Dying Young: It Does Happen. Lessons From the Front Lines.

On February 8th, our daughter lost her wonderful new husband after being married only three months. Just 42 years young, he succumbed to a sudden cardiac arrest while taking out the garbage.

I’d like to share three financial planning insights and lessons that I was reminded of as a result of this most horrible of family tragedies, the most poignant of which is that ALL of us, regardless of age or financial status, MUST prepare for the end of our lives, and we must do it NOW. It’s a cliché but true: you don’t know when your time will come, and unless you’ve been through it, you don’t truly understand the mess you will leave behind if you don’t take at the very least the following steps.

First, I don’t care how young you are, how healthy you think you are, and how absurdly slight the odds are that you, your spouse, or other close family members might die, you need a will. Yes, I mean you! And you may need something more than a will, like a living trust, if you have an estate that will need to be probated. This is because probate fees are extremely high, usually between $4-12,000 in attorney fees, plus a similar amount is paid to the executor. Probate proceedings also typically last a long time. In California, probate takes seven to nine months to be completed. A competent estate planning attorney can help you determine how much your estate is worth, how much may be subject to probate, and guide you through the steps you can take to avoid it. Your attorney can also help you with other vital documents that you likely need to have, including a durable power of attorney (in case you are incapacitated and unable to make legal decisions for yourself), and an advance directive (for health care decisions you cannot make for yourself in the event you are incapacitated).

Second, buy and own life insurance.  Yes, the odds of dying are extremely low if you are young, but the flip side is the cost of term life insurance is also extremely low for a healthy young person. Most people dramatically underestimate the financial predicament they heap upon their loved ones (or whoever is responsible for cleaning up the mess you’ve left, if you happen to have no loved ones). One rule of thumb for how much you should own is to calculate how much annual income you will need to support your household if you were to die. Subtract from that necessary income any employment income, Social Security, pension benefits, or income available from your own existing savings that your spouse or children could immediately begin collecting. The remainder is the unmet you’ll need to need to cover.  If that unmet need is a long-term need, you can multiply that figure by 20 or 25 to come up with the amount of life insurance you should own. If the unmet need is only for a short-term, just multiply the unmet need by the number of years you need it to determine how much life insurance you should buy. Be sure to add in an amount to cover any potential college costs for your children. This is a very simplified calculation and you can certainly make it more complex, but for crying out loud, just get some insurance. If your estate might be subject to estate taxes, you should also discuss with your estate planning attorney ways to avoid having life insurance proceeds be includable in your taxable estate.

Third, be sure your spouse or heirs have access to your digital account passwords and know where all your assets are located.  There are few things more frustrating than not knowing where a recently deceased loved one’s assets are, or being unable to access their online accounts. My son-in-law excelled in this area, and it made dealing with his affairs much simpler. One  way to do this is include a list of your assets and their locations in your will (bonus points if you include who should take possession of personal belongings in this list), along with important passwords. A safer way to document passwords is to use an online password vault, with one master password that would give your loved ones access to the rest of your passwords. Some of the better password vaults now allow you to identify someone who is allowed to gain emergency access to your vault in the event of your death. Whatever you choose, ensure your online password list is up to date and accessible to your survivors when needed.

If you don’t have all three of these bases covered now, drop everything and make sure they are covered immediately.  I mean it, close this browser and look up a local estate planning attorney, or ask our staff to refer you to one. Take it from my family’s all-too recent experiences.  We never know when a loved one can be instantly taken from us. Why take a chance that your (or your family’s) financial security might be turned upside down?

-By Richard Del Monte

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