Each of us will die. Even though we know this, most find that planning for death is not easy. Preparing for the inevitable, whether close at hand or in the indeterminate future, can help your family through the difficult process of death and its aftermath. Much has been written about providing financial security for your loved ones following death. Often neglected in the preparation, however, are practical considerations to assist your family and fiduciaries in the time immediately before and immediately following death.
Thoughtful, organized preparation can provide your family with information and much needed guidance during a stressful time, allowing for your desires to be followed with a reduced possibility for conflict among family members.
This article highlights some practical things you should consider when preparing for your death or the death of a loved one.
Review Current Estate Planning Documents
Keeping estate planning documents (such as your will and/or revocable trust) up to date allows your property to reach your heirs and confirm that the appropriate fiduciaries have been appointed to carry out your intentions. Your fiduciaries will also need to properly settle your affairs by satisfying your debts, paying your final taxes and distributing what is left over to your heirs. When reviewing estate planning documents, consider the following questions:
- Will your beneficiaries receive property outright, and is that appropriate? For any beneficiary unable to properly manage wealth, consider creating a trust so that your legacy is protected while being made available (per the trust’s terms) for the benefit of your beneficiary.
- Have tax laws changed in a way that would adversely impact your plan? Alternatively, have tax laws changed in way that would allow you to simplify your plan?
- Have you named the right fiduciaries? Perhaps circumstances have changed such that the executors, trustees and agents named in your current documents are no longer appropriate. For example, has your named fiduciary moved away, had health issues or retired? If so, perhaps a new fiduciary is appropriate.
- Do your beneficiary designations reflect your current plan? Life insurance and retirement plans (and certain other assets) do not pass through your will, but by beneficiary designation. Have you checked all of your beneficiary designations to ensure that they match your current plan?
- Is your will self-proving? Many states allow an extra document to be attached to your will so that the witnesses do not have to appear and authenticate your will during the probate process. This extra document should be signed at the time you execute your will. (Probate is the legal process by which a document is authenticated as your will.) If your will is not self-proving, consider making it so.
- Have you moved since your estate planning documents were last prepared? Laws can vary greatly from state to state. If you have moved since your estate planning documents were prepared, the laws of your new home state may adversely impact your plan. Consider changing your documents to reflect the laws of your new state.
Your attorney and other advisors can help you keep your estate planning documents updated and appropriate for your family’s unique situation.
Assemble a Fact Book of Important Information for your Fiduciaries and Beneficiaries
Think of the things you use every day. Think of the people who you interact with, such as friends and business associates. Think of the services you access. If you suddenly were no longer here, would your family and fiduciaries know who to contact and how to gain access to accounts, records and electronic information? Creating a “fact book” containing important information will help your fiduciaries administer your estate and wind up your affairs.
Each fact book will be different depending upon the life of the individual creating the book. No matter how simple or complex your affairs may be, following your death it becomes much harder to adequately settle your affairs without accurate information. Therefore, consider memorializing the following information for your family in your fact book.
- Provide the names and contact information for all of your advisors, including your:
- banker and other financial advisors;
- insurance professional (with a list of carriers and policy numbers);
- spiritual advisor;
- funeral director (with information regarding any prepaid funeral trusts);
- cemetery director (with plot information, and the location of the deed); and
- other important people who should be notified (such as, business partners, managers or subordinates).
- Provide information regarding the location of your original documents, such as your will, any trusts, insurance and annuity contracts, buy-sell agreements, business documents and any other documents that would be relevant to your particular estate.
- Provide information regarding your financial accounts, including the name and contact information for the financial advisor who maintains each account. It may be important to provide information regarding how and when an asset was acquired.
- Provide information regarding your online presence, such as account names and even passwords. The use of this information is subject to each online account provider’s service agreement (which vary greatly from provider to provider). If the provider’s service agreement allows you to designate a successor user for an account, do so in compliance with the service agreement and list that person in the fact book. Remember, in some jurisdictions it may be against the law (subject to criminal penalties) to use someone else’s passwords. Be sure to consult an attorney before attempting to access a decedent’s online or social media accounts.
- Provide information regarding the location of previously filed tax returns (or actual copies). It is especially important for your fiduciaries to have copies of your previously filed gift tax returns, as copies must be filed with your estate tax return.
It may also be important to provide your family and fiduciaries with important instructions, such as your desires regarding the disposition of your bodily remains. In some jurisdictions, it can take time to probate your will. While including your burial instructions in your will may be useful, a delay in probate can render them moot. Consider providing specific instructions in a separate document that is witnessed (and, perhaps, even notarized). In this way, your family will know how to handle your funeral without having to wait for probate.
Remember “Who Does What” and Appoint the Right People
As we age, we create structures and ask (or formally appoint) people to assist us. We name agents under powers of attorney, create and fund revocable trusts and engage other service providers to help us with things we are less able (or no longer desire) to do.
