What to Do if You Only Have a Short Time to Get Your Financial Affairs in Order
The doctor said at your last visit, “I’m sorry. There is nothing more we can do. You will not live long. I hope your affairs are in order.” Depression sets in as you realize that your life will end soon. A sense of urgency pervades your thoughts and those around you. If you’re like most people, you have a Will and Revocable Trust but they were probably done 20 years ago when the kids were young. You know that you need to see an estate planning attorney because you don’t have much time left.
What steps can you take to assure proper and efficient administration of your estate? Here is a 23-point checklist to help you get your affairs in order if you only have a short time to live.
1. Prepare a Durable Power of Attorney.
If your illness renders you unable to sign documents and make financial decisions, you will defeat the implementation of your final financial transactions. By signing a Durable Power of Attorney, you confer on another person the power to sign financial documents for you.
2. Prepare an Appointment of Health Care Representative and a Living Will.
If your illness renders you unable to make health care decisions, you need someone with the power to make those decisions for you. An Appointment of Health Care Representative gives your agent the power to make health care decisions for you. This can include administration of pain medications, enrollment in a hospice program, or hiring home care providers. A Living Will gives the doctor permission to stop life support measures if those measures will not prolong your life. You can include end-of-life wishes in the appointment of health care representative and living will.
3. Update and Fund your Revocable Trust.
You have a Revocable Trust but things have changed in the years since you set it up. Your children have grown so they can serve as Trustee or Executor. If you are the Trustee of your Revocable Trust, now is the time to change the Trustee to someone you can trust who will survive you. More importantly, now is the time to put assets in the name of your Revocable Trust. For real estate, that means you must sign a deed conveying the property to the Trustee of the Revocable Trust. For brokerage investments, it means transferring your investments to a trust account or to a transfer on death (TOD) account that names the trust as beneficiary. For a business, it means assigning a membership interest in a limited liability company (LLC) to the Trustee or transferring stock in a corporation to the Trustee. By funding the Revocable Trust, you will reduce the assets that pass through probate thus saving your estate money.
4. Make Tax-Free Gifts.
You can move hundreds of thousands of dollars out of your estate by making $15,000 gifts (the current gift tax annual exclusion) outright to donees or to irrevocable trusts with rights of withdrawal. For instance, if you have 10 grandchildren and 5 children, you can give away a total of $225,000 (15,000 x 15). You can prepay a grandchild’s tuition directly to a college without limit. You can pay a person’s medical care for treatment not covered by insurance.
5. Make gifts to grandchildren with your lifetime gift tax exemption.
If you are married, your spouse receives your unused estate tax exemption (currently $11.4 million). The same is not true for your generation-skipping tax (GST) exemption. It’s use it or lose it. Consequently, if you want to give to grandchildren do so through either lifetime gifts to grandchildren or naming them in a trust for their benefit in your Will or trust.
6. Make Charitable Gifts.
Now is the time to talk to a charity about the legacy you wish to leave. Find out about programs that could use funding or critical needs that the charity could address with your support. Give an outright gift for simplicity before you die or name the charity as a beneficiary of your retirement plan.
7. Get Married.
Many couples who were previously married to others live together without getting married. They fear the commitment and the legal consequences if they break up. If you only have a few weeks to live, though, those concerns disappear. As a spouse, your partner will have many more rights than if he or she survives you as a friend. If you want your partner to receive your estate, why not tie the knot!
8. Consolidate Accounts.
You may have multiple brokerage accounts and stocks held in street name or in a dividend reinvestment plan (DRIP). With little time left on the planet, diversification and saving brokerage fees are no longer a major concern. Consolidating all of your investments into one brokerage account would greatly simplify your estate.
9. Exercise Powers of Appointment.
Are you the beneficiary of your parents’ trusts? If so, then speak to the attorney who prepared the estate plan and get a copy of those trusts. Have your attorney determine whether you have the power to appoint the trust principal to others including charitable organizations. If so, have your attorney prepare the documents to exercise your power of appointment. Confirm the effectiveness of the exercise with your parents’ attorney.
10. Confirm all beneficiary designations in writing.
Most people designate beneficiaries when they set up an account. You may have set up the account 10 years ago and have no idea who you designated as beneficiary. Now is the time to confirm who are the beneficiaries and change them if they do not conform to your current estate plan.
11. Create a joint account with sufficient funds to cover your final expenses.
Many expenses will arise upon your death. Who will pay for your medical bills, income taxes, cremation or casket, the funeral, the reception, and burial (or scattering of ashes)? Sometimes it can run in excess of $10,000. Estimate what those expenses might be for you and either prepay them or fund a joint account with your Executor (the person who will carry out your Will). By creating a joint account, your Executor will have immediate access to the funds to pay for final expenses. The joint owner will not even need to wait for the death certificate to cover these costs.
