Today I want to give you some news that will be really terrible for many of you – you’re going to die. It might even hurt. While I’m not scared of dying so much, I don’t want my family to be in extra pain when I go. That’s what prompts me to write today’s post – no, I’m not dying of some rare disease (that I know of), but I love my family. I want them to grieve (I know that’s a little selfish, but don’t you want your family to miss you when you’re gone?), but I don’t want them to have a difficult time otherwise. What’s the best way to help them? My answers may surprise you.
The Requirements
For many people, they refuse to think about death or what happens when they die. I believe this is why a lot of people don’t like church. I also think it is why a lot of people won’t make a plan for what to do with their stuff or how to take care of their family when they’re gone. Let’s talk about some necessities for estate planning, starting with four major documents you need to have.
- A Last Will and Testament (a.k.a. “Will”) – this document allows your wishes to be carried out when you die. Who do you want to raise your kids? Who gets the house? Where do the investments go? What about that prized coin collection? A proper Will answers all those questions, or at least officially states your position. If you want your family to be able to deal with your stuff when you die, you need a Will.
- A Living Will (a.k.a. “Advanced Directive”) – This is the document they always ask you about if you go to the hospital. It is the document that answers, “if I’m on life support, should they unhook me, wait a while, or let me be a vegetable?”
- A Healthcare Power of Attorney – If you’re unconscious, doctors can’t ask you if you’re allowed to take medication or have a procedure done. This document tells the doctors who you trust to make those decisions if you can’t make them on your own.
- A Durable Power of Attorney – This is similar to #3, but it applies to pretty much all situations (not just health care). This document allows the one you name to make financial decisions for you, sign paperwork for you, even file taxes for you. It is a SERIOUS document, but a powerful one that is needed if/when you aren’t able to make some decisions on your own.
If you have those four documents in place, you’ve officially done the bare minimum preparation for planning your estate. I can hear you now saying, “…but they cost too much…” Baloney. Unless you have a super complicated situation, you can get these forms to fill out yourself from places like LegalZoom, US Legal Forms, or Mama Bear. If you need personalized attention, you can hire an attorney to put these forms together for you. My aunt has done estate planning for decades and does a top-notch job for what I believe is a reasonable price. Yes, it is more than these online services, but it is also one-on-one assistance through the process and all you have to do is read and sign the documents.
These documents should all go in your Love Drawer with the rest of the things Stacy outlined in that post. Love your family enough to do this simple thing.
One More Thing
If you earn an income that your family depends on, please be sure to get life insurance. Don’t be a moron and skip this part PLEASE! I know those are strong words but as our breadwinner, if I kick the bucket and didn’t have life insurance, Stacy’s left to figure out how to keep up our house, take care of two kids and put food on the table each day. While I know she’s quite capable and there’s nothing wrong with a woman working outside the home, it would mean Humorous Homemaking would become Stacy goes and gets a day job and puts the kids in daycare. That’s not her calling and it would be wrong of me to impact our family in that way when it could easily be prevented.
If you’re not a breadwinner or the income you bring in isn’t required to maintain the household, life insurance isn’t quite as important, but it also isn’t very expensive for most people. Get good LEVEL TERM life insurance about 10x the amount of your income and you’re covered. How much will it cost? It all depends on your age, your health, etc. For us, I got this insurance on myself for about $200 per year. You can read more on life insurance in this post I wrote a while back.
Well, it is your turn. I know many of you have lost loved ones and dealt with the havoc of those who died without these simple things in place. How did it impact you?
Fantastic post, Barry! We need to do these things, but we thought we had to scrape together the money to go to an attorney for them all. We’ll get them done right away, now that we know. Thanks so much! I’ll be sharing on FB and Pinning. 🙂
Barry,
It’s also worth noting that, if you do have life insurance, the beneficiary designation on the policy often overrides any instructions left in a Will. Any person who buys life insurance and has estate planning in place needs to double-check the beneficiary designation(s) with his/her attorney.
EXCELLENT point! Thank you for adding!
I would add that for many people, a living revocable trust is a must. It can help hold assets if you die while your children are still minors and unable to inherit (and probably unable to responsibly handle their inheritance), and it can help your loved ones avoid probate – thus saving them going through the courts and potentially losing part of their inheritance to fees and court costs. They can be costly to set up, but I think it’s worth every penny to know my survivors won’t have to deal with probate to get the assets I want them to have after I’m gone.
Some more info for your Oklahoma readers. I am a Certified Legal Asst. in Oklahoma and prepare basic legal documents to supplement my income. I do not draft Wills though simply because usually clients have questions that not beng an attorney, I am not allowed to answer because it would be giving legal advice.
