Money is one of those topics we’re not encouraged to discuss openly. Death? That’s high up on the list, too.
But the inevitable is truly inevitable. And whether your departure is unexpected or comes at the end of a long illness, it can leave behind a considerable financial burden.
If you’ve cared for an aging parent or someone with a long-term illness, you know the kinds of expenses that accumulate. But if you’re young or in good health, you may not have thought about your own mortality. And if you die unexpectedly, someone will have to put together the puzzle you leave behind.
This to-do list is brief and doesn’t take into consideration each person’s individual circumstances, but if you haven’t done any end-of-life planning, it’s a good place to start. Not only will it help sort out the money stuff, but it’ll give you some peace of mind, too.
1. Do I Need a Will?
A will isn’t just a thing that people with money or assets make. Do you have a car? A job with a 401(k)? A dog? Then you probably need a will.
“Everyone needs a living will,” said Amy Pickard, whose firm, Good to Go, seeks to remove the stigma from end-of-life planning. “If you’re 18 and live away from home, you need the paperwork. It’s just leaving behind instructions.”
She works with clients and even hosts death-planning parties to get people thinking about their final wishes. Having a will drawn up can cost as little as $5 — yes, it’s really valid in many states — to about $2,500. Read our full guide on wills and estate planning to help reduce the stress of planning for the inevitable.
2. What Will Happen to My Bank Accounts?
If bills will still need to be paid in your absence, consider designating making a bank account payable on death to a beneficiary.
Pickard said it takes five minutes to go into your bank and ask to have someone added to your account as the payable on death beneficiary. You need to give their name and Social Security number. “It’s one thing that will take a lot of work and stress out of the death duties,” Pickard said.
Having a joint account with your spouse isn’t an easier solution, she warned. If you both die in an accident, a third party will still need to be able to access your accounts.
Gale Allison, an estate lawyer in Tulsa, Oklahoma, doesn’t advise people to designate a payable on death for their bank accounts unless they are sure they can keep up with the responsibility to keep that designation up to to date. Relationships may change over time, and when those changes settle, the paperwork needs to match the new reality.
3. Should I Have Life Insurance?
Even if you’re a young, healthy person with no dependents, life insurance can help keep your next of kin afloat while they settle your accounts.You might see infomercials for life insurance when you’re home sick and catching up on “The Price Is Right.” But while the people in the ads may look, erm… elderly, life insurance isn’t just for seniors.
Jesse Rozmarynowski, a licensed life and health insurance agent with Advantage Group in Madison, Wisconsin, offers some simple math to determine how much coverage you might want.
First, think about what it would cost to have the type of funeral you’d prefer. Then, consider your outstanding debts, from mortgages and car loans to private student loans and credit card debt. On top of that, add in your living expenses for a year — or longer, if you’d be leaving a spouse or child without your income. Add it all up, and you’ll have a good idea of how much coverage you’ll want.
If you’re on the younger side, Rozmarynowski recommends term life insurance because it can be considerably cheaper than whole life insurance, and it offers comparable coverage. With term life insurance, you pay a premium for a certain number of years, and you are covered in the event of your death within that term. Once it expires, you need to buy a new policy. Take out whole life insurance, and you’ll pay a premium each month for the rest of your life — the only expiration date to worry about is your own.
That’s just a basic rundown of life insurance options. We have more information about the different types of life insurance available.
Don’t write off employer-offered life insurance just because you don’t have kids or a spouse at home, Rozmarynowski said. “Those plans can be less expensive because they’re arranged for a group, and you may be able to skip any medical questions or health exams to be eligible for coverage.” Find out if your employer-offered coverage is portable, which means you can take that coverage with you if you change jobs.
At the very least, make sure there’s money set aside for immediate costs your loved ones will have to handle.
“Even if it’s $3,000, that should pretty much cover cremation and a burial,” Pickard said.
4. Does Someone Know Where My Important Documents Are Stored?
Whether it’s a three-ring binder on your bookshelf, a manila envelope on the top shelf of your closet, or what personal finance idol Dave Ramsey calls a Legacy Drawer, you need to set aside a place for your important documents and instructions.
Your funeral instructions, tax returns, your will and the dog’s vet records all need to be easy to find when you’re not there to show someone where your important documents are tucked away.
“It is imperative your next of kin know where you’ve chosen to store these important papers,” said Elizabeth Fournier of Cornerstone Funeral Services. “A safe deposit box is not a good place. These documents need to be accessed sooner than a trip to the bank.”
You can also leave instructions telling where to find these documents with a legal or financial professional you trust. The key is to tell at least two people you trust so they know where to go to find out what you want done and what will need to be taken care of, Rozmarynowski said. This helps ensure at least one of those people is available to help if the need arises.
5. Who Has Access to My Passwords?
“I don’t think we’re thinking about digital assets yet,” said Kevin Ruth, head of wealth planning and personal trust at Fidelity Investments. It’s not just a new area for estate planners to tackle — it’s new for lawmakers, too.
Ruth recommends keeping a hard copy list of your accounts and passwords, and keeping that list somewhere secure with your other emergency files. Then, if you have considerable digital assets, like music files, photos or ebooks that you’d like to pass on to someone, make sure you list that person in your legal documents.
6. Who Are My Beneficiaries?
Ruth recommends checking annually your beneficiary designations, those who get the funds from your accounts should you die.
“For younger people, company life insurance may be the biggest asset they may have, and their estate can be controlled by that beneficiary,” Ruth explained. “So make sure it’s going to the right people.”
7. Am I Ready to Talk About This (Out Loud)?!?!?!?
It’s really hard to talk about death, especially when it seems far off and hypothetical. But frank conversations now can make life easier later for the loved ones you leave behind.
Fournier urges people to think about their final wishes, even if they are healthy. And if you want a grand exit, you may want to do additional financial planning. With more than 25 years in the funeral industry, Fournier has learned that final wishes aren’t always reasonable.
“People say they want their ashes scattered off some volcano in Hawaii and they make their wishes known, but the family feels massive amounts of grief because they can’t afford to satisfy those wishes,” she said.
Talking about those wishes, no matter how awkward it feels now, can help you be realistic about what’s going to happen later. “It helps to give your family an out,” Fournier said.
Don’t expect to have a quick 20-minute chat with your sibling or cousin over Sunday dinner, but do expect this preparation process to take time and thought. By putting the financial pieces of the puzzle in place now, you’ll offer a clearer picture to those left behind if you depart unexpectedly.