How many times have you told your loved ones that you don’t want to be a burden, and saddle them with a financial mess at the end of your life? It’s a common sentiment.
Despite their good intentions, however, many people do leave a pile of bills. So, what happens to unpaid bills, and how can you make sure that your loved ones don't have to spend too much time getting those bills paid?
Better to start a plan now, should you become incapacitated or die prematurely. Doing so will lighten the load for your grieving loved ones who must announce your passing, write your obituary, arrange your funeral, empty your home, and disperse your belongings, among other things.
Following are more tasks to consider. Be sure to consult a financial adviser, estate attorney or CPA for advice, as needed.
1. Start by getting — and staying — organized
If you haven’t done so, compile your most important documents — bank, brokerage and retirement accounts; insurance policies; will or estate plan, living will, power of attorney; and your health care, Social Security and Medicare records. In the process, simplify if you can; multiple bank and credit card accounts can make things more complicated, says Martin Hewitt, special counsel at Fried, Frank, Harris, Shriver & Jacobson, LLP in New York, and a commissioner to the American Bar Association’s Commission on Law and Aging.
Don’t forget your digital assets. Hewett recommends making a list of the account numbers, as well as the usernames and passwords for every online account, including email, e-commerce and social media.
Now, familiarize yourself with both the low-tech (a fireproof briefcase or backpack) and digital options (a thumb drive for your laptop or online document storage service) for storing this vital information. Tell two individuals how to access these records — as well as extra house and car keys — in the event of your death or incapacitation, or a natural disaster. The Federal Emergency Management Agency (FEMA) offers a handy checklist for assembling such materials in its Emergency Financial First Aid Kit (EFFAK).
2. Figure out what you owe
Now, create an honest accounting of every liability you have now, or may have in the future, on a spreadsheet, and update it at least once a year. Include your mortgage, credit cards, personal loans, student loans or medical debts, as well as any loans you may have cosigned for others.