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The 4 Most Uncomfortable Estate Planning Questions You MUST Answer

Estate Planning Tax Planning Retirement Planning

6 MIN READ

What will happen to my family and belongings after I die? This is one of the most uncomfortable, but necessary, questions we must ask ourselves for the sake of our family. A properly executed estate plan can thoroughly answer this question before your death to reduce the emotional stress that your passing will bring.

Estate planning is necessary regardless of your age and net worth. It should include all of your assets and possessions. Your financial assets may include, but are not limited to, property, vehicles, bank accounts, investments, and insurance. Anything you own should be included in the plan. Don’t forget to include family heirlooms or other items of sentimental value in your estate plan.  You’ll want to decide now who will receive which possessions and when they will receive them.

Estate planning is about more than your earthly possessions. What would happen if you were suddenly incapacitated? Who would take charge of your estate?

Here are 4 uncomfortable but key questions you must answer:


Question 1: If you both die, who will raise the kids?

No one wants to think about their own mortality, let alone their spouse’s. It’s hard to fathom both of you passing simultaneously or passing away before your children are old enough to take care of themselves. But we never know when the worst could happen. If you don't explicitly express what should happen to your minor children after you’ve both passed away because you are ‘intestate’ or without a will, then the courts will.

If you are a US immigrant, you may want to consider naming a guardian in the US as opposed to in your home country if it is your desire that your children remain in the US under the auspices of someone you trust. If you do name a non-US person as a guardian of your children, be sure to consider that potential guardian’s ability to return to and stay in the US during the petitioning process, the ability for the children to immigrate to the guardian’s country, and any tax consequences if your minor child were to move out of the country if they are the beneficiary of a trust.

In your will, name and document a chosen guardian to raise your kids in the event of a catastrophe. Talk to the potential guardian(s) - you don’t want this responsibility to be a surprise - and seek a lawyer’s help documenting your wishes. Your will should also detail the financial support that would accompany the guardianship of your children. This might take the form of a trust fund managed by a designated trustee. Sufficient life insurance coverage and the assignment of primary and secondary beneficiaries should be part of this discussion.

Related Article: When is it ok to withdraw money early from your 401K? 

Question 2: What are your current online passwords and answers to your security questions?

Our financial lives are often maintained online. The challenge comes about if you haven’t shared this information with family, a trusted advisor, or your attorney. They may find it difficult, if not impossible, to access necessary information to fulfill the requirements of your estate plan.

Use a “Digital Will” - use a cloud storage solution for file management and give your login information to a trusted person. If you're not comfortable with sharing your online data, then write down the information and place it in a safe deposit box.  Safe deposit box contents should be detailed in your estate plan. Whether hard copy or in a digital format, create a “folder of death” which contains all information anyone would need in case of your death. There are even some “folders of death” for sale, like the Peace of Mind Planner, that can help you get organized. If you prefer a digital solution, Everplans is a startup that provides a secure digital archive of everything your loved ones might need.

Consider designating a financial power of attorney who can help with your financial affairs if you ever become incapacitated. Make sure they know where your documents and passwords are located.

Related Article: Five Things Non-Citizens Need To Know About Social Security

Question 3: Have you named all of your beneficiaries? On all of your accounts, big and small?

Nearly all of your accounts allow you to designate your beneficiaries. For example, your pension and 401K will each require that you name your beneficiaries in the event of your death. Failure to name beneficiaries can lengthen costly court battles over your assets, and your assets may not be divided in accordance with your wishes. In addition, ‘Beneficiary’ designations at financial institutions on your ‘Transfer on Death’ (TOD) form trump those listed in your will and do not go through probate, so invest some time making sure they match up to avoid confusion or unintended consequences.

In addition, it can be helpful to communicate clearly who your beneficiaries are to the beneficiaries themselves (and who they are not). Some opt to keep this information a secret, sometimes using what is called a ‘silent trust’ or ‘quiet trust’. Using such a trust can help keep part of your estate out of probate and depending on how they are set up, they can reduce taxation on your estate. Speak to your lawyer if you think there will be any challenges to your will after you die.

Note: don’t name minors, non-US citizens, or animals as beneficiaries on TOD forms. It’s important to not list minors as beneficiaries on TOD accounts. This may result in a challenging situation if the children or grandchildren are still minors when you die. Minors do not have the legal authority to receive such investments and a court will have to appoint a guardian for that child until the minor reaches 18. In addition, most states do not permit beneficiaries that are non-US Citizens. You often need the social security number of a beneficiary to designate them as such in the account. Finally, animals are not allowed to be designated as beneficiaries. But of course you can name minors, non-US citizens, and animals as beneficiaries in your will. For pets, you may want to explore a pet trust.

Question 4: How long do you want to be on life support?

A car accident, unexpected illness, or injuries sustained during a natural disaster may place you and your family in an impossible position of deciding on whether to prolong your life with extraordinary measures like a breathing tube or ventilator. A living will (sometimes called an ‘advanced health directive’ is a statement that explains what you want to happen to your medical treatment if you are no longer able to express informed consent. care directive helps determine the level of care you want as your quality of life diminishes. It also helps loved ones through a difficult decision. You should also designate a healthcare proxy, sometimes called a ‘durable power of attorney for healthcare’, which is a document that appoints a person who makes medical decisions for you if you are not able to make them for yourself. You’ll want to communicate your wishes to your healthcare proxy clearly - both verbally and in writing and educate them about how they can best represent your wishes. Finally, you should complete a ‘disposition of remains’ document which details how you want your body to be treated after you die.


Need help consolidating your accounts? Understanding estate tax? Schedule a free consultation with MYRA Wealth.