Life is full of financial decisions, big and small. Here, we’ll provide a framework for how to approach those moments.
If you have children, own property, have investments, a retirement savings account, or personal possessions that mean something to you, then it probably behooves you to have a will.
We’ve outlined four considerations as you prepare to make a will.
First, a will. It’s a legal document that outlines how you want your property and possessions handled and distributed when you die.
With that you’ll want to name an executor of will, someone who can oversee and execute the plan you’ve laid out for your estate and possessions after your death.
“If you don’t have a will in place, each state has a set of rules for how your assets get distributed – and it’s rarely going to be 100% in accordance with what you want,” said Jill Schlesinger, CFP® and host of the Jill on Money podcast. “So, with a will it forces you to put this down on paper.”
It’s also a good idea to have a power of attorney document (there are different types) and a health care proxy.
A power of attorney is a document that assigns a trusted individual, or agent, to make decisions on your behalf. It’s up to you to grant what powers this person has, which can include the opening and closing of bank accounts, sale of securities, ability to give gifts, and to make payments for just about any service, bill or debt. A health care proxy is a type of power of attorney document in which you appoint a person to make medical decisions for you in the event you become incapacitated or if you’re in a mental state that doesn’t allow you to make your own decisions.
“That person is incredibly important and you should talk to them about what your wishes are,” Schlesinger said. “The health care proxies have become so detailed.”
Keep in mind that every state has different laws and requirements for properly executing wills and durable power of attorney documents.
You can make a will online, although many professionals, Schlesinger included, recommend hiring an attorney.
“For the vast majority of people – people who have children, people who have assets and businesses – they do need an attorney,” Schlesinger said.
Reason being is that an attorney should be intimately familiar with state death tax laws and state intestacy laws (in the event someone fails to leave behind a last will).
If you have children under the age of 18, you’ll need to name a legal guardian.
“This is where many people get tripped up,” Schlesinger said. “I never in my life have seen bigger knockdown, drag-out fights between couples than over this issue. The problem that stops people’s forward progress with estate planning is they can’t decide on a guardian - so they don’t do anything. What I would encourage people to do is, even if it’s not ideal, name someone.”
Two additional considerations when it comes to guardianship: think about the age and health of who you’d name as guardian; and make sure it’s someone who will raise your children in a way that’s consistent with your value structure.
“If it’s a money thing, you don’t have to leave your money with the person who’s raising your kids,” Schlesinger said. "You can have a third party manage the money on behalf of your kids.”
Said Schlesinger: “This is going to sound kind of morbid, but it’s a good idea to talk about it, regardless if you come from a religious or non-religious family. This is a hugely thorny issue.”
Schlesinger recommends a letter of instruction be left behind.
“To say how you want your remains handled affirmatively, on paper, is very helpful for the heirs,” Schlesinger said. "They may not be happy, but it tells them what should happen.”
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