It is important to remember that many relationships expire when you do. For example, your power of attorney is no longer valid after your death and its use after you have died could expose your agent to personal liability. If you are relying on the agent under your power of attorney to help you with financial decisions and transactions, that person’s ability to do so ends with your death.
You may wish to have plans in place to ensure that funds are available to your family for the period of time between your death and when your executor gains access to your financial accounts. This could be as simple as keeping cash in your home to cover a few weeks’ expenses or creating and funding a revocable trust with a successor trustee.
Be sure your powers of attorney confer the necessary powers on your agents. Don’t simply rely on a “form” document. Some state laws require special acknowledgement of important powers, such as the power to make gifts, change retirement plan beneficiary designations or create trusts. Be sure that your power of attorney gives your agent the powers you intend your agent to have. An attorney who specializes in estate planning can make sure you have an appropriate power of attorney. To corrupt an old maxim, “it is better to have the power and not need it, than to need the power and not have it.”
Be sure you have a living will and/or healthcare power of attorney (the laws of some states require both) so that your end-of-life decisions are carried out, even if you are unable to communicate them. It is very important to select the right person to carry out your desires. You may choose to appoint a child or children as healthcare agents. While that may make sense, be deliberate in how you draft these documents. For example, if an end-of-life decision requires the unanimous consent of your children and one of them does not agree, then your instructions may not be carried out. Conversely, if your healthcare document requires a majority vote of your children, a child who dissents may become estranged from the family. You may wish to discuss these difficult, but very important, decisions with your family before selecting agents to ensure that the persons you appoint will carry out your instructions. Finally, one need not appoint family members to this (or any other) fiduciary position. If naming family members will cause pain or discord, consider naming a friend or trusted advisor to ensure that your wishes are followed.
Be sure your healthcare/end-of-life documents and financial power of attorney permit your agents to enter into agreements with service providers. By having expansive powers of attorney (both financial and healthcare), your agents can ensure you receive appropriate care, including hospice care, even if you are unable to communicate your desires. It is strongly recommended that before your agents enter into any contract with a care facility that they consult with an attorney, as executing a contract in the wrong fashion can subject a family member to personal liability as guarantor for the cost of your care.
Prepaid Funeral Trusts
It may be possible to set aside funds to pay for your funeral before you pass away by creating a prepaid funeral trust. According to the Internal Revenue Service, a funeral trust “is an arrangement between the grantor and funeral home [or] cemetery to allow for the prepayment of funeral expenses. The funeral trust is a ‘pooled income fund’ set up by a funeral home [or] cemetery to which a person transfers property to cover future funeral and burial costs.” Some of these arrangements can allow you to “lock in” the cost of the funeral services that you have purchased and that will apply when you ultimately pass away. It is important to select a reputable funeral service provider before creating such a trust. Also, be sure that the trust can be transferred to another provider should the original funeral service provider go out of business. Before entering into any trust arrangement, particularly an irrevocable trust, you should consult an attorney. This is especially important as these arrangements can impact Medicaid planning. After careful consideration, you may find that arranging for your funeral in advance and setting aside the funds necessary to pay for it in a funeral trust can relieve your family of the stress attendant upon making those arrangements while they are grieving your loss.
Hospice Care and End-of-Life Decisions
As the end of life approaches, particularly when caused by an intractable progressive illness, hospice care may be necessary. Hospice care may be welcomed because of its philosophy of providing compassionate care to individuals in the final phase of life when death is inevitable, and when no active treatment is given for the serious illness leading to death. Hospice care generally accepts the inevitability of death, and care rendered through this model will neither accelerate nor postpone death but will allow a person’s symptoms to be treated to a level of comfort while not treating the underlying illness. Hospice care focuses on the patient and the family with respect to decision-making while hospice professionals work diligently to ensure the patient’s final days pass with dignity. Family updates and open communication, often in the form of regularly scheduled family meetings with the hospice care team, can help manage expectations about the final days of life and the process of death, and provide a network of support for the family. Of course, it is your decision as to whether hospice care is appropriate. Yet, if you are unable to communicate or lack the capacity to understand, be sure your agents under your healthcare power of attorney and living will understand your desires with respect to end-of-life care and that your documents confer upon them the authority to obtain hospice care if it is desired.
Preparing Now Can Save Heartache Later
End-of-life decisions are difficult. The death of a loved one can bring pain, sorrow and even regret. Preparing for the inevitable can help your family and fiduciaries through a difficult time.
By providing clear instructions with the documents necessary to carry them out, your family and fiduciaries can adequately prepare for and manage your affairs after your passing. By providing a fact book, they will know how you would like things handled after you are gone and who to contact to make that happen.
Your PNC Private Bank team can help you prepare for whatever the end of life brings. Let us help you and your family assemble the tools to help your family navigate a challenging but inevitable time.
For more information, please contact your PNC Bank advisor.