Nothing is as natural as dying, and yet hundreds of Americans are not prepared for it. According to statistics, about half will pass away with almost no financial assets under their name. In the meantime, around 60% will not have any will or estate planning.
Death, therefore, can still a kind of burden—and a costly and complicated one—particularly for those left behind. Fortunately, it can be a peaceful passing if an individual can take the following steps before dying:
1. Talk to an Estate Planner
Those who have considerable assets need to talk to an estate planning lawyer. This is because rules about how to manage one’s estate can vary between states.
For example, the kind of probate depends on the value of the assets and the condition of the estate (if a will or intestate covers it). If the deceased has a personal property that amounts to $50,000 or less and doesn’t have any real property like a house or land, the will or intestate doesn’t have to go through open probate.
If the will or the intestate estate is not contested, the court doesn’t perform much administration. However, if these are being disputed, formal probate will occur.
An estate planner guides not only the individual but also the families who may be left behind. Those who specialize in financial planning can also advise on how to grow one’s assets while still living.
2. Know Your Net Worth
Many Americans mistakenly believe that their assets’ value is their net worth—that could be if they don’t have any debt. But studies have shown that an average American could have an average debt of over $90,000. It may already include student and personal loans, mortgage, and credit card debt.
Further, ideally, a person’s net worth should increase over time. Once they are around 55 and 64 years old, their average worth may already be $1.175 million.
To determine one’s net worth, financial and estate planners can help them calculate the figures. Many online tools can also do the math. However, the formula is simple: assets fewer liabilities.
Knowing an individual’s net worth can determine whether they have enough assets to cover the debts if they pass before completing the repayments.
3. Take Care of Taxes
Death doesn’t spell the end of taxes. In fact, the person may still owe money to the IRS, although this depends on the state. In Colorado, for example, the remaining family members need not settle for estate and inheritance taxes.
However, the federal government may collect one. The good news is the exemption is high. As of 2021, the limit is $11.7 million. Anything excess of this will then be subject to 40%.
Note, though, that the IRS may attach a tax lien on the estate. Unless this is settled, the rightful heirs may not be able to claim and use the assets.
To avoid giving family members headaches in the future, an individual needs to pay taxes religiously and correctly. Moreover, they may have to assign an executor who can negotiate debts with creditors and agencies like the IRS.
4. Consider Getting a Life Insurance Policy
A person can die without a life insurance policy, but this may be necessary if:
- The individual is the head of the household — The beneficiaries can use the funds to pay off loans or tide them over until they can generate their income.
- The person has considerable assets — The coverage can be used to pay off federal estate taxes.
- They plan to grow their money — Some life insurance policies today are already investment-linked. A part of the premium is invested into the holder’s preferred fund. Upon death, the beneficiaries can receive both the value of the coverage and the returns of the investment.
5. Draft a Medical Directive
Also known as advance directives, these are sets of instructions that may have to be followed if the individual is already too ill to make rational decisions or communicate them with family members and the healthcare team. For example, they may be unconscious or in a coma.
Two of the most common medical directives are the living will and medical power of attorney. In the latter, the document assigns a medical proxy that acts on behalf of the patient.
This person coordinates with the healthcare professionals and ultimately decides for the sick or injured individual, especially when there’s no living available.
Meanwhile, the living will guide those left behind on what to do in case the person can no longer decide. It can cover resuscitation, kinds of tests and treatments they allow, and organ donation.
A person’s death can be complicated and overwhelming for those left behind. For their sake, every American should consider planning it well.