12. Exercise Powers to Appoint Successor Trustees.
Sometimes trusts have powers to appoint Trustees. If you are the Trustee of a trust, look for the power to choose a successor Trustee. If the trust contains such a power, appoint the right person to succeed you as Trustee of the trust.
13. Revoke old trusts and obsolete premarital agreements.
Are there old trusts you never funded with provisions that no longer make any sense? Do you have an old premarital agreement that seems obsolete given how long you have been married? Consider revoking them so no confusion occurs regarding the validity of those legal documents after you die.
14. Convert Traditional IRAs or 401(k) plans to Roth IRAs or Roth 401(k)s.
If you have traditional IRAs or regular 401(k) plans, consider converting them to Roth IRAs if you have large medical expenses in the final year of your life. The medical expenses will offset the additional income tax owed upon converting traditional IRAs and regular 401(k)s to Roth IRAs and Roth 401(k)s. It will not only wisely use your medical expenses, it will free beneficiaries from paying income tax on withdrawals from your IRAs and 401(k)s.
15. Provide Employee Benefit Information.
If you work for a large employer like General Dynamics, Pfizer or the State of Connecticut, you have valuable employee benefits that may be due upon your death. Your employee records for a pension, 401(k) plan, deferred compensation, or profit sharing plan could help your loved ones. The information from your employer is not always accurate and sometime cannot be found by the employer. Certainly, information on who to contact in the Human Resources department and who are informed co-workers can prove most valuable.
16. Organize all of your Insurance & Retirement Documents.
Executors spend a lot of time hunting for long-term care insurance policies, life insurance policies, and health insurance information. They often need to find annuity contracts and IRA beneficiary designation forms. Assembling all of those documents will make your Executor’s job much easier and save legal costs.
17. Complete a Personal Affairs and Funeral Arrangements Checklist.
You need to write down important information such as:
•what you own
•who to contact after you pass away
•what you want for your wake, funeral and burial, or cremation and memorial service
•what should be in your obituary
See our Personal Affairs & Funeral Arrangements Checklist. Write down this information and giving it to your Executor and lawyer will prove invaluable to your family and give them peace of mind that they knew what you want and tried their best to follow your wishes.
18. Arrange a Care Plan for Your Pets.
You owe it to your pets to have a plan for them as well. Who will take them into their home? What do they eat and who is their veterinarian. What funds have you provide for their care? See our article Providing for Pets for more information.
19. Find Important Government Documents.
Assemble your social security card, birth certificate, marriage certificate, naturalization papers, green card, and DD-214 military discharge papers. You may be the only one who knows where they are kept because they may have been issued 50 years ago.
20. Complete a Digital Asset List.
It is virtually impossible to gain access to your online life without usernames and passwords. Creating a Digital Asset List can give your executor access to your bank accounts online, the ability to pay bills and investing funds. It can also give your executor the ability to access your social media accounts such as Facebook, Twitter and LinkedIn. Passwords to laptops, tablets, cell phones, and desktop computers must go to the person you trust – your Executor. See our Digital Assets Checklist to learn more.
21. Inventory Your Safe Deposit Box.
Go to the Bank with your Executor to assure that your Executor’s name is on the box and he or she has a key to the box. Inventory what is in the box so you know what will be found after you are gone.
22. Resign as Agent, Trustee or Executor.
If you serve as a fiduciary under a Durable Power of Attorney, a trust or a Will, it is time to resign and turn everything over to a successor. Send notice of your resignation to beneficiaries, financial institutions, accountants, and lawyers. It will complete unfinished business and prevent any legal actions for breach of fiduciary duty. Consult your attorney to make sure all releases from liability are secured.
23. Establish a Caregiver Plan for Your Dependents.
If you have minor children, provide care for a spouse or adult children, or are guardian for a child, you must create a detailed plan for their care. An experienced estate planning attorney can help you create a memo that clearly describes what your dependents need, the resources available to provide for those needs, and the people and organizations who can help meet those needs.
In Conclusion
Not all of these strategies may apply to you. In the short time you have left, you may not even be able to accomplish the strategies that do apply to you. You will certainly need the assistance of a spouse or a close friend (preferably your Executor) to accomplish these last minute tasks. Nevertheless, the more strategies you consider and act upon, the more efficiently your Executor will administer your estate, the better care your dependents will receive, and the sooner your gifts will make a difference for charity and your loved ones.
If you only have a short time to live and need help with financial estate planning, contact our office today at (860) 442-0150.
