May 2024
Barbara O’Neill, Ph.D., CFP®, AFC®
Distinguished Professor and Extension Financial Management Specialist Emeritus
Rutgers Cooperative Extension
The statistics are startling! Two-thirds of U.S. adults have no will and die intestate, leaving their state of residence to decide the distribution of their assets. Typically, the order of priority is surviving spouse, children, grandchildren, parents, siblings, and cousins. Distribution percentages to each type of heir vary by state.
A will, living will with health care proxy, and durable power of attorney are highly recommended. In plain language, a will states, "where your stuff goes" and names an executor (person or business) to manage distribution of your assets. A living will states preferences for end-of-life care and appoints an agent to speak up for you if you are unable to. A durable power of attorney appoints an agent to manage your finances in the event of incapacity.
Five other documents can also make estate settlement more efficient, less stressful, and/or less costly. Each one is described below. The good news is that you can use a "small steps" approach to estate planning and tackle each one gradually (think 10–15 minutes per day) after legal documents are prepared (don't procrastinate on those!).
Separate Writing- This is a list that describes who should receive tangible untitled personal possessions. It should be kept with a will, but is not part of a will, and can be written in your own handwriting or prepared on a computer using Microsoft Word or Excel. Very simply, it is a table with three columns: 1. Name of beneficiary, 2. Description of gift, and 3. Location of item. There should also be two lines at the bottom, one for a signature and the other for the date that the document was prepared. If changes are made later, they should be initialed and dated.
Letter of Last Instruction- This is a letter or list (PDF) that provides information and guidance to family members and/or an executor to use upon your death. Items that are typically included are: names and contact information for family members, close acquaintances, and professional advisors (accountant, lawyer, investment advisor, insurance agent); funeral wishes (e.g., burial vs. cremation) and prepaid arrangements (if any); people and organizations that should be notified about your death; memorial service preferences (e.g., prayers, poems, music); organizations to receive memorial donations (if any); description of the location of important papers; and a list of financial accounts, credit card accounts, and automatic payments that are tied to credit cards or a checking account.
Death Notice/Obituary- One of the hardest things that survivors need to do is write an obituary for their loved one so consider doing this yourself so it is 95% completed before you die and you know that it says things about you that you want. Some people write two obits: a standard one for newspapers that have word limits and pricey fees and a longer, more personal, obit for online distribution, sometimes as part of a tribute web page with photos and videos of the deceased. There are dozens of online resources and obituary templates to help write an obituary.
Digital Assets Inventory- Digital assets are any personal information stored electronically on any electronic device (e.g., laptop, tablet, cell phone) or "cloud" server. Think login credentials for e-mail accounts, financial accounts, heath care portals, online retailers, publication accounts, social media platforms, and more. The best way to determine your digital assets is to identify them by general category (e.g., online retailer accounts and financial accounts) and then prepare a detailed inventory. A digital assets inventory (PDF) is a detailed list of digital assets along with their username, password, or other identification information (e.g., PIN number, challenge question answers).
Beneficiary Designations and Personal Representatives List- It will save your executor and heirs time and stress if you prepare a list (PDF) of personal representatives for the three legal documents noted above and beneficiaries named in life insurance policies, annuities, and tax-deferred retirement savings plans (e.g., 401(k)s, 403(b)s, and IRAs). Ditto for persons named in Payable on Death (POD) designations on bank accounts and U.S. savings bonds and Transfer on Death (TOD) designations on taxable account investments (e.g., mutual funds). These assets can usually transfer quickly to beneficiaries- free of probate- with some required paperwork and a death certificate.