When planning a trip, you probably focus on making the travel arrangements, ensuring you’ll have enough spending money and other practical issues, such as having someone cover you at the office and someone else keep an eye on your house or pets.
The last thing on your mind may be putting your financial and other personal documents in order. However, if you expect to be away for any length of time — especially if your loved ones won’t be traveling with you — take a thorough inventory of your critical documents and put them in a safe place before you leave town.
Why? Well, it’s not fun to think about, but a surprisingly high percentage of people die while traveling. To be clear, you’ll probably be fine and have a great time. But being prepared is never a bad idea. Here are some of the basic financial and estate planning steps you can take before you take off:
Life insurance. Are the beneficiaries you originally chose still relevant? Take a look at your life insurance policies. Have there been deaths, births, adoptions or divorces that change your life insurance picture? Is there someone new who would be economically harmed or devastated in the event of your death? Officially add them to your list of beneficiaries.
Also, is there enough insurance? Has your financial situation changed since you last bought a policy? Contact your agent to change beneficiaries, change amounts or buy additional insurance.
Retirement accounts. Retirement accounts also have beneficiaries. To protect your loved ones’ financial interests, list by name the primary and contingent beneficiaries of your IRA, 401(k) and other retirement accounts.
Listing your beneficiaries by name ensures that your retirement assets are more quickly passed to your loved ones in the event of your death. This way you also ensure that they can select the most favorable available tax treatment for their inheritance.
Furthermore, if you have stepchildren or long-time relationships other than marriage, listing beneficiaries by name, together with your last will and testament, can help prevent accidental disinheritance.
Last will and testament. If you don’t have a will, put one in place as soon as you can. If you do have a will, check your list of beneficiaries to make sure they’re still the people you intend to be your heirs. If you have acquired or lost property since you last updated it, adjust the terms as necessary.
Also, check your executor. Is your original executor still willing and able to take on the responsibility? Or do you need to make a change?
Power of attorney documents. A power of attorney authorizes someone to make important decisions and control financial resources on your behalf if needed. A springing power of attorney becomes effective only under specific circumstances — such as if you become incapacitated.
A health care power of attorney essentially appoints someone to make critical decisions regarding your medical care in the event you’re unable to communicate your wishes. Examples include decisions about what treatments to authorize, or whether to remove life support.
If you don’t have a health care power of attorney in place, hospital officials must defer to the wishes of your legal next of kin — which may not be who you want making difficult decisions.
Advanced health care directive. In addition to having a springing power of attorney to enable a trusted individual to make critical decisions on your behalf, provide your loved ones and medical professionals with your end-of-life or crisis care wishes. Among the questions you’ll want to answer are if you want to:
- Be kept on life support when chances of recovery are very low,
- Have a “do not resuscitate” order placed in your file,
- Discourage your doctors from “heroic measures” to prolong your life, or
- Donate your organs (and, if so, which ones).
Your advanced health care directive — also called a living will — provides the guidance needed by your next of kin or other individual whom you appoint.
Homestead documents. Depending on your situation and state, you may want to sign a homestead declaration. In some cases, this document can help protect your financial legacy by allowing you to pass your home equity on to your heirs — even if there’s a judgment against you. This need for this sometimes arises because of high medical bills from end-of-life care. State laws vary, so speak with your attorney about how to protect your home equity from judgments in your state.
Most people preparing to leave on a trip don’t consider the possibility that they may not return, or may end up in the hospital for a lengthy stay. Before you go, take a little time to make decisions and put your wishes in writing. You owe it to those you may leave behind.
Please contact Judith Barnhard via our online contact form for more information.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.