1. Oklahoma does not have a “Financial Power of Attorney.” We have a Limited Power of Attorney and a Durable Power of Attorney. The Durable Power of Attorney includes a Guardianship provision AND allows you to transact business as the person whose power you hold. As Barry said…BE CAREFUL WITH THIS DOCUMENT…and make sure you implicitly trust the person to whom you are giving your power.
2. An Advanced Medical Directive IS NOT the same as a Do Not Resusitate (DNR). An Advanced Directive only applies in certain circumstances, and in Oklahoma, requires two doctors to bring it into effect. DNRs are exactly what they say. If you go to the hospital with a heart attack, and you have one signed, a lot of the time, the will not touch you. There are exceptions. A lot of hospitals are changing their forms that is more like a Directive.
3. Most investments allow you the chance to designate a beneficiary, and Oklahoma allows you to hold real propert with another person in joint tenantcy. Both of these have the affect of avoiding probatr (saving money) altogether.
Simply put…READ EVERY WORD OF THE DOCUMENT BEFORE SIGNING, and if you are not sure, ask questions until you do understand it. A competient legal professional will not have a problem explaining until you understand.
Sorry for the book on your comments, Barry and Stacey.
Thanks for adding to the discussion. Good details!
Good time for this post. I’m currently visiting my aging parents and this made for an easy discussion. I am currently on the bank accounts and have durable power to healthcare only. Should they do a power of attorney and a last will or just a last will? What do Ya think?
The advice of the elder law experts I know personally (and even worked for) said you should always have all four I mentioned. A will covers what should happen after your death; a power of attorney can be put into place before death and can help tremendously thereafter.
When our little girls were very small, we went to a highly recommended lawyer who had prepared wills for many of our friends. It cost around $500 to have wills made for each of the two of us. Unfortunately, for some weird reason, the wills were written incorrectly, and when we reviewed them a few years later, we noticed the problem. Basically, our estate wouldn’t have ended up going to our children! We were shocked! We went back in to the lawyer to ask him to make the correction, and he wouldn’t unless we paid to have new wills again. We were so surprised at his attitude about this, as we were very kind about it. And he hadn’t messed up our friends’ wills at all. If it was just up to me, I would have pushed to have him make the necessary changes at no cost, but my husband is not one who would have done that, so we didn’t. The lawyer passed away a few months later and his office was shut down. So after spending that kind of money on wills that were no good, we have been upset enough about it that we just haven’t gone anywhere to have a new will written up. Plus, there really isn’t a lawyer that anyone recommends around here anymore. No one seems to really like/trust any of them in our area. So we don’t have a will anymore. Sad, but true. 🙁
Be careful – although I’m not a lawyer (thank you, Lord – not my calling), just saying you don’t like the will you wrote up before doesn’t mean it automatically goes away. Until you revoke it in writing, it is a legal and binding document that the courts must follow. One of the first statements in most wills is a revocation of any previous documents. I’ve you’ve not revoked it in writing, it could still stand. At a bare minimum, please find out the answer to this issue – I would hate for your attorney’s mistake to cost your family so dearly when your intentions were otherwise.
I agree with everything except the insurance amount. Life insurance is very important for every member of your family. My in-laws have dealt with lots of tragedies in their lives. My FIL and MIL both lost their spouses early in their marriages (and then married each other). Since my MIL’s deceased husband had life insurance, she was able to grieve and not have to worry about work for a full year, but then spend the next 8 years working just part-time for something to do and supplement, and still almost fully care for her son.
My FIL is another story. When his wife died after a 3 year battle with cancer, he was left with 3 young children and astronomical medical bills. She had no insurance, so he was left trying to find a way to care for these kids and pay bills. While it was a difficult decision, he had no way to take any break from work and grieve, and then he also felt like he had to get married again right away to have someone raise his kids and help at home. While God worked through this situation, if there had been a decent amount of insurance on her instead of a simple burial policy, he would have had more freedom to do what he felt best for himself and his family, not forced to make quick and life changing decisions.
Term insurance is great, and a good policy to cover at least the time until your youngest graduates college is a MINIMUM. Life insurance is more than money to cover the funeral and replace a few years salary, it’s the way to make sure what you want for your family happens, even if you’re not there to see it. My husband and I have enough term life insurance to cover paying off our house, any debts, and to put into savings for each child to cover their cost of college (varies for each family, but how much would it take to make sure your family has the life you want without you there?). We have Whole Life insurance policies on ourselves for enough to cover burial, any medical expenses from a traumatic death, and several years of income (the 10x annual income amount).
