Whether we're young and just starting life or older and approaching the end, we don't want to think about our own death. Adding money to the mix only makes it worse.
But all adults need to think about what will happen to their financial affairs when they die. (These seven documents you should fill out before you die may help you get started.) Failure to do so could leave a mess for those who survive you and could cost them money.
So evaluate your estate planning and see if it's adequate. (For the record, I am not an attorney and this is not meant to be legal advice. I have been a financial planner and often referred clients to get competent legal advice. This is meant to do the same.)
Understanding the Lingo
Let's create working definitions for some commonly used terms. Estate refers to the financial and physical assets you own or partially own at the time of your death. Estate planning comprises the arrangements you make before your death to ensure your wishes are followed after death. A will is the most commonly used document to make your wishes known to those who survive you and any appropriate government authorities.
Estate Planning
Decide what you want your estate plan to do. You need to name someone Americans are dying with an average of $62,000 of debt, so this is important. (One way to find out any debts you have or any other problems with your finances is by reviewing your credit. You can see a free snapshot of your credit reports on Credit.com.)
Another common misconception is that married couples can solve the problem by putting everything into joint accounts. Unfortunately, not everything can be titled jointly (think of jewelry or home electronics). Even if everything is held jointly, what happens if both spouses die in a joint accident?
Dying without a will can leave a mess. State law will determine the who executor will be and how your property will be distributed. That might not produce the results you want. For instance, in some cases law dictates that some inheritance goes to children before the surviving spouse.
A will is especially important for unmarried couples. State laws are a patchwork. Some states recognize a common law marriage just the same as one registered with the state. In other places, a lifelong live-in partner is accorded no more rights than a complete stranger.
State laws are also problematic for couples in a second marriage. You may think certain assets you brought into a second marriage should go to children from your first marriage. The state might think otherwise.