On the week of this writing I attended a funeral for a distant relative. He was 22 years old. Both he and his 20-year-old girlfriend were victims of a violent death. The two of them had a 5-year-old son together.
I sympathize with the families for their loss. My heart goes out to the little boy. Can you imagine attending the funeral of your mother at 11 a.m. then returning to the same funeral home on the same day to attend the funeral of your father at 2 p.m.?
Throughout the entire funeral I watched the little boy. I wondered if he grasped a small idea of what was taking place on that day. I wondered who would provide and care for the young man now that both his parents are deceased. I later learned that the deceased had no life insurance and that the family had a difficult time raising the money for the funeral.
Planning for life after death is extremely difficult. Less than 30 percent of Americans have a will. Many people procrastinate preparing a will thinking that if they plan for life after death, it will accelerate their date of death. Some people procrastinate because they don’t feel their worldly possessions are large enough to go through the trouble of preparing a will and planning for life after death. Some people procrastinate because they assume that their assets will automatically pass to their natural heirs. Some people procrastinate thinking they are too young to be preparing for death.
Preparing for life after death is a sign of maturity and selflessness. It’s not about you. It’s about ensuring the loved ones you leave behind can pay for their living expenses, maintain their lifestyle and continue with the goals and dreams you shared. If you have someone who depends on you, be it a spouse, minor child, parent, domestic partner, special needs or disabled person, you need a will and estate plan—regardless of your age or current financial predicament.
I imagine this young, energetic couple of modest means thought they would be here to see their son grow into a young man. They probably believed that if something were to happen to the other, the surviving parent would be there to carry out their plans for their child. As a result, planning for life after death was far removed from their thinking. The importance of having a will and preparing for life after death can be explained by reviewing the consequences of dying without one.
The probate court will appoint a guardian for your minor children.
The most important component of a will is establishing a guardian for your minor children, special needs dependents and disabled dependents. Parents tend to ignore the possibility of simultaneous death. In the event something was to happen to one parent, it’s natural to assume that the surviving parent would care for the child. If both parents were to die simultaneously, who would care for the child? Your minor children will not be permitted to register at school, participate in athletic events or receive medical treatment unless there’s a living parent or authorized guardian. When you die without a will and there are minor children involved, the probate court will decide a guardian for your minor child. This decision may coincide with your choice and it may not. When establishing a will, it’s important to select a guardian whose style of rearing children is similar to yours.
Who will provide economic support for your loved ones?
When we think of life insurance, we think about having enough money to bury the deceased. However, burial expenses are the least expensive item. The core purpose of life insurance is to replace the income or economic value of the deceased. Your spouse and dependent children rely on your income. Should you die, the income your family depended on to pay for living expenses ceases. However, the bills keep rolling in. You should have life insurance that equals about 10 to 15 times your annual income. I recommend 20-year level term life insurance for this purpose. There’s a survivor benefit awarded under Social Security for those who earned enough credits. Benefits from Social Security alone will not be sufficient. Without economic support, it can be a burden both emotionally and financially on your loved ones.
Where will your assets go?
Assets with the greatest value upon death tend to be the deceased’s home, pension plan, retirement plan and life insurance. I generally recommend that you transfer these assets outside of a will. With assets such as your pension plan, retirement plan and life insurance, you can do this by designating to whom you want these assets to go. This is called beneficiary designation. With assets such as your home, bank account, and brokerage accounts, you can do this by titling property joint ownership with right of survivorship. Having property owned as joint ownership with right of survivorship and by designating a beneficiary will avoid the sometimes lengthy, costly process of probate—validation of the will. You can specify how the rest of your assets such as your car, furniture and clothing, etc. is to be distributed with your will. If there’s no will, the state will decide where your property goes.
For less than $70 this young couple could have had a will prepared detailing who they wanted to care for their child among other things. For less than $30 per month, this young couple could have had 20-year level term life insurance with a face value of $200,000 on both of their lives. Even a poor man can afford these prices. With planning, there would have been money for funeral expenses, money to provide economic support for the child and instructions on who will care for the child.
(Mortgage and Money Coach Damon Carr is owner of ACE Financial. Sign up for Damon’s FREE Online Newsletter at www.allcreditexperts.com. Damon can be reached at 412-856-1183.)