Protecting Your Loved Ones

One of the most important things you can do for your loved ones is to prepare for the day when you’ll no longer be there to care for them. Everyone — regardless of age — should plan their estate. Having an up-to-date estate plan in place will be even more important if you’re unexpectedly injured or killed in a disaster. 

What is Estate Planning?  

Your estate is everything you own, and you need estate planning documents to ensure that your possessions and assets are distributed according to your wishes. In addition, these documents cover your health care wishes and who should take custody of your children and/or pets.  

Engage the professional team that you already work with to make sure that your actions and intentions are aligned. Having a well-articulated financial plan prior to engaging an estate planning attorney will be key in the implementation of a plan that is consistent with your family’s wishes. Your CPA will be able to contribute to the discussion of the important tax implications of the estate planning strategy.  

It’s a good idea to hire a lawyer who is thoroughly experienced with estate planning methods and techniques to assist you. If you don’t have money to pay a lawyer, call a legal aid clinic or a law school and ask if they can help you for a reduced rate or for free. Or check to see if you have any legal benefits through your EAP at work. 

Here are the documents that typically make up a complete estate plan: 

  • Living trust and/or will: This is your most important document. It names your heirs — the people you want to receive your money and other possessions when you die — and appoints a guardian if you have minor children. If you die without a will, the state will decide who gets your money and who will take care of your children. 
  • Durable power of attorney: This document names the person (or other entity) you want to pay your bills and manage your money if you become ill or incapacitated and are unable to make these types of decisions. 
  • Health care proxy: In a health care proxy, you name a person who will make decisions about your health care if you get sick and cannot make those decisions for yourself. 
  • Living will: A living will explains what types of medical treatment you want, or don’t want, if you get sick and are unable to communicate your wishes. 
  • Beneficiary documents: If you have life insurance, a retirement account or certain other types of investments, you must name beneficiaries — the person(s) or trust(s) that will inherit the money if you die. 

You may also want to consider drafting a letter of intent. It’s not a legal document, but it can be helpful in telling other people where things are and what you want to happen at your death (or if you are seriously injured and unable to communicate your wishes). Think of a letter of intent as something that you would give to someone if you were leaving on a yearlong trip tomorrow morning. Make sure the letter of intent is stored in a safe place and be sure to tell several people where it is. Even better, share copies of your letter of intent with anyone who would be involved in managing your affairs if you were killed or seriously injured in a disaster.  

What to Include in a Letter of Intent  

  • Where important documents are located.  
  • The names and phone numbers of your financial and legal advisers, your employer and other people your loved ones may need to contact.  
  • Your wishes for your funeral and information about any prepaid burial plans.  
  • A financial inventory to explain to your loved ones what income, investments or insurance proceeds they can expect to receive, and what expenses and other bills may come due. Include information about retirement plans, employee benefit plans, employer-sponsored life insurance coverage, vacation pay, business expenses that may not have been reimbursed, personal property you keep at work, car loans, home mortgages, and so on.  
  • Your wishes for raising and educating your children and any financial arrangements you have made to accomplish these goals.  
  • Your wishes for your pets.

For more information, check out our full guide, Disasters and Financial Planning: A Guide for Preparedness and Recovery, created in collaboration with the American Red Cross as a public service by the National Endowment for Financial Education (NEFE).