In life, Prince influenced popular music for more than a generation. His death may have a different kind of impact, because his sister says the pop virtuoso died without a will — offering a high-profile reminder about the importance of estate planning.
While dying often involves saying goodbye to loved ones, letting go of long-held grudges or reflecting on a life lived, it also comes with a lot of paperwork to make sure that your final requests are honored.
This can help distraught family members make medical decisions on your behalf during your last days or divvy up your earthly belongings after you’re gone in a manner you would see fit.
“You spend your whole life planning for the future, but when you plan for the end, it’s not that much fun,” says Ted Sarenski, CPA and chairman of the elder planning task force at the American Institute of Certified Public Accountants. “No one has escaped death yet.”
Bankrate’s quiz will help you determine whether you have the right legal documents in place in case the end is closer than you think.
Numerous public opinion surveys have indicated that -- like Prince -- at least half of Americans don't have wills.
A will is a legal document that details how you want your property distributed and who will oversee that distribution, along with who should care for any minor children. Without a will, the state will oversee the distribution of assets, typically half to a spouse and the other half to any children. Having a will can help keep family members from bickering when your estate is split up.
Once you write a will, revisit it every few years in case your family changes due to divorce, births of additional children or grandchildren, deaths or other circumstances, says Carolyn McClanahan, founder of Life Planning Partners, based in Jacksonville, Florida.
"What if your grown-up daughter is a drug abuser but is still designated as the executor of your will after you pass?" she asks.
Here's a cautionary tale about beneficiaries: The U.S. Supreme Court ruled in 2009 in Kennedy v. Plan Administrator for DuPont Savings and Retirement that a woman was entitled to her deceased ex-husband's retirement benefits because she was still named the sole beneficiary at the time of his death, even though their divorce decree years before had terminated her rights to those benefits.
Even your will doesn't trump the beneficiary designation forms, McClanahan says. "This is a big mistake that people make. They think everything will pass through their will."
What needs a beneficiary designation form? Typically life insurance policies, annuities, traditional and Roth IRAs, 401(k)s and other workplace retirement plans as well as pensions. If you want to change the beneficiary, you will need to get a new beneficiary designation form from the plan or policy administrator to make the change official.
Even if your will designates that your children get your assets, if they are minor children the court will not allow them to take control of those assets, says McClanahan. Instead, the court will appoint a guardian to claim the assets.
McClanahan recommends that you create a trust within the will and name the trustee, who will manage the trust until control is transferred to the child.
Specify the trust by writing "the trust under my last will and testament for the beneficiary of" and give the child's name, she says. "This is where the details matter," she says.
Although 72% of Americans have given at least some thought about their wishes for medical treatment at the end of their lives, only slightly more than a third -- 35% -- actually have put them in writing, according to a 2013 Pew Research survey.
Also called an advanced health directive, a living will establishes your wishes for medical care and treatment to keep you alive in the event you are incapacitated. This is especially comforting for family members, who must make these decisions for you while also coping with your condition.
"We don't want people to have to make very important medical decisions in the middle of a crisis," says Holly Deni, director of the ElderLife division, which focuses on retirement and elder care planning, at Locker Financial Services in Little Falls, New Jersey. "Even if you're incapacitated and not involved, you don't want your family running around and trying to guess what you want without documents in place."
Also called a durable power of attorney for health care or medical power of attorney, a health care proxy is a document that designates another person to make health care decisions for you if you can't do it yourself.
"You don't want to deal with the consequences of not doing this. (Otherwise) you're giving up all your power to a judge who knows nothing about you," Deni says. "Things will be dealt with in a very clinical and bloodless way."
Make sure to keep open discussions with your proxy in case your health care desires change as you grow older. If you are battling a possibly incapacitating disease or injury, have your health care proxy attend your appointments with your physicians so the doctors can get to know your proxy and see that you have a good relationship with that person, Deni says.
A power of attorney is a legal document that gives another person the authority to act on your behalf in legal or financial matters. The scope of the power of attorney can be narrowed if needed.
"Anyone who is over 21 needs a power of attorney," Deni says. "We don't know what the world has in store for us. Sometimes bad things can happen."
If you don't arrange for a power of attorney and you're in the hospital unable to conduct your affairs, then no bills get paid, including the rent, mortgage, credit card bills and car payments.
"Your financial life comes to a standstill until the creditors come to your door," says Deni, who faced a similar situation when her aunt was incapacitated with no power of attorney. The court eventually will appoint a guardian to deal with financial affairs, a process that can cost $10,000 or more, depending on whether it's contested, Deni says.
Even if you have a power of attorney, that person won't know where to start if your personal finances are scattered. CPA Sarenski recommends putting together a financial notebook that has a list of all your personal finance accounts and information at banks, brokerage firms, insurance companies, mortgage lenders or servicers, credit card companies, landlords and other lenders.
Don't forget smaller accounts like PayPal or eBay. Include any usernames and passwords to log on to online accounts, along with copies of past tax returns. Make sure to list any financial professionals you use, such as estate attorneys or tax preparers.
The notebook can be physical or digital, either stored on a thumb drive or in the cloud, Sarenski says. Just make sure the person with your power of attorney can get to it.
"We ask people where they found their loved one's information and they say we found this in the kitchen drawer and then something else in the bedroom," Sarenski says. "A financial notebook keeps it all in one place."