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photo credit: Theodore Scott
You know it’s inevitable. You know it will happen some day, and you hope it will be when you are old and gray. But you really never know when it will be your time. All you have to do is take a look on CNN, or the newspaper and you’re bound to read a story of someone’s untimely death.
Most people think of estate planning as something for people with money, and wills as something only people with kids need. That’s far from the truth, though. Everyone needs to plan for their death.
Insurance
I recommend term life insurance because it is affordable, and achievable for many families. If you or your spouse has a group life insurance policy remember that when/if you leave or are fired that policy will end. It is best to take any free coverage through your job, and then compare costs with other insurers. I recommend USAA if you can use them, or Accuquote since they offer multiple quotes and ratings on various insurance companies.
Have Children: If you have children your #1 priority should be to purchase a term life insurance policy that will replace your income for 5-10 years (depending on the ages of your children). You want to purchase a term that goes to the time your youngest child (or future children) will be in college. You need less insurance after that point, and should adjust your policy accordingly. If like me you have no/little income, consider a life insurance policy that will cover all debts in your name, college expenses (some or all if you plan to help your children pay for school), and possibly childcare costs.
Children in the Future: If you plan to have children in the future consider purchasing life insurance sooner rather than later. The younger you are, the easier and less expensive it is to purchase.
No Dependents: Even if you don’t have dependents you may want to purchase a term life insurance policy. At the very least you want about $6,000 for burial and funeral costs. (this is the average I found for 2008) If you have a spouse or partner and 2 incomes you want to consider leaving them with enough to pay off any existing debt (credit cards in both your names, or your home loan for example). You may also want to consider naming a friend, family member, or a charity on your policy.
After death costs
While it may seem morbid, it is a good idea to share with loved ones your plans for your remains. My plans are included in my will. If possible I want my remains to be used for organ/tissue donation. I also prefer to be cremated to cut back on the expenses associated with burial.
Things you want to consider:
- Do you want to be an organ/tissue donor? You can specify this on your driver’s license, but it also helps to have it in writing elsewhere.
- Burial or cremation? If you are religious, you may have strict practices you want followed. It’s best to outline these on paper. At the very least you spouse or executor can then just hand a funeral home your wishes on paper.
- Where do you want your remains to be kept? You might want your ashes spread over a lake you frequent, or kept on the fireplace mantle. You might want to be buried in your hometown, or maybe in a family graveyard.
- Do you want people to celebrate your life or to hold a somber funeral? Some people may want an Irish wake, a party, or a gathering of friends and family.
- Who will handle the decision making? Your spouse may be too emotional, you may have paid for and outlined a plan already, or you may want a friend or family member in charge of making decisions.
- How will your family and friends pay for your after death expenses? Are they paid for in advance, paid by insurance, or do you have a fund set aside for those costs?
Wills, Testaments, and Trusts
Creating a will allows you to name who you want to handle your estate after your death, and allows you to be as specific as you want to be. Our will is somewhat vague about certain things on purpose. We figure that our assets, debts, and property will change over time, so we will include a list of assets, accounts, and belongings and who gets what. I plan to update this yearly.
With children, you also need to consider who would be a suitable guardian. Keep in mind you want to provide for them in case you are no longer living, so make sure you have enough insurance to cover the cost of raising your children, and any expenses their guardians would take on.
A will should be updated anytime you have a major life change such as divorce, new children in the family, or death of a named executor or guardian. You may have wording included to avoid having to change your will for some of these events, but be sure to check if you have experience one of these changes.
Some questions you may want to ask when you are preparing a will include:
- Who will act as an executor? You will also need a backup and maybe even a 3rd, just in case.
- Who will act as guardian or caretaker of your children, and/or pets?
- What are your main assets?
- How would you allocate your estate? Do you want to leave off family members? What happens if no one survives you?
These are just a few questions, there are many others. A good estate attorney will send you a list of questions to fill out before you meet. You may also find more questions from my attorney here.*
Living Wills and Advanced Directives
These documents deal with the end of your life, and who has control over your assets, dependents, and decision making should you be incapacitated. They cover what you would want to happen in the event of a terminal illness or irreversible coma, and who can make medical decisions, property decisions, and other choices if you are incapacitated. An example would be if you suffered severe head trauma and were in a short-term coma. You don’t want your spouse, family or friends to have to worry about what your wishes are, it will all be outlined on paper.
Closing Thoughts
While it is important that you do these things, remember once you are done you won’t have to think about it for many years to come. This is one of those difficult things to think about but once you do, you realize it is somewhat freeing. I know now that our kids will be well taken care of if we’re gone, and that no one will have to scramble to figure things out.
It is also VITAL that you discuss the same issues with any close living relative (especially parents!), spouse or partner (or serious girlfriend/boyfriend), and even close friends. You may feel uncomfortable talking about it now, but you’ll be relieved if you ever have to use what you learned.
Anything I missed? I’ve never experienced a close family member, friend, or parent passing away, so if you’ve been through it and have advice I’d love to know what you struggled with.
Kelly
*Our lawyer’s website can be found here. We found extremely professional, helpful, and knowledgeable. I included links to his site based on my opinions, and as am not profiting from it.
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