may want to consider how you would like to be buried or what you want your funeral to look like if that’s important to you. This can be part of your end-of-life checklist and you can specify with your will how you would like it to be handled. A few other things that you may want to consider include:

  • Digital Assets: Make sure you have all of your logins and passwords in a single place and specify in your will what happens to any valuable digital assets that you own.
  • Real Estate Assets: It’s important to protect your home and makes sure whatever the laws of your state specify about passing on homes to the next generation is taken care of. This might be your most valuable asset so you want to take care of it.
  • DNR: If you do not want to be resuscitated in certain circumstances then it’s important to fill out that paperwork with your doctors.
  • Living Arrangements: Specify how you would like your housing arrangement to go if you get ill.
  • Pet Trust: You may want to consider a pet trust if you’re leaving an animal behind.
  • Power of Attorney: You may need to pick a power of attorney in case you can’t make financial decisions for yourself.

The Bottom Line

There are certain steps you should take to ensure your estate plan is in order and everything will go as you plan after your death. This will not only make it easier for your loved ones but you can also protect your assets better by preparing in advance. It’s important to make sure you consider all aspects of your estate plan so that nothing slips through the cracks or it could cost your heirs time, money or both.

Tax Planning Tips

  • A financial advisor can help you optimize a tax strategy to benefit your investment and retirement goals. If you don’t have a financial advisor, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goalsget started now.
  • If you don’t know whether you’re better off with the standard deduction versus itemized, you might want to read up on it and do some math. Educating yourself before the tax return deadline could help you save a significant amount of money.
  • Our annual roundup of the best tax filing software can help you get through this tax season as painlessly as possible.

Photo credits: ©iStock.com/wutwhanfoto, ©iStock.com/artisteer, ©iStock.com/Peopleimages

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