It’s Valentine’s Day, which means there’s no better time to talk about the most loving thing you can do for your significant other and your family: make sure they’re taken care of when you’re gone.
No, I’m not trying to sell you life insurance. In fact, I have often argued strongly against many life insurance products in my columns.
Instead, I’m urging you to be proactive about giving your loved ones everything they will need.
Here are three ways to lighten their burden after you pass.
A “Trustworthy” Option
When my dad died a few years ago, an emotional time was made much easier by the fact that my parents had all of their funeral arrangements preplanned and all of their financial information in one place.
Financially, everything was simple. They had arranged their affairs so that everything flowed directly to my mom without probate.
To do that, they set up trusts.
Most people think of “trust fund babies” when they hear the word “trusts.” But in its simplest form, a trust helps avoid probate, which costs money and can take a very long time. It’d be a shame for your family to potentially incur court costs and have to wait for what you generously want to give them.
By the way, establishing a trust doesn’t mean the money is put aside for your heirs and you can’t access it. Not at all. You can have full access to your money whenever you want it. Then, once you pass, it is very clear what happens next to those assets.
You can also set up rules. For example, my kids are in their very early adult years. Should something happen to both my wife and me, my kids would get enough to live on, but they wouldn’t get the full amount until a certain age.
My kids are good kids. But an exponential increase in one’s net worth in their early 20s may be too tempting for even the most responsible young adults.
If you do have significant assets, a trust can help your heirs avoid taxes as well. You worked hard for your money and have already paid taxes on it. The last thing you want is for your kids or other heirs to give up a sizable portion of your estate to Uncle Sam.
It does cost some money to set up a trust – usually a few thousand dollars, depending on how complicated the trust will be. But simple ones take an hour or so of meeting with an attorney and then reviewing and signing the paperwork.
Every financial planner I know has said a trust is worth every penny.
You don’t have to be rich to set up a trust. I strongly recommend looking into it rather than using a simple will.
Make Your Funeral Arrangements in Advance
Another thing that made it easier when my dad passed was that the funeral was prearranged.
My mom just had to make one call to the funeral home, and everything was taken care of. When I asked what I could do to help with the funeral, there was literally nothing left to do.
I remember what it was like when other family members passed – and the intense scrambling to put a service together and honor the deceased’s wishes.
If you can, prearrange your funeral and make sure your family knows how to put everything in motion. That way, they can spend more time comforting each other and less time trying to figure out details.
The Password Is…
It’s hard enough to remember our own online passwords, much less figure out our loved ones’. Make a list of passwords, and make sure your heirs know where that list is. I would code it somehow.
We have two electronic documents, one with usernames and another with passwords. I suggest that the documents have fake names, like “SummerTrip2015” or “WeddingSongs” – something no one would care about if they got access to your computer. Our kids have copies of the documents and also know how to access our computers.
If something happens to us, I don’t want my kids wasting hours on hold with the cable company, my cellphone provider, etc., trying to explain the situation and getting bounced from department to department. I want them to be able to log on and cancel my service with the click of a button.
These aren’t pleasant topics to talk about – and certainly not your typical Valentine’s Day fare. But in my opinion, taking care of these things now is the ultimate expression of love that you can show your partner or heirs.