I’m no ball of sunshine this week, let me tell you! Earlier, I talked about the suicides that had been committed due to financial difficulties. Today I’m back with another tale of woe that didn’t end well.

Death is one of those topics that people really don’t want to talk about, but from a financial standpoint, it’s perhaps one of the most important discussions to have with your loved ones. But, being prepared for death means more than just having your financial documents all in one place. It certainly covers this aspect, but it’s not the only thing you should do.

Gather Little By Little has an excellent post about what he did to prepare for death’s imminent arrival. He goes into great detail about how everything is set up for his wife and children and how she’ll be able to find the information. He also includes a piece that I hadn’t thought of myself, but has since become my favorite piece of advice – writing letters to loved ones.

I’ll leave those details to GLBL because he did such a fantastic job of writing it out, I really would love you guys to click over and read his post. My post is about something else related to the things he’s done. And it was inspired by the fact that a personal member of mine died of a heart attack this week…and I was completely unable to help her son.

The Back Story

The client to which this post is dedicated has only been coming to me for a short time. When she came to see me, she was a complete mess, both emotionally and financially. Her husband was leaving her after 30 years, but not before putting her in major debt for a kitchen project he thought would make her feel better about him leaving. Frankly, having met the man, she was better off anyway, but she was devastated.

She came to me with her bills and asked me to help figure out a way to help her. The best solution was to do a home equity loan to pay off the kitchen debt, get her caught up on her bills, and give her a little extra for some other minor home repairs and court-ordered monies owed to the ex. With the one payment, her budget was easier for her to handle, plus it freed up other debts she’d been paying on. She felt at ease with the decision and the only thing we had to do was make sure the ex would sign the documents since he was still on the house. He agreed and we set up the loan.

At the time of closing, my member was going to refuse the credit life and disability insurance. I talked her into keeping it because it was something she needed being a single-income mother and having this debt. It was comparatively cheaper with us than with anyone else that she could go with on that, so she agreed to keep it. For the record, credit life pays off the loan in the event of a death (excluding suicide) so that it’s not passed on to the estate. Disability postpones loan payments for a period of time when you’ve been injured. Since she had it on the loan, the home equity will be paid off and her ex-husband does not have to liquidate assets from the estate to pay it off.

Once the loan funded, we sat down and made a monthly budget to help keep her on track and using some online tools my credit union offers specific to our members. The next thing I wanted to talk about was having beneficiaries added to her account, but she was getting ready to go out of the country and didn’t want to deal with it at the time. So, I told her to make sure she came and saw me when she got back, but that she really needed to consider adding beneficiaries to the account. Thanks to the home equity, she had quite a bit of money built up in her accounts.

Yesterday her son and the ex-husband came into the credit union and wanted to add the son to the account. They told me that my member had died of a heart attack several days earlier and the son needed to be able to access the money for funeral purposes. They had called into the credit union and spoke to someone who wasn’t paying attention because they told the son and ex-husband that the ex was on the account. He wasn’t. He was on the loan and the loan alone. I had to notate the account and explain that to them.

I couldn’t help the son because they didn’t have the death certificate or the paperwork showing him as executor of the estate. Talk about feeling pretty crappy. He looked like he would burst into tears at any moment, which made me feel worse, but I can’t give her information to anyone without her permission or the proper paperwork. Much as I wanted to help, I had to stand my ground. The ex-husband sure had a field day making a scene in the lobby.

Designate A Beneficiary!

The above could have been avoided if my member had added her son as beneficiary to the accounts. As a beneficiary he would only have to produce his id and the death certificate in order for us to allow him access to the accounts.

For yourself, it is so important to designate a beneficiary on all of your accounts, not just IRA and investment accounts. Your bank will NOT give that information to them without jumping through a lot of hoops if they’re not listed. It takes maybe five minutes of your time to go in and have one added, then sign the appropriate documentation. Make the time to add someone as beneficiary.

Adding a beneficiary does not give them access to your account in any way – unless something happens to you. So, while you’re still alive, they can’t even check the account balance. This is simply a precaution to protect you and your loved ones in the event of death. I can tell you with absolute certainty, it’s hard enough on the family members while they’re grieving. There’s no need to make it harder by making them jump through hoops.

