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Death is not a fun topic and preparing your loved ones for your death doesn't sound like a fun activity.
Here's your warning that this is totally going to be a downer post.
Even though talking about death is depressing, it is crucial. It's also not about you! Preparing your loved ones for your death is all about your love for them.
When you pass away a lot of things have to be done. Make it easier for your loved ones by doing a few of these things in advance.
Get a Will
If you don't have a will, get one now.
A will is a fundamental document that says who gets your stuff, who takes care of your kids, and who is in charge of the dealing with your crap after you die. The person in charge is called the executor. They are executing your wishes as you have written in your will.
If you die without a will, your state will decide who gets your stuff and who takes care of your kids. Even if your state happens to pick the right people, you will make them jump through extra hoops when you could have just written a will. If the state gets it wrong, your blind nephew gets your motorcycle and cousin “prison” Jimmy raises your kids.
Not having a will could be a big money mistake.
Make it easier, and safer, for your loved ones by getting a will.
To create a will you:
- Name the executor: The executor is the person in charge of carrying out your will instructions.
- Decide who gets what: List any property or assets that don't already have beneficiaries.
- Name guardians for your kids: If you have children, who do you want to raise them?
- Notarize: Get your will notarized to make it valid. This is a fancy way of saying that a Notary, often found in your local bank or credit union, witnesses your signature and then adds their stamp.
The more specific you are the less guesswork your survivors have to do to figure out who gets what. Even if you don't care, it's not about your apathy, it's about making your heirs' lives easier.
Getting a will doesn't have to cost a lot of money or take a lot of time. In most cases setting up a will with LegalZoom will work. Setting up a will with LegalZoom might take 20 minutes and cost around $100. So, what are you waiting for? Create a will right now!
Make sure to update your will periodically. Life changes, you have kids, marriage, divorce or other life events. A simple update every four to five years will usually work.
Buy Life Insurance
A lot of people ignore life insurance. They think that they don't need it, they are too young, or don't believe that they need very much.
Here's the deal. Most people think about life insurance wrong. It's not about you, it's about providing for your loved ones when you are gone.
There has never been a beneficiary that said, “Wow, Jim left me too much money to take care of the kids!”
There's no such thing as too much life insurance, but there is such a thing as too little. Remember the idea is to care for your loved ones when you are gone.
To figure out approximately how much life insurance you should have, answer these questions:
- How much money do you need for final expenses? Research funeral, burial, and other final expenses in your area.
- What debts would you like to have paid off at your death? Do you want to pay off your mortgage, car payments, and student loans?
- What savings would you like to pre-fund? Would you like to pre-fund your kid's college, emergency fund, or retirement for your spouse? Any savings goals you pre-fund takes the pressure off your heirs.
- How much future income is needed to sustain your household? What income will disappear if you pass away? How long would you like that income to continue for your family?
- What expenses would be needed to cover all the things that you do? This is especially important for non-working spouses. Would your family need childcare, a nanny, or a live-in cook? Non-working spouses need life insurance too.
Now total all these numbers up. If you don't already have this much life insurance, consider buying more. Your family will thank you if you die.
To figure out how much life insurance you need, try this calculator from NerdWallet:
Get your documents in order
Make sure that your documents are in an easy to find location.
Your trust, will, life insurance, and other documents will be needed after you die, so don't make your heirs hunt for them.
Here is a list of handy documents your loved ones could benefit from having after your death:
- Life insurance policies
- Summary of your company benefits
- A list of your bank and retirement accounts
- Contact information for your professional contacts, ie financial advisor, CPA, and attorney
- List of your passwords! How do they access your computer, social media, and wifi?
- Any last wish requests or goodbye letters (see below)
Basically think, “what actions will my loved ones have to take after I die?” and then try to make it as easy as possible for them.
Last Wish requests
Would you prefer to be buried, cremated, have your ashes spread from the top of Mount Everest? Is there a special reading or a specific song you would like for your funeral? Do you want them to tell jokes at your service?
When I got the receipt from the funeral parlor, on the bottom it said, “Thank you. Please come again.”
What is the difference between death and marriage? Dead people are free!
What is the difference between a bad golfer and a bad skydiver? A bad golfer goes WHACK… “damn”, a bad skydiver goes “damn” WHACK.
Disclaimer: These are not my jokes but I do not know the authors. Also, probably don't tell these at a funeral.
Here are some other funny jokes and quotes about money.
Last wish requests are the hard decisions that someone has to make after you are gone. Help them out and save your loved ones the agony of indecision by making your wishes known. Spelling out your wishes beforehand takes some pressure off the people organizing your funeral, wake, or memorial pub crawl.
Check your beneficiaries
When you sign up for your 401k, IRA, or other retirement accounts you name beneficiaries. Your named beneficiaries are who will inherit your money when you die.
When life changes beneficiaries can change too. Make sure that your IRAs, 401k, and life insurance all have beneficiaries and that they represent who you want to receive the money.
Beneficiary documents supersede divorce decrees and wills. A common mistake is to leave an ex-spouse as a beneficiary after divorce. This can make for a really tough environment after you pass away.
Cinderella's dad left everything to her step-mother, disinheriting his own daughter. If she wasn't lucky enough to have a fairy godmother, she'd still be sewing clothes with animals.
Know your pension options
Don't choose the single life option because it has a higher payout!
Most companies will highlight the single life option because it pays the most, but if you die, your heirs get zero.
Choosing one of the joint options is the responsible way to make sure that your spouse's income lives beyond you.
No joke here, choose an easier future for the people you love over a few extra bucks a month of income now.
Write a Goodbye Letter to your loved ones
Consider writing a goodbye letter stating how much people mean to you. This is separate from your will or last wishes.
A goodbye letter could be particularly powerful if you passed away suddenly, or if you had an argument as your last conversation.
It's not about you, the letter is about helping everyone else after you are gone.
None of us know when we are going to die. Don't procrastinate on taking care of these tasks.
Spend a little time now to save your loved ones tons of time later. In the end, they will thank you for it.