Candidly, one of the most challenging aspects of personal finance for me is thinking about the distant future. Not so much what my life will look like in 10 years but rather what it might look like in 50 years. It’s easy to visualize how to control my finances next week, next month, or even next year, but thinking decades into the future is tough. There are many variables involved in thinking at that level, which is what makes it so hard to comprehend. But the good news is there are short-term steps you can take to future-proof your long-term finances. Taking these steps will introduce elements of certainty to an inherently uncertain set of life events. The three steps I will recommend are not exactly pleasant to take but can save months or years of time, effort, and money.
- Draft a will
- What is it? A will—or last will and testament—is a legal document that specifies your wishes for how to handle your assets after your death. If applicable, it also documents how the care of your children or dependents will be administered and funded.
- Why is it useful? It provides precise details about key financial decisions to be made. Plus, it places responsibility for those decisions in the hands of people you trust rather than complete strangers (like the court system).
- Who benefits from it? Relatives and heirs who outlive you will benefit from your having a written will. The executor of your will should have an easier time interpreting your final wishes because they will be specified in written form. Your heirs will also have an easier and quicker time accessing whatever is left behind (cash, investments, property, prized possessions, etc.). Additionally, your minor children will go through less turmoil because there will be no questions about who their future guardians will be.
- What’s the moral to the story? Minimize uncertainty and confusion by specifying your intent ahead of time about your financial assets.
- What else should be considered? You can prepare a valid will yourself; however, it’s better to take an extra step to decrease the likelihood your will is challenged in the future. The will should at least be witnessed and ideally prepared by a trusts and estates attorney to ensure quality and legal integrity. Always check your state’s requirements to be sure you are compliant. As a best practice, you should provide this document to anyone named therein; for instance, future guardians of your children should know they’ve been identified in a legal document.
- Draft a living will
- What is it? Conceptually, a living will—or advance healthcare directive—is similar to a last will and testament in that it documents how you want various aspects of your future to be handled. However, a living will specifies how various