5 Estate Planning Questions Everyone Should Ask

By Dan Rafter on 5 March 2018 0 comments

There are no guarantees when it comes to the number of years everyone gets on this earth. You may plan to live well into your 90s, but circumstances — and your health — can change very quickly. This is why it's important not to put off the uncomfortable but necessary work of planning your estate.

Not sure where to start? Ask yourself these five key estate planning questions.

1. Why haven't I created a will?

You might not be rich, or even old, but that doesn't mean you don't need a will. A will is for anyone who wants to leave behind assets to loved ones or specify who should raise their children if they die.

That last point is especially important. If you are a parent of young children, you need to spell out in a will who should take guardianship of your sons or daughters should you unexpectedly pass away. If you don't, the courts will make that decision for you. Don't leave this up to chance. Draft a will and include these instructions. If you already have a will but you've had a major life change since you wrote it, it's probably time to update your will.

It's best to work with a legal professional when drafting your will. A professional can help you list clearly who gets what assets. If you want to leave your home to a loved one after you die, you might need to take the extra step to create a trust, too. This can get complicated, so again, it's best to work with an attorney. (See also: Here's What Happens If You Don't Leave a Will)

2. Do I have enough life insurance?

Life insurance is a necessary financial protection for your loved ones. If you should pass away unexpectedly, would your spouse be able to afford the monthly mortgage payments? Would your children be able to remain in the home in which they've grown up?

Life insurance can help ensure that your loved ones don't have to worry about paying their bills after you die. Upon your death, your life insurance will give an agreed-upon payment to your beneficiary, who can use that money to cover anything from mortgage payments to college tuition.

There are two main types of life insurance: term and whole. Term life insurance is less expensive but still provides solid coverage. With this type of insurance, you pay a premium for a certain number of years, perhaps 20 or 30. If you die during this time, your policy pays out. Once that term expires, you'll need to buy a new policy if you want to maintain life insurance coverage.

Whole life insurance is usually more expensive, but you don't have to worry about renewing after a term ends. Instead, you pay a premium every month — or every year — for the rest of your life. There is no end limit on the premium. The policy will pay out when you die.

How much life insurance do you need? That depends on your situation. Do you have young children dependent on your income? Does your spouse work? Are all your children young adults who are earning livings of their own? You'll want more life insurance coverage the younger and more dependent on your income your loved ones are. Your life insurance payout should at least cover the debt you owe for your mortgage, car, credit cards, and education. (See also: Term vs Whole Life Insurance: Here's How to Choose)

3. What do I want to do with my home?

One of the biggest assets you might have is your home. A home, though, can be a problem after you die.

If you've paid off your home and own it, you'll have to determine what you want your survivors to do with that residence. Do you want to leave your home to a child? That can be a tough decision if you have more than one child. Or do you want your children to sell the home and split the proceeds? Make sure you specify in your will what your preference is for dealing with your home. This can help prevent tension among your survivors.

If you haven't finished paying off your house, your options may be more limited. Funds from your estate may be used to pay off the debt you owe to your mortgage lender. But if your estate doesn't have enough money to cover this, your home might have to be sold, especially if none of your survivors want to take on your remaining mortgage payments. (See also: Why You May Need a Revocable Living Trust)

4. Will anyone know how to find my key documents?

Where do you keep your most important financial documents? Do you have a designated place for everything, from your will, to your tax returns and bank statements, to instructions for your funeral?

Wherever that place is, you need to make sure that your loved ones know where to find these important papers. Having a will doesn't help if no one can find it. And making sure that your next of kin know exactly where your checkbook, bank account statements, and past tax returns are stored can ease the burden they'll face when trying to move on from your death. (See also: 9 End-of-Life Cost Savings Your Survivors Will Thank You For)

5. Who will care for your pets?

Do you share your home with a beloved pooch, cat, or parakeet? What would happen to these companions if you should pass away?

If you want to make sure that your pets are cared for after you pass, leave instructions. You can include this information in a will, especially if you are going to leave your pets to a family member. You might want to also set up a savings account or leave a sum of money that will help cover the costs of caring for your pets, as a way to ease any burden on family members.

If you have no one to care for your pets after you die, you might specify in your will that you'd like your animals donated to a pet-care organization. (See also: 6 Reasons You Need to Include Pets in Your Will)

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