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Estate planning: things to do before you die

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Estate planning is an important thing to do as you get older. It helps your family members organize and keep track of your financial accounts and personal property so they can distribute your assets according to your final wishes after you pass away. In this article, we’ll explain what estate planning is and what information should be included in your estate plan.

What is estate planning

Estate planning is the process of deciding who will receive your assets after you pass away. Most people create an estate plan when they reach retirement, but it’s never too early to make one. Not only does estate planning give you peace of mind, but it also makes it much easier for your family members to carry out your final wishes at the time of your death.

Although an estate plan is similar to a will, they are two different things. A will is essentially a set of instructions for how you want your property to be handled after your death. An estate plan should include a copy of your will, but it also includes instruction for handling your finances, your outstanding debts, your life insurance policy and your health.

Estate planning checklist

Estate planning is a multi-step process that includes preparing various documents, among other things. To make sure you don’t miss any crucial steps, we created a checklist of all the things you should do while making your estate plan.

Create an inventory of personal items

First things first, make a comprehensive inventory of all the personal belongings you own. This should include things like your vehicles, furniture, antiques, collectibles, valuables, electronics and so on. If you own multiple homes, make sure to account for all the belongings in each location. Keep in mind that this list will probably be extremely long—that’s ok. You don’t have to account for every single small thing – but the more detailed, the better.

Put a “Transfer on Death” designation on your bank accounts

When you die, the money sitting in your bank accounts doesn’t automatically get passed down to your next of kin. To claim the money, your family members have to go through probate, which involves a court hearing and expensive legal fees. To avoid that, you can assign a Transfer on Death (TOD) designation on your bank accounts, which allows the bank to route your money to a beneficiary directly.

Write down your retirement accounts

If you have a 401K, IRA, annuity or other type of retirement plan, write down the account information so it’s easily accessible by your family members when you pass away. You should also contact the provider and make sure the beneficiary listed on your plan is still correct. For example, if you were divorced, your ex-spouse might still be listed as the beneficiary. For peace of mind, it’s a good idea to make sure everything is accurate when you’re estate planning.

List your unpaid debts

When you pass away, your family members become responsible for your unpaid debts, whether it’s a mortgage, car payments or outstanding medical bills. Make a list of all the unpaid debts you have, the amount of money you owe and who you owe the money to. Don’t forget to list your credit cards, including retail store cards. If you die before you’ve paid off your mortgage, for example, your family members can contact the lender and notify them so you don’t get penalized for missed payments. 

Review your life insurance policy

If you have a life insurance policy, the policy documents should be included in your estate plan. When you pass away, your beneficiaries can refer to the estate plan to get important information about your policy, like how much your death benefit is worth, whether you’ve named a funeral home as the beneficiary and who to contact in order to collect the money. While you’re creating the estate plan, it’s a good idea to contact your insurance company to make sure your beneficiaries are listed correctly. Remember that you can have multiple beneficiaries for a life insurance policy. 

Create a will

The next step is to create a will if you don’t already have one. A will is a legal document that includes instructions for how you want your physical assets and personal property to be distributed after you die. There are two ways to draft a will—use an online software or hire a lawyer. Once your will is completed, signed and notarized, add it to your estate plan and keep a copy in a secure location. It’s a good idea to review your will every few years so it stays up-to-date.

Consolidate your accounts

If you have multiple bank accounts or multiple retirement accounts, consider consolidating them. It’s less work for you to keep them updated and it’s also easier for your family members when they need to access the funds. For instance, if you have a 401K, considering rolling the money into an existing IRA account that has a higher return on investment. You’ll maximize your money’s potential growth and simplify your portfolio simultaneously.

Choose an estate administrator

An estate administrator is someone who is responsible for executing your will after you die. This is often a spouse, child or other close family member. However, being an estate administrator is an important role and it should be someone who is mentally able to make difficult decisions. It might be too much to handle for a spouse or child while they’re mourning your death. Before you choose an estate administrator, think carefully about who would be good for the job and make sure they’re up for the task before you decide.

Choose a power of attorney

A power of attorney is someone who is legally allowed to make financial decisions on your behalf if you become unable to do so. This is common for older people who might not think as sharply as they once did. When you’re choosing a power of attorney, consider someone who has your best interests at heart and is someone who you trust. Like with an estate administrator, don’t just assume that your spouse or child is the best option. When you make the selection, you and your appointed power of attorney will need to visit a lawyer to sign the appropriate legal documents. 

Make copies of your estate plan

The last step is the easiest—make sure you have several copies of your estate plan, both digitally and in hard copy format. Distribute your estate plan to your spouse, children, estate administrator and power of attorney. If you work with a lawyer or financial planner, make sure they have a copy as well. Misplacing your estate plan will only make things harder for your loved ones when they need to reference the information. 

The takeaway

  • An estate plan details who will receive your personal and financial assets after you die.
  • It contains information about your will, your retirement accounts, your life insurance policy, your unpaid debts and more.
  • An estate plan should have an administrator who is responsible for executing your final wishes and distributing your assets appropriately.

Preparing for your own death can feel like a weird task, especially as you’re deciding how to distribute your assets. But after you pass away, your family members will be grieving and it’s extremely helpful to have a document outlining your final wishes. Having an estate plan also ensures that your final wishes are carried out exactly as you want them to be, which offers some peace of mind.

Elizabeth Rivelli

Elizabeth is an insurance writer for coverage.com, where she covers insurance providers and reviews policies to help consumers find comprehensive and affordable coverage for every area of their life. She has more than three years of writing experience for top online insurance and finance publications.

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