What will happen to your dependents if something unthinkable happens to you today? Have you ever thought of end-of-life financial planning? Well, it’s actually hard to think of the end of your life and plan your finances. It sounds very unpleasant to you as well your dependents. But it’s important to do so when you are healthy and keep your finances in order and your wishes in writing.
Yes, Antoine de Saint-Exupery rightly said “a goal without a plan is just a wish”. Therefore, it’s a good idea to plan yourfinances if your goal is to protect your dependents against adverse financial situations in your absence.
What is financial planning?
It is a detailed evaluation of your current as well as future financial condition, and, based upon that evaluation, setting up a plan to cover your financial needs, manage your savings and allocate your assets.
5 tips for end-of-life financial planning
It’s really important that you discuss this with a professional financial planner to better understand how your assets should be handled in your absence. For effective end-of-life financial planning, the first thing you need to do is to prepare a checklist.
1. Create a will
The first and most important step you should take is to make a will. A property will is a systematic way of distributing your assets among your dependents. It helps you specify which assets you want to allocate to whom. If you die without a will, your dependents may face a lot confusion and tiresome legal formalities. The court will have the ultimate authority to divide your property based on property inheritance laws. If you have minor children, you can appoint someone as the custodian of your will. The process of making a will may vary from state to state.
2. Making a living trust
Another way of chalking out your end-of-life financial plan is to make a living trust. A living trust can help you manage your properties both before and after your death. For a number of reasons, you might want to build a trust. For example, you might want to leave a substantial amount of your assets to charity. In that case, you can set up a charitable trust and allow the trust to manage your assets.
You can also opt for a trust for your children with particular directives regarding how and when they will be able to access your savings. However, there are certain costs involved in setting up a trust, although it may help your beneficiaries get tax benefits. You can include assets like vehicles, stocks, bank accounts, bonds, antiques, artwork, jewellery and real estate in your trust.
3. Choose your beneficiaries carefully and review them
It’s always important to cross-check the list of beneficiaries you have made. Make sure your assets go to the right person after your death. It is very difficult to change or remove beneficiaries once you have included them in your list of beneficiaries. If you have a joint bank account with your spouse, make sure automatic survivorship is allowed, so that the account gets automatically transferred to your spouse after your demise.
4. Check your Life Insurance policies
If something unthinkable happens to you, Life Insurance policies can really help your dependents by providing some extra income. These policies are particularly designed to replace lost income. It’s important you review your Life Insurance policies bought early in life to make sure you have got enough policy coverage to meet the current or future financial needs of your children/dependents.
5. Keep a record of your online accounts and payments
Another important thing you should be very careful about are your online banking accounts. It is advisable you maintain a list of your online accounts and their passwords so that you can pass them to your family members when you are not in a position to use them. Otherwise, your dependents might have a tough time requesting banks for access to accounts and passwords when you are not there. Also, you should keep a record of the payments that you have made against various bills.
It’s important that you don’t delay your end-of-life financial planning. Although it’s not possible to predict and cover every eventuality that your dependents may face, it’s important you sit with a financial expert to discuss what you can do to provide the best coverage to your near ones.