The past year was defined by incomprehensible loss—and for many, the losses were personal. In May, my father-in-law Bernie passed away on his 94th birthday. In the end, he said he was ready to go, but we are mourning the loss of an attentive and engaged family man who was like a second father to me.
In the midst of our grieving, I was thankful that we had done some planning ahead of time for this moment. With this recent experience in mind, here are some steps you can take to prepare in advance for inevitable end-of-life transitions.
Will: A valid will can transfer property, manage debt and estate taxes, designate guardians for minors, establish trusts, and name charitable beneficiaries. Without a will, a state’s intestacy laws will direct the distribution of property; a will provides control and an assurance that a loved one’s wishes will be followed. Remember that a will may need to be updated after a divorce or the death of a spouse or relative.
Healthcare: Advance medical directives provide clarity in situations that are often emotionally fraught. A durable power of attorney (DPOA) for healthcare appoints a trusted person to make healthcare decisions for an individual and becomes effective in the event of incapacity. A living will dictates in which situations an individual will receive life-sustaining treatment. The DPOA for healthcare does not usually cover this situation, so it is valuable to have both the DPOA and a living will in place.
Finances: A DPOA for financial matters allows a trusted loved one to act on behalf of another in all contractual and financial matters. For extended periods of incapacitation or illness, having this in place can be key.
An estate planning attorney can assist you with preparing these forms; you can search for one through the National Network of Estate Planning Attorneys. However, an attorney isn’t always necessary. Many state governments and bar associations offer simple online versions of estate planning forms that can be completed without legal help, although some forms may still require notarization.
In addition to these basic planning documents, there are additional steps you can take to minimize or eliminate the need to have the surrogate court probate the will. Probate court is where the will is read, and papers prepared to establish who (the Executor) will take care of following the wishes in the will. Following these steps will speed up the transition process and make funds immediately available for paying expenses and debts.
Beneficiaries: Add beneficiaries to non-retirement accounts. While all IRAs are required to have designated beneficiaries, brokerage and bank accounts can also have designated beneficiaries to keep these assets from being subject to probate. For taxable investment accounts, use the Transfer-on-Death (TOD) designation; for checking and savings accounts, the equivalent designation is Payable-on-Death (POD).
Your Natural Investments advisor can help you put TOD designations in place and review your current beneficiary arrangement with you; your bank can assist you with POD designations.
Bank account: Talk with your loved one about adding a trusted individual to a joint checking account. More helpful (and secure) than sharing a username and password, joint ownership provides immediate access to liquid funds for the expenses that arise in the event of a loved one’s death. This arrangement can also prove useful during life if assistance is required with budgeting and billpaying. Since this involves a transfer of ownership, talk to your NI advisor or tax preparer about any potential gift tax issues.
The death of a loved one can be overwhelming, so the more groundwork one does in advance of the inevitable, the better prepared surviving family members will be to navigate through complex processes efficiently, so they can prioritize what matters most.
This article was co-authored with Greg Pitts. Greg aims to help you reflect your values in your investment portfolio, while building wealth for you and your family and achieving your financial goals. He lives in New York.