One other thing you should consider is that in most states, a bank or credit union’s listed beneficiaries supersede a will. So, if you list beneficiaries and change your mind in the will, the bank is legally obligated to pay out to the listed beneficiaries. Now, this will vary specifically by state, so look into your states laws regarding this, but I know several of them follow this rule implicitly. In any case, it just makes good financial sense to keep your beneficiaries current.

Write Up A Will!

You don’t have to actually make a will in order for your possessions to pass on to your heirs, probate can decide that for you. However, it’s always better to have a written account of your wishes so that loved ones are not having to take it to court. The process is stressful, can get expensive, and may even turn out to be decided in a way you would not have preferred.

In most cases, a surviving spouse will receive the assets. In the case of children, the assets are divided amongst them and the spouse – the specific percentage amounts will vary depending on the state the decedent resided in. And, in the event there are no surviving relatives and no will, the state automatically inherits the assets.

You can draw up your own will if you’d like; however, most experts don’t recommend this because oftentimes it doesn’t stand up in probate due to some technicality that wasn’t followed. It’s always best to seek legal advice if writing a will.

Estate Planning

Technically, if you get with an attorney and set up at least a basic estate plan, you’ll be covered with everything. Estate planning includes the will, power-of-attorney, healthcare proxy, and in some cases, a trust. This process will also give you the opportunity to assign an executor (the person responsible for handling your estate) rather than leaving that up to probate. Many people don’t consider this planning as necessary to consider until they reach their retirement years, but I submit to you that it’s best to have at least a basic plan in place much earlier than that.

My member that recently passed away was in her earlier 40s. She had some minor health problems, but nothing her doctor was concerned with in the sense that he was suggesting she set up a will. Yet here we are, waiting for probate to finish it’s decision so we know how to handle the estate.

I’ve been thinking about this myself recently. I don’t have kids, but I do have family that knows nothing of my finances and how I’d like that money divvied up. To be honest, most of it I’d want to go to my niece and nephew for school, but a probate wouldn’t see it that way. In Texas, it would go to my parents in the absence of a will. I’m only 27 and plan to live as long as God will let me, but the reality is that I’m not prepared if something were to happen to me. I have all my beneficiaries designated on my life insurance and investments, but I too have failed to list them on my accounts – a fact I intend to rectify this week. But, beyond that, I will probably be visiting an estate attorney in the very near future to make sure that my estate is set up to my specifications.

Life Insurance

If you have a family, you can’t afford not to have life insurance. My member didn’t and now the funeral expenses are having to come from the funds left over from the home equity loan. However, if it hadn’t been for those funds, the family would be paying out of pocket. As it is, they’re already paying out of pocket because the case is still in probate, but they‘ll be reimbursed as soon as we get the court documents specifying the executor.

When trying to figure out how much you’ll need for life insurance, there are some factors to keep in mind.

1. This money is likely to replace your income if you were to pass away. There needs to be enough to comfortably cover what you were making each month
2. Keep funeral expenses in mind.
3. Consider how well off you’d like to leave your family.

Personally, my life insurance is set at $100,000. I’m single; however, I still have some outstanding student debts that I’d want my family to pay off (I’m just honorable that way), I’d like them to cover any funeral costs with that money as opposed to their own money, and I’d like to leave the majority of it to my niece and nephew. Once I have a family of my own, that number will change.

Recap: Beginning to End

I realize this topic doesn’t really garner a lot of popularity in terms of people wanting to talk about it. However, I had a huge reality check this week with all that’s happened and I’m passing these thoughts on to you guys.

In the event that you die, will your family be taken care of, or are you putting off the planning?

If you answered with the latter, I urge you not to put it off any longer.

1. List all of your finances in one place so that your executor can easily access them, and they know what is where.
2. Add beneficiaries to your accounts…all of them.
3. At the very least, draw up a will. Don’t make your relatives try to figure out how to handle this through probate.
4. At best, it’s a good idea to start estate planning early. If you do, you can knock out the will, power-of-attorney, healthcare proxies, and trusts (if desired) in one.
5. It’s always recommended to carry some life insurance. It will help your family in the event you are gone.

Reality check: Have you guys done this? If not, when were you planning to get it done?

Wanna discuss beyond the comments? Head over to  The Open Thread.

Related posts:

1. The New Insurance Rules
2. Credit Card Debt After Death
3. Deposit Insurance: Recession-proof your savings
4. Carnivals and Weekly Roundup
5. Weekly Round Up