Iconic singer Aretha Franklin had it all: respect, talent, fame and fortune, but what she didn’t have was a prepared estate. Reports indicate that the Queen of Soul didn’t have a will or trust set up before her death from cancer in August. Now her fortune might be in limbo for her survivors.
An estate consists of all property owned by you at the time of your death, according to Findlaw.com:
- Real estate
- Bank accounts
- Stocks and other securities
- Life insurance policies
- Personal property such as automobiles, jewelry and artwork
Dealing with finances before a death is an unpleasant topic that people prefer to avoid, but it is important to address it.
A 2016 survey by the Harris Poll for Rocket Lawyer found that 64% of American adults don’t have a will, either because they don’t think they need one or they have procrastinated. People may assume that only the rich need to create a will, but the truth is everyone should draw one up. A will outlines your wishes and removes the guesswork after you are gone.
A will is a legal document in which you declare who will manage your estate after you die. The person named in the will to manage your estate is called the executor. An executor ensures debts and other directives are taken care of.
You should update your will after a huge life change, such as marriage, divorce, a birth, or a death in the family.
If you are married, you shouldn’t have joint wills, since it is unlikely you will pass away at the same time. While it is good to seek advice from an estate planning attorney, you start the process by reviewing will templates on different websites.
Separate wills also take into consideration other personal circumstances, such as previous marriages, other children, charitable or political causes a partner wants to support, and outstanding bills and debt.
When drawing up the will, be sure to include the names of the beneficiaries and what you are leaving to them. Remember to include beneficiary information for bank accounts, stocks, bonds and life insurance policies. When you sign up for insurance or start a job, you are asked to list beneficiary information. You can name more than one person in a life insurance policy.
To make the will legally binding, you will usually need to obtain signatures from at least two witnesses and have the document notarized.
In addition to the common type of wills, there are a couple of other options you also might want to include:
- A digital plan. You might want to consider a social media will, especially if you have many online ventures and an extensive social media presence. Facebook allows users to designate a person who can manage their profile in the event of the user’s death. You should check each site to see what documents you need to present to confirm the death and next steps.
- A personal plan. An emotional will is not legally binding, but you can prepare it for your loved ones. It’s a place where you can share your thoughts, memories and hopes for loved ones. It is a lasting remembrance of your life and provides comfort to family members.
An alternative to a will is a living trust. A trust transfers assets from your name to your beneficiaries. A living trust goes into effect right away, while a will is activated after you die. The main benefits of a living trust, according to LegalZoom, are that it avoids probate, can save certain people money and provides privacy.
Keep in mind, though, that living trusts are more costly to set up than wills, and there are some ways to avoid probate without them. Two types of people for whom a living trust might be appropriate are those who own out-of-state property, such as a vacation home (to avoid probate in that state), and those who want to disinherit a child or leave more to one child than another (because trusts are harder to contest).
In addition to drawing up a will, it is important to inform loved ones about end-of-life decisions — what you want done in case you are unable to make medical decisions for yourself. Do you want to be resuscitated and kept on life support? Do you want to donate organs after you die? In a living will, there is a health care declaration with a power of attorney that will ensure your medical wishes are granted.
Do you own a business? Create a succession plan that details who you want to take over your business upon your passing.
Document your funeral preferences — do you want to be buried or cremated? Plan the funeral details: Do you want a life celebration or some other memorial service? Choose a funeral home and church if desired and estimate how much the funeral will cost. Are you a veteran? Are there funds designated for funeral costs?
Necessary documents include real estate and car deeds, a will, trusts, insurance and retirement plans, 401(k) accounts and IRA documents. They should be stored in one location, and the executor of the will should know where to find them. You should also indicate other preferences, such as who should take care of a beloved animal.
While Aretha Franklin’s estate may take time to clear, let it serve as a reminder to document your final wishes. The main takeaway is to figure out where you want your assets, property and finances to go to avoid problems after your passing.
Having an estate plan in place for when you die is one of the most considerate things you can do for your survivors. Talking with an estate planning attorney or financial adviser can outline all your options and make the grieving process less painful.
Marguerita M. Cheng is the Chief Executive Officer at Blue Ocean Global Wealth. She is a CFP® professional, a Chartered Retirement Planning Counselor℠ and a Retirement Income Certified Professional. She helps educate the public, policymakers and media about the benefits of competent, ethical financial planning.
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