6 ways to financially prepare for your own death

Although thinking about your own death can seem morbid at times, it’s a good idea to put plans in place to become more financially prepared. After all – if you don’t plan for your own death, someone else will have to do it for you when you are gone. More often than not, this role will fall to your partner, family members or children.

In addition to legal concerns surrounding your assets and estate, there are also day-to-day financial considerations that need to be thought through. We’ve put together a simple list of things you’ll want to consider:

Organize your financial documents.

Do your loved ones know where you keep your important documents, such as marriage certificates, social security cards, credit cards, bank account information, retirement funds, insurance policies, tax returns and more?

Pulling together and organizing these documents is a big step in being prepared. It is also useful to collect names, addresses and phone numbers of professional advisors such as bankers, attorneys, stockbrokers and insurance agents.

Thankfully, this doesn’t have to be a big production. Getting the framework in place doesn’t need to take very long, and once you have things set up, it’s fairly easy to keep with it. (For more details on how to get organized, take a look at this Hands On article).

Once you’ve organized the materials into a well thought-out system, put together a document that details where your loved ones can find documents and how your system is organized. This can be a simple letter, or a more detailed financial key.

Review your beneficiary information.

Make sure the beneficiaries listed on your important financial assets, including retirement accounts and life insurance policies, are accurate. It can be difficult, if not impossible, to change or arrange for disbursement of these assets upon someone’s death if beneficiary information is outdated or incorrect.

Establish or update your will.

The best way to ensure your funds, property and personal effects will be distributed according to your wishes is to prepare a will.

If you already have a will, review the document to make sure it still reflects your current wishes. If you have not yet established a will, create one immediately.

Consider setting up a trust.

A trust can be a useful estate planning tool, especially if you’d like to leave money to friends or family members without giving them complete control. Trusts can be set up in various ways, but many are designed to pay a small amount to the beneficiary during the grantor’s lifetime, and then disburse the remainder of the assets upon the grantor’s death.

Trusts carry lots of benefits, including the reduction of estate and gift taxes, and the ability to put conditions on how and when your assets are distributed after you die, among others.

Plan for your funeral.

In 2010, the average funeral cost $6,500. And that didn’t even include cemetery plots, monuments/markers, or flowers and obituaries. According to the Federal Trade Commission, funerals in the U.S. can easily exceed $10,000 by the time you add in these costs.

Think about how your loved ones will pay for your funeral. You may want to consider purchasing life insurance or setting aside funds for this purpose.

Choose an executor.

An executor is the person responsible for distributing your property, paying your debts and managing your property while your estate is in probate, among many other things.

Your executor will be in charge of making countless decisions about your estate over several years. These decisions can affect how much your estate will pay in income, estate and inheritance taxes, and the amount your beneficiaries ultimately receive.

Most people name children or other family members as executors, however, this can sometimes lead to added stress to them upon your death or infighting between siblings.  A great way to avoid controversy is to name a bank trust department as your executor.  This takes the emotion out of estate settlement, keeps siblings from fighting, and can speed up the process because we have a lot of experience settling estates.