Advice for the Living – Preparing Your Estate


Ask SmallIvy:  Please send investing questions to vtsioriginal@yahoo.com or leave in a comment.

I know that 90% of those reading this are not planning to ever die.  But just in case you do, you can make it a lot easier on your heirs if you set things up properly as you go.  Your children, spouse, and friends don’t need the additional stress of dealing with a complex estate on top of their grief from losing you.  This should be done now – today – whether you are 98 or 22, as you never know what could happen.  Here are things to do to make things a lot simpler:

Make a will and give it to the executor.  A will spells out all of your wishes.  Without it, the state will decide.  No matter your age, put together a will and give a copy to the person who will execute it so they know where it is.  A second copy should go in your legacy drawer (see below).  Also, be sure to update it every 5-10 years.

Get life insurance if someone will be taking care of your children. Taking your children is a big responsibility and only something that a great family member or friend would do.  Be sure to buy a large amount of term life insurance so that taking in your children won’t be a financial burden.  Be sure to include both money for day-to-day expenses and money for college, a down-payment on a first house, or whatever you would like your children to have.  You might also consider including money with instructions that the funds should be used for acquiring a larger house or adding onto an existing home if you know more room would be needed.

Realize (and explain in your will and in person) that the funds should be used however is needed to care for the children.  There is nothing wrong with the funds going into the family meal budget, to maintain the family home and autos, pay for part of family meals and vacations, and other such expenses.  Some individuals feel that the such money should be kept separate and given directly to the children, but day-to-day expenses are part of the cost of their upbringing and therefore should be funded in part by you.  Also, it is not healthy to have “our money” and “their money,” since this builds resentment and keeps a family from coming together.  If there are specific things you would like some of the money used for – like a college account – specify that in your will.  You should specify that the remainder of the money, however, should be used for general expenses and become part of the family wealth.

Tell people your plans.  If you decide not to put someone in your will who may be expecting something (i.e., a child), tell them about it while you are living.  There is nothing cute about leaving your executor to deal with a big mess and possible legal fight.  If you want to cut someone out, be an adult and tell them about it.  Even if it not something as extreme as cutting someone out of the will, let people know your plans.  If you would like one daughter to have some family heirloom, let all of your children know while you are living so there is no dispute.

Name primary and secondary beneficiaries on every account.  It is very easy for those listed as beneficiaries to get the money from you accounts once you die.  It is simply a matter of providing the death certificate which is typically available within a few months after you pass.  This is very helpful, especially if you leave expenses behind or your heirs end up paying for your funeral expenses.  If you don’t name beneficiaries, the accounts will need to go through probate, which may take a year or more.  Plus, the courts may decide whom gets the money.  Be sure to keep this information up-to-date.  If you leave the money to your parents when you are young and never change it, it becomes very complex if they die before you and they are still named as beneficiaries.

Don’t prepay for your funeral, but leave money for it and let people know your wishes.  Prepaying for a funeral is probably a poor use of money (although it would be a wonderful gift for your heirs to have everything taken care of beforehand).  In the very least, include a portion of your estate for your funeral expenses and make sure everyone knows what the money is for (in your will).  If you have someone you fully trust, consider setting up an account with the money in their name so they can withdraw it immediately when needed.  Remember that the IRS will consider large amounts put in another’s name a gift, so you may need to fund the account over a couple of years (the gift amount was $13,000 in 2011, but check with your accountant before proceeding).  A joint account may work as well (but check with an estate attorney about this first, since the account may be frozen in some states).

Create a legacy Drawer.  (Thanks to Dave Ramsey for this idea.)  Create a place in your house – a drawer, file, box, etc… where you place all of your important paperwork.  This would include a list of assets and their locations, a copy of your will, life insurance policies, and so on.  If you have a safe deposit box for deeds, titles, stock certificates and the like, you should also have information on where to get the key (and leave a key with someone you trust).  Basically, everything someone would need if you were dead to sell and distribute the assets should be contained in the box or referenced.

Simplify your life.  If you are late in life, think about selling off a lot of the stuff you don’t need and giving the things to people which you would like them to have (again, remember the IRS gift tax restrictions).  Realize that if you have a house full of treasures it is very likely that they will be sold at yard sale prices, or even be given or thrown away after you die if your children have to clean out the house in the course of a few days or a week.  It is far better to sell off things while you are still living and there is plenty of time to wait for the right buyer.

Consider also selling the big family house and buying or renting an apartment or condo.  It is nice to only need to cancel a rental contract for an apartment or clean a condo than to prepare a large house with a yard and perform extensive repairs and upgrades for sale.  Plus, do you really want to be mowing a lawn, painting windows, and doing other maintenance during your retirement years?

Show love for those around you by putting your life in order and making things easier for your heirs.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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