After my husband Tyler’s accident last year, one of my first thoughts was: We don’t have a will. We’re both young and healthy, so it had never risen to the top of our to-do list. As I contemplated how quickly things could have turned out differently, the questions started to pop up. Like, all of our joint-owned property would come to me, but what about the things my spouse owned separately? And, what if we were both killed in a car accident — then what would happen?
I realize these aren’t fun things to think about. But since the last thing any of us wants to do is leave the people we love legally or financially burdened by our passing, it’s important to consider what steps we can take today to get an estate plan in order. Here are a few estate planning documents everyone should have:
1. A Valid Will: Don’t have a will? You’re not alone. 60% of American adults don’t either. That shouldn’t be an excuse to not get this task completed. If you die without a will, you are leaving the dividing of your assets, and potentially the guardianship of your children, in the hands of your state. In most cases, the property is divided among your “heirs,” which includes your surviving spouse, parents, siblings, and distant relatives. Curious about what happens if you die without a will? Check out this article.
Tip: Most people know that a will is important, but they get stuck on taking action because they assume the process is costly and time consuming. When it comes to creating a will, you have two options: talk to a local estate planning attorney or create one yourself using online resources. While talking to an attorney will probably be more costly, you’re more likely to get an accurate will that’s customized to your situation. The good news? Your employer may offer free or reduced consultations with a lawyer as part of your benefits package.
2. Life Insurance: If you passed away unexpectedly, what financial burden would you leave on your loved ones? Federal student loans are discharged upon your death, but private ones generally are not. Do you have a mortgage that your partner will continue to pay for? What about expenses — present and future — for your children? Use this NerdWallet article to see how much life insurance you may need.
Tip: The easiest way to get started with life insurance is to check and see what your employer offers. Many employers offer term life insurance — meaning it covers you while you are still employed at that organization — and they may even give you options to supplement that insurance for you, your spouse, and/or your children for a minimal monthly cost.
3. Beneficiary Designations: Retirement plans and insurance products will have beneficiary designations that you need to keep track of and update as needed. These designations will actually trump whatever you have put in your will, so it’s important to keep these current as your life situation changes.
Tip: The good news? Most companies make it pretty easy to update beneficiaries. Make a list of all retirement plans, insurance products, and annuities that you own, then put a date on your calendar to look through each of these accounts to review your beneficiaries and update them as needed. Don’t get up until you’ve checked each one.
4. Advanced Medical Directive: This document generally includes a living will, which states your wishes for medical care should you become unable to make these decisions for yourself. It may also appoint a person to act as your medical power of attorney, which allows that person the authority to make decisions if you can’t. These documents ensure that your wishes for medical care are respected no matter what happens.
Tip: To create an advanced directive, contact a local attorney or download a form from a site such as the National Hospice and Palliative Care Organization. Once you’ve written the document and had it signed by two witnesses or notarized, it’s important that you make your wishes known with the person you’ve appointed, other loved ones, and your health care providers.
5. Letter of Instruction: Unlike the items listed above, this is not legally binding. A letter of instruction (also called a letter of intent) provides information about your personal preferences in funeral or medical care as well as the dispersion or care of assets that you can’t outline in a traditional will. Most importantly, though, this document can include a list of all of your assets, directions on who to contact for more information, and where to find username and password information for online accounts.
Tip: This letter is meant to be written after all of the other estate planning documents are completed. Since this isn’t a legally binding document, it can be tempting to want to start here, but I encourage you to get the other steps completed first, and then use this document to help provide context, fill in any gaps, and give your loved ones a quick key to access all of your assets.
Estate planning may not be fun, but it’s necessary. Taking the time to walk through these steps can ensure your wishes are known and alleviate the extra burden on your loved ones during their time of grief. It’s easy to leave these for “someday.” But I encourage you to choose one item off the list and complete it in the next month. Then, after you’ve completed one, give yourself another month deadline to complete the rest. Review your documents every year and make updates as needed.
Know of resources that can make estate planning easier? Share below!