Our Children also have a small Whole Life insurance policy on each of them. There are many diseases children can get that will make them unable to ever get life insurance (diabetes, cancer), and I am protecting their future insurability for $15/month to ensure that they have a policy that will not only cover a burial and a little extra for either medical expenses and time for us to grieve if they die young, but they will also be able to increase upon at certain ages and life events with no medical testing if they ever cannot get insurance on their own. My SIL has diabetes and will never be able to get life insurance beyond what an employer might provide of 1-2x annual salary.
Term is a great option for short-term if that’s all you can afford, but can you afford getting sick or hurt and not be able to get life insurance when you need it? We thank God for his provision when my dad had cancer. A week before he was diagnosed he got a brand new policy, and before he cancelled his old policy he received the diagnosis. The whole time he was sick, he had peace knowing that God had provided a way for his family to be taken care of if he died, even though he hadn’t planned it that way and was just planning on having a small policy of 10x salary (as the sole bread-winner with 4 kids). He now has kept both policies as he will never be able to buy life insurance on himself again.
Sorry for the long-winded reply, but this is something very dear to my heart as I’ve seen first hand what can happen without a good life policy. While not having those 4 documents may cause months to years of legal fees and probate, if you don’t provide financially for your family, what good is that house or car if they immediately have to sell it and struggle for years to get by while the remaining parent has to work hard just to pay off medical bills, legal fees and daycare?
Thanks for sharing your perspective, Sarah. You’ve obviously had some of these insurances benefit you. While if tragedy strikes, the more insurance you have the merrier, I believe term insurance is still the better choice as a part of a long-term financial plan. The goal with any life/disability/illness insurance is to replace income lost to those circumstances. So we have a policy on me that would allow Stacy to continue on financially with little impact. That is a level term life insurance equal to roughly 8x my income (10x when I first signed up, as my income has risen while our financial needs have not). We have a smaller policy on Stacy because, although we will not have an income to replace if/when she passes, if it is before our children are grown, I will gain extra expenses for childcare and schooling that we do not have because Stacy stays with and cares for them.
Insurance is also a VERY emotional issue, causing many to far over-insure. I’ve counseled more than one person who was nearing foreclosure, but were paying $500+ per month on multiple life insurance policies, a cancer policy, heart attack coverage, short- and long-term disability that is already offered through their employers, etc. As I think my post and your response will hopefully pull together for those who read – there must be a balance.
One last thought – I am NOT a fan of whole/variable life insurance. As insurance, it is expensive. As an investment, returns are low. I would ask anyone who is a fan to put their thoughts out here in the comments, but I’ve yet to find a good reason to take on a whole life policy EXCEPT when there is severe illness that prevents you from getting any other type (and then you REALLY overpay).
Thanks again for your input!
I believe my reason for buying a whole life policy was a great one even though I know term is cheaper in the short term. This policy will save us money and the risk of losing it in the long run.
When I went to inquire about getting life insurance on my infant son the company we were talking with offered a 10 pay policy, meaning in 10 years it is paid up and we do not have to worry about not losing the policy if later in life we cannot afford to keep up with the payments.
Long story short(er) we pay about 28 dollars a month (I’d have to go look up the actual mount as it is lumped in with alot of our other policies) and we only have 1 1/2 years left on it. It would be enough to cover burial and at least a year of my husbands salary.
Oops, this policy would cover my sons burial and about 6 months or more of my husbands income. I got the amount confused with another policy of ours. Also, since we bought some of our policies this very well known company has quit offering 10 pay policies and has started offering 15 pay policies.
I’m glad you’re pleased with your policy choice and I hope you never have to use it.
In deed, I hope we never have to use it but at some point in time I know somebody will (Hebrews 9:27). My hope is that when he grows up he will eventually have a wife and children as the beneficiaries and they will not benefit from the policy (plus any others he may purchase as an adult) until his grandchildren are grown with children of their own.
One thing that is good (and what we did) is the Whole life policy is the amount for burial and 10xs the salary, because that need will go on even after the kids are grown, and insurance is only going to get more expensive as you get older. The term is a great place to get the large amounts you need for college expenses and while your house is not paid off. We have a family term policy that is very affordable for my husband and I for $500,000 on each of us, (which for a large family is necessary for college, ahh!), and it covers every current and future child for $10,000. What’s nice about the whole life policies we set up for our kids, is that by the time they’re 21, the cash value accrued will pay for all future premiums, so unless they increase the insurance amount, they will never have another premium to pay.
There are so many options out there, and sadly there are financial planners that talk people into too big a policy, too many policies, or a fancier policy than necessary. As a former financial planner, it burns me. Some days it’s tough and I’d love to get rid of that payment for insurance, but I’ve seen what some people pay for policies once they’re older, or once they’ve been sick, or seen what happens without insurance. Thankfully, we can afford it with no issues. But some days I selfishly want cable… 🙂