Important Information to get your Financial Affairs in Order

Being prepared is the best way to ensure that your financial affairs are in order.

The earlier you start with a SMART+ER financial plan, the better. Having important documents in a single place can give you peace of mind, help ensure your wishes are honored, and ease the burden on your loved ones.

As a bonus, it’s both cheaper while giving your loved ones time to grieve. The goal is to dissuade financial infighting

Table of Contents

Here are some reasons why it’s important to have your financial affairs in order:

Bank Accounts and Beneficiaries

Make sure all bank accounts have direct beneficiaries. The beneficiary need only go to the bank with your death certificate and an ID of their own. Additionally, make sure your beneficiary has direct access to the bank account.

If you are new to the term, a beneficiary is a person or entity that receives benefits from someone else’s property.

Beneficiaries are often named in legal documents, such as a will, trust, life insurance policy, annuity, or retirement account.

Transferring Assets After Death

Assets can be distributed at death in several ways, such as with a beneficiary designation, by law, by probate, or by a trust. Each method of transfer has advantages as well as important considerations. Check out the Fidelity post for more details.

Transfer On Death (TOD) deed if you own a home. Completing this document and filing it with your county saves your heirs anywhere from a thousand dollars to millions.

This document allows you to transfer ownership of your home to your designee. All they need to do is take their ID and your death certificate to the county building and the deed is signed over. Doing this will avoid the home having to go through probate.

I have a friend going through this now. It’s expensive and emotionally draining. These transfers also carry tax implications.

Advance Directives which includes a Living Will

A living will is a written document that specifies what medical treatment you would or would not want in the event you are in a terminal condition or a persistent vegetative state. A living will directs health care providers to cease or refrain from certain medical/surgical treatments.

sweet little girl with her mother and grandmother. Three generation concept

A terminal condition is an incurable, irreversible medical condition in an advanced state caused by injury, disease, or physical illness, which will, in the opinion of the attending physician, to a reasonable degree of medical certainty, result in death regardless of the continued application of life-sustaining treatment.

Make sure you tell your loved ones who is the executor of your will, so there isn’t any confusion about it later.

Durable Power of Attorney

Allows one to designate a person to make legal decisions if you are no longer competent to do so.

This is different from your will.

Per Hopkinsmedicine.org, the appointed healthcare agent has broader power to execute your wishes than can be provided under a living will, so you will want to select your agent carefully to make sure your agent knows and will follow your wishes. Unlike with a living will, you don’t have to be in a terminal condition for the power of attorney to take effect.

Power of Attorney for Healthcare

This document allows one to designate someone to make healthcare decisions for them.

Confusingly this is also different and may vary from your will. For example, you might have the most logical person for the money side. While you have the most empathetic person for the healthcare side.

Last Will and Testament

Designates to whom personal belongings will go. Especially family heirlooms need to be discussed. Not sure why anyone would fight over an armoire but they do.

Funeral Planning Declaration

Allows one to say exactly one’s wishes as far as the disposition of the body and the services. Why do all this? Simple to AVOID probate.

Unfortunately even while you are grieving, probate costs can be 3% to 7% of the estate’s value, or more as the value of an estate increases. The costs can also vary based on state law or the area where the deceased died. Probate proceedings can take up to a year or two.

During this time, assets are typically “frozen” until the courts decide on the distribution of the property. The heirs are the ones who will have to pay for probate. Probate filing fees can range from $50 to $1,200. These fees vary from state to state.

Next steps to supplement your current financial affairs

If all the above is not done, you have to open an estate account at the bank. All money that doesn’t have direct beneficiaries goes into this account.

You have to have an attorney to open the estate account. The attorney also has to publicize your passing in the newspaper or post-publication at the county courthouse, to allow anyone to make a claim on your property. – It’s a complete PAIN.

Again, make a list of all banks and account numbers, all investment institutions with account numbers, lists of credit cards, utility accounts, etc. Leave clear instructions as to how and when these things are paid. Review your documents at least one time annually.

Make sure heirs know where life insurance policies are located. Also, Make 100% sure SOMEONE knows your Apple ID, bank ID account logins, and passwords! Make sure you have titles for all vehicles, boats, trucks, etc.

Set up a TRUST for intended beneficiaries, especially those that are too young, and appoint a trustee of said trust.

Most Importantly, Take Action to Ensure Your Household's Financial Affairs

Talk with those closest to you and make all your wishes KNOWN. Take time to brief those whom you’ve designated. It's also beneficial to let those you didn't designate know. This will help to eliminate unnecessarily expensive probate issues.

Do this to explain why your decisions were made and to avoid any lingering questions or hurt feelings.