My brother, a recently retired Naval Senior Chief Petty Officer, passed away from malignant melanoma this past February. He was only 43. He had spent 21 years of his life serving the military as a Cryptologic Technician specializing in Mandarin Chinese and had a full life filled with travel and experiences that many do not get to experience in their lifetime. I tell you this not to make you sad or uncomfortable, but to share with you my sister-in-law’s experience of becoming a young widow with only a very short notice. And really, that is how life happens. No matter how young or healthy you are, there are illnesses and accidents that can suddenly happen to any one of us.
Even though death is one of the few certainties in life, estate planning is easily the most neglected part of the financial planning process. Still, it is one of the most important steps you can take to protect yourself and your family. When I think of financial planning and wealth building, I compare it to building a house. You have to start with a solid foundation and build your way up. Skipping vital steps along the way could leave your financial house crumbling and your family with no other choice but to rebuild everything again.
Laying a Foundation
Building a strong financial house starts with basic estate planning documents and adequate insurance for the what-ifs that can be financially devastating. My brother was very smart when it came to investing his money, planning for his early retirement, and laying a foundation. He never thought he would have to use any of this but he planned accordingly and it brought peace in his last days knowing that his family would be able to maintain their lifestyle.
A Will: If you have children or assets, you need a will. This is where you name a Guardian for your minor children, assign an Executor to carry out your final wishes, as well as appoint a Trustee to manage your assets. Without a will in place, the decision will be left to somebody else to appoint a Guardian for your children and to settle your estate. Do you really want crazy Uncle Bob raising your kids?
Living Wills and a Durable Medical Power Of Attorney: A Living Will outlines your wishes for those end-of-life decisions, such as continued care with life support. Remember the Terri Schiavo case? A durable medical power of attorney appoints a person in charge of making medical decisions on your behalf if you are unable to make those decisions on your own. The person you appoint should be someone you trust and who understands your wishes should the unthinkable occur.
Life Insurance: Your life insurance coverage will depend on your current needs if something were to happen to you today. If you have any outstanding debt such as a mortgage, or other loans, ask yourself whether you want to leave your family with these unpaid burdens. Leaving your loved ones with a lump sum of cash to cover burial expenses, debt obligations, and a replacement of your income will relieve much stress during a very emotional time. After all, ensuring your family can stay in the home and continue with future plans can bring tremendous peace of mind.
Estate planning can be simple or it can become very complicated. Everyone’s situation is different which is why it is advisable to consult an attorney who specializes in estate planning. They can help you determine whether you need very basic documents or something much more complex. In the meantime, make it a habit to review your beneficiary information on retirement plans and insurance policies every couple of years. Those with an extensive iTunes or Kindle library should understand that those digital files may not be able to be passed on to family members. Look into password management software or other methods to ensure loved ones have access to your online accounts.
My brother’s passing was so unexpected for my family but my sister-in-law feels blessed that he took the time to save and plan. They worked so hard to make early-retirement a possibility and his pre-planning has given her the confidence and ability to move forward with the life they had both dreamed of living. I encourage you to make estate planning a priority because it’s not about the stuff we leave behind, but taking care of the people we leave behind.