Grieving over the loss of a loved one is difficult and disorienting, no matter how much preparation is done. The preparation can make things easier on your heirs in both the short term, and the long term.
- Think about what will happen the first month after you pass?
Life insurance to cover the family’s immediate financial needs – the amount of coverage would vary on a situational basis. If you can, communicate to your loved ones how you’d like your funeral and burial or cremation handled. Prepaying for these services will alleviate the concerns regarding what’s to be done and who needs to handle what part of it. Make sure to communicate these plans to your family directly.
- Consider how your assets should be handled.
One of only a few states that impose both an inheritance tax and a state estate tax is New Jersey. There can be a situation if it would be hard to sell the assets being passed on are property, so the beneficiary may not have the funds needed to pay the taxes to receive the property without being forced to sell it at a fire-sale price. Life insurance to cover taxes on an illiquid asset in the estate would allow heirs to maintain control until they wanted to liquidate it on their own schedule.
You can significantly reduce confusion and conflicts if you decide who will get what and put it in your trust or will. As you get older, think of giving away things that you no longer use before you die so they won’t be part of the estate.
Probate court proceedings (during which a deceased person’s assets are transferred to the people who inherit them) are often lengthy and confusing. The most convenient way to avoid them is to create a living trust.
There are some other mechanisms to avoid probate on some of your assets, but they vary from state to state. In New Jersey, you can set things up for Joint Ownership, Payable-on-Death designations for bank accounts, and Transfer-on-Death registrations for securities, but no Transfer-on-Death deeds for real estate or Transfer-on-Death registration for vehicles. Although these various designations are available, you may create unintended taxes as well as unintended distributions in your estate plan.
Speak with a professional estate planner to learn more about what you can do to ensure a smooth transition, delegate authority, and make it so your assets are used according to your wishes.