artofthecoupon.com

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

I was at an Estate Sale this weekend, and I was talking to one of the staff member’s. She told me that the story was a very sad one.  A man and his second wife had bought the house together 20 years ago.  The wife put in $44,000 to the sale of the house, but for whatever reason the house was only in the husband’s name.  Well, he died without a will and the son from his first marriage pressured the wife into accepting her original $44,000 back and taking nothing more from the estate (he even got her to sign a legally binding document).  She was timid, and meek, and grief stricken and went along with it and while the son sold the house for $280,000 she was out of luck and forced to move in with her daughter-in-law.This is probably unlikely to happen to most of you, unless you happen to be a meek person with a very ungrateful (step) child.  However, everyone still needs to have some things in place to protect their loved ones in case of emergency or death.  

• An Organized File of Financial Documents

Somewhere, in a safe place, you should have a detailed listing of your assets and how to access them.  Whether it’s as simple as listing amounts, account names, websites and passwords to access them; or as complex as detailed ledgers, somewhere in one safe place you should have a complete and detailed list of your assets and obligations.  Make sure someone that you really trust knows exactly where this place is, but make sure it is in a safe place so if someone breaks into your car or home or whatever, they won’t find the key to the mint (so to speak).  

One caution… if you put this into a safe deposit box, make sure someone knows exactly where the key is (unlike my grandmother, who had everything in a box which no one could access… that was quite a treasure hunt!).  Granted the bank can open a safe deposit box without a key, but copies of your death certificate and all sorts of other paperwork would be required, so it is much easier to make sure someone knows where the keys. 

You should also include a listing of your debts, including mortgage debt.  Generally, obligations will have to be settled through the estate before anyone inherits. There are some exceptions to this though, for example government student loans are discharged at death.  Also, if there is no money in the estate (i.e. if it is all in life insurance and irrevocable trusts, which aren’t considered part of the estate) then creditors and other bills generally don’t have to be paid. Be sure to list them though, so that your loved ones can know who to notify in the event of your death, so they aren’t receiving bills and collection notices.  

• Insurance

If anyone depends on you for anything, it is a good idea to have life insurance.  This is obviously true for breadwinners of the family, but also equally as true for stay-at-home mom’s because if something were to happen to you someone would have to be paid to do all that you do on a daily basis.  Figure out what is needed for your family to survive in case you pass away. This varies depending on your situation, but I think it is advisable to at a minimum have enough life insurance to pay off your mortgage so your surviving family members will have a roof over their heads.

Long term care insurance may also be a good idea.  The time to get this is when you are young and healthy. This type of insurance pays the cost of nursing home or home care, should you ever become unable to care for yourself.  Nursing homes are expensive, and if you have any assets (pension, savings, social security income, etc.) these assets have to be completely exhausted before any state aid will kick in. Even if you end up with no assets, care options are much better and you have much more freedom of choice if you are privately insured, versus dependent on state aid.  Check into this when you are young and the premiums aren’t that bad, especially for the peace of mind you are getting.  

• A Will

This is a no-brainer, especially if you have kids. Ensure that you name a guardian for your kids, and if possible set up a trust (and a trustee) to provide for their care.  If you have dependent pets, don’t forget to name a guardian for them and set up a trust (check with the person first and make sure they are as committed to their care as you would be).  

By having a will, you also avoid things passing through the court system, where you lose out on money in fees and taxes.  If you have a lot of assets, it is best to have a qualified professional help you write a will, to ensure that you are allocating these assets with the minimum of tax obligations on your beneficiaries (i.e. you may be better off setting up trusts as opposed to just leaving items to loved ones).  

• Instructions for power of attorney and emergency care