5 financial arrangements you need to make
There are a number of financial issues that arise when someone dies. See five financial arrangements to make as soon as possible before the time comes.
Our articles, research studies, tools and reviews maintain strict editorial integrity; however, we may be compensated when you click on or are approved for offers from our partners.
You may think this is your last responsibility, but preparing your financial affairs for your death should take place long before you reach the age where you are likely to die. After all, when it comes to the responsibility of preparing for death, the only way to do it is to be early. If you leave it too late, there’s nothing you can do about it.
When a person dies, close friends and family members can be very upset. Suddenly there are several details that need to be decided in a compressed time frame – decisions about things like organ donation, who to notify, funeral plans and funeral arrangements, and these requests come up when people are not not in a good emotional state to make decisions.
To avoid increasing this burden, you should resolve some important financial issues before you die. In fact, it’s wise to deal with these issues while you’re still quite young. For one thing, know that it’s known if they’ll die unexpectedly, and even if the worst doesn’t happen, you may be in a better position to make rational decisions when death seems a long way off.
Here are five financial arrangements you should make for your death, even if you expect to live for many more years:
1. Your will
Writing down your instructions on how your assets should be distributed not only ensures that your wishes will be honored, but it also serves important functions for your survivors. Your will can direct your money and property where you think it’s most appropriate, and clear instructions can prevent disputes between loved ones about who is entitled to what.
Keep in mind that a will should be a living document. Creating one is such a chore that people tend to think of it as a one-time task that they can forget about when it’s done, but you have to take into account the changes that can happen over time.
Question of guardianship and trusts
For example, when your children are minors, ensuring their guardianship is a high priority. When they are young adults, guardianship is no longer an issue. However, you may want to have their inheritance distributed to them over time through a trust, rather than all at once.
The number of heirs may change
Also, the number of your heirs may change over time and your executor may predecease you. If possible, the will should be written in such a way as to allow for the possibility of such changes, but even then it is a good idea to review your will every ten years or so to ensure that it still matches. to your wishes and your situation.
2. Funeral Trust
A funeral trust makes sure there is money set aside for burial or cremation costs. This is especially important if your resources are dwindling to the point where you need to resort to Medicaid. You only have a small amount of money left to qualify for Medicaid, but the amount placed in a funeral trust is excluded from this eligibility requirement.
3. Life insurance
Oddly enough, life insurance can be more important when you’re young, even though you’re unlikely to die at this stage. One reason is that when you were young you didn’t have the chance to accumulate a lot of savings, so life insurance has to fill more of the void to take care of your dependents. Also, the younger your dependents are, the more financial assistance they will need before they are old enough to support themselves.
4. Power of attorney
It’s wise to give someone permission to make decisions on your behalf if you lose the ability to do so. Otherwise, your loved ones may have to go to court to be able to manage your affairs. This can lead to costly delays and may result in someone other than the person you intended getting this permission.
5. Tell key people about your finances
You should give your executor and primary beneficiary an overview of your financial situation, including an idea of the bank accounts and other assets you have. This will help them know what to expect and could save them valuable time researching which assets should be included in your estate.
6. Succession planning for the family business
If you own a business that you want your heirs to take over after you leave, this creates special planning challenges.
According to Steven Richards, executive director of the Center for Cooperative and Enterprise Development at Clemson University, the first step is to figure out who is best suited to run the business after you. “Decide who will be the successor of the company. All heirs are loved equally, but not all heirs are the best choice to run the business in the future.
This choice can be difficult, but it is crucial. Once made, the decision should be reflected in your legal documents and communicated to your family members, Richards says. “Hold a family meeting to discuss expectations for the results of this process. Often this is where an Estate/Business Planning Facilitator is needed to complete the process. »
Richards warns that business owners tend to put off making tough choices. “Owners tend not to want to have difficult discussions about the future of the business with their heirs, so they put off planning until it’s too late.”
Postponing succession planning does not benefit your heirs or your business. As with all of the steps in this article, these decisions need to be made early because you won’t be able to make them if you delay too long. Hopefully, you will have made these arrangements several years before they come into play.
More from MoneyRates.com:
How should I invest a funeral trust?
“Handicapped” by Wealth: The Dangers of Unprepared Heirs
How do I access funds for funeral arrangements?