|Preparing your finances for death
- Create a road map.
I suggest that the very first file folder, placed in front
of the others, should be called "road map" and contain
a summary of all your property and financial holdings. On it, list
your assets, account numbers where applicable and approximate fair
market values as of a particular date. It should list real estate
holdings, business interests, current accounts (bank and brokerage),
cars owned, cash or face values of life insurance policies, retirement
benefits, and any personal property of significant value. The road
map should also list your liabilities as of a particular date.
Phone numbers of the institutions that you do business
with would be a useful addition to the road map file. If you deal
with an accountant, financial planner or attorney who is familiar
with your financial situation, be sure to include his or her phone
number and address. If additional papers pertaining to your finances
exist outside the security file, indicate their whereabouts on
the road map. When you've assembled everything, let your family
members know that your road map exists and where you keep it.
Oh -- and if you have any specific preferences about your funeral
or burial, you might want to include a file folder called "Last
wishes for my funeral." Maybe you don't want sonatas by Beethoven
and Bach to be piped in during the wake, but would rather have Steppenwolf's
"Magic Carpet Ride" or Led Zeppelin's "Stairway to
Heaven" playing. This is a good opportunity to let your wishes
The pieces of an estate plan
A road map gives your progeny some direction of how much you owe
and own, but your job isn't finished yet. Have you created or updated
your will? If you have not yet created one, you are leaving the
vitally important task of asset distribution to the state in which
you live. It may turn out differently from what you have in mind.
If you have a will but haven't updated it in years, it may be time
to do so -- especially if your circumstances have changed.
Some 50 percent to 70 percent of Americans die without
a will, according to Stephen Maple, author of "The Complete
Idiot's Guide to Wills & Estates," which is an excellent
resource on the subject. Do-it-yourself
will kits may do the job if your estate plan is relatively simple,
but for more complicated family situations, hire an estate planning
attorney. On its Web site, the AARP
can help you find a lawyer that will do the job for reasonable fees.
Don't forget that the beneficiary information that
you designate on certain financial documents supersede whatever
you might state in your will. So be sure to update the beneficiary
information for your life insurance policies, annuities, 401(k)
plans, IRAs and other accounts so that your assets go to the right
folks. You don't want your retirement money going to your ex, right?
In addition to creating a will, you might want to
set up a trust for one of any number of reasons. Maybe you want
to include a pour-over provision in your will to specify that some
of your assets be placed in a trust for your spendthrift son at
the time of your death. That way they could be disbursed, say, three
times over a period of 15 years so that he doesn't squander his
inheritance all at once.
Or maybe you want to set up a trust with income going
to your current spouse and the remainder going to the children from
your first marriage -- to ensure that it doesn't end up in the hands
of your spouse's next husband or wife. Or maybe you have substantial
assets and want to make sure that you and your spouse avail yourselves
of the estate-tax exemption to which you are both entitled by creating
a bypass trust.