"Happy anniversary, honey! Let's celebrate by filling out our do-not-resuscitate forms!"
Contemplating your mortality -- or, worse, that of your sweetheart -- is hardly the most romantic way to pledge your everlasting love. But failing to plan for life's inevitabilities could ruin more than just one romantic day for the people you care about most.
Remember, even if you're not around, someone still has to pay the electric bill, monitor your investments and take over your affairs if you become unable to do so.
"It's an emotional subject," says Scott Halliwell, a certified financial planner ™ practitioner with USAA. "No one wants to face their own mortality. Most people avoid estate planning because they think it's going to be a difficult, not to mention expensive, process."
While it's true that many situations will require hiring an attorney, setting up an estate plan doesn't have to be complicated or costly. Here are six "to-do's" to help make it happen.
1. Fill out a living will and a durable power of attorney for health care.
Also known as an advance directive, a living will is one of two critical forms that let your family and doctors know what types of medical care you want, and don't want, should you become incapacitated. A living will tells your doctor how you want critical life-support issues handled. A do-not-resuscitate order, in which you decline CPR if your heart stops or you quit breathing, is a separate simple form. A living will can be changed or revoked if necessary. Let your doctor know of your decision, destroy the document and indicate any changes in writing. Use a living will revocation form, and sign in front of a notary and witnesses if you think the change could be challenged. And when creating a new living will, indicate that you've revoked any previous ones.
You also may want to name a durable power of attorney for health care. This person would make any necessary medical decisions for you, as well as make sure you receive the type of care you want, if you become incapacitated.
Where to get it: Your doctor, local hospital or senior citizens center. Online, look for your state medical association website or visit the U.S. Living Will Registry and download, fill out and file a living will. To include more detailed health care instructions with your living will, visit agingwithdignity.org and caringinfo.org. For a fee, an estate-planning attorney can help you create these documents.
2. Establish a durable power of attorney for finances.
A durable power of attorney is meant to safeguard your finances should you become unable to handle your affairs. The person you name has the power to make as many -- or as few -- financial decisions on your behalf as you specify in the document. You can have it kick in immediately, or go into effect if you become incapacitated.
Where to get it: Many state websites carry durable power of attorney forms. If not, contact a lawyer. "Getting advice in this area is worth it," says Halliwell. "And having a lawyer help draw up your papers might not cost as much as you think."
If your financial dealings are limited to a few institutions, you can also use their in-house power of attorney forms. Or you can go the do-it-yourself route. If you choose the latter, remember to:
- Sign the forms the right (legal) way: It is a best practice for both you and your agent -- the person you've chosen to act on your behalf -- to sign the forms in front of a notary.
- Provide a plan B: Name primary and contingent agents on each form. If you and your spouse are in an accident, or your agent is unable to act, a court will have to appoint a conservator or guardian, wasting precious time.
- Change your mind the right way: To alter your power of attorney, you'll need to revoke the existing one and destroy all copies. Then, fill out a revocation document or type out your wishes, sign in front of a notary, and send copies to all involved parties.
3. Leave instructions on how to keep your family running smoothly.
Does "date night" in your household entail clearing off the dining room table hand-in-hand for a romantic evening of paying bills, reconciling receipts with your bank statements, reviewing your portfolio or doing your taxes via candlelight?
Didn't think so. Still, somehow all those things get done. It's not uncommon for one partner to take the lead in managing the family finances. Ideally, more than one person under the roof needs to know how to keep the lights on and where to send the check to fund the IRA and the college savings plan.
If you are the family CEO, schedule 30 minutes to get your spouse in the loop so he or she can take over at a moment's notice. Use this as an excuse to get organized. Consider automating the savings and bill-payment process to make it easier for the partner who doesn't regularly handle financial issues to keep the home fires burning in your absence.
4. Update your beneficiary designations.
We hope your honey knows how to spell your name right and did so when filling out beneficiary forms; misspellings are boo-boos you don't want to see here. If you haven't looked at your beneficiary designations lately -- particularly if you've gotten married, divorced, had kids or lost a spouse -- put this on your must-do list. "Too often, I've worked with couples who haven't made beneficiary arrangements or whose forms are out-of-date," says Halliwell. Take the time to double-check that yours are correct.
By designating beneficiaries, some of your assets can go directly to your survivors without having to be listed in a will or accounted for in a trust. Your list can include these items:
- Retirement accounts: IRAs, 401(k)s, 403(b)s, 457s, pensions and self-employment retirement plans (such as Keoghs).
- Banking and credit union services: Checking accounts, savings accounts and certificates of deposit.
- Insurance proceeds: Life insurance policies.
- Other financial stuff: Annuities, savings bonds and investment accounts.
Also, have a plan B. If your primary beneficiary isn't around to collect and no secondary beneficiary is named, the probate court or retirement plan administrator will dictate who gets your money. Be exact. You can name multiple primary and secondary beneficiaries, so don't be afraid to spell out how you want your assets divided.
Beneficiary forms, durable powers of attorney and health care directives are particularly important for couples who aren't legally bound in the eyes of the law. Though many of the same estate-planning and medical directive rights are available to unmarried couples, the difference is that they don't happen automatically. You've got to fill out the paperwork to make your wishes a reality.
5. At the very least, set up a simple will.
Beneficiary forms may be enough to settle your estate, particularly if the laws in your state handle the dispersal of assets, property, the guardianship of offspring and family photo collection to your liking. However, before you declare "mission accomplished," check your state's probate laws to see how estates are handled.
The last thing you want your loved ones to do after your death is wait for a court to decide who inherits your belongings and property. Without the proper legal papers in place, that's what could happen to the families of the more than half of Americans who don't have a will on record.
To spare your survivors such hardship, a will is the way to go. A will identifies the person you've chosen as executor for your estate, the people and organizations you want to inherit your assets, guardians for your children and a property guardian to manage assets left to the little ones until they're adults. It lets you orchestrate the payment of debts and taxes, and lets you leave assets to nonrelatives, unregistered domestic partners, charities and organizations that wouldn't be recognized as beneficiaries under state law alone.
6. Don't forget to reveal your secret hiding place for all these important papers.
Don't let your lovingly prepared plans go unnoticed. The worst thing you can do is to keep your instructions in case of your death or incapacitation secret. Make copies of all your important papers, including your directions on how to run the household finances, and tell your executor and your loved ones where they're kept.
Finally, to help everyone remember how thoughtful you've been, include in your important papers a list of delightful vignettes from your life to share after you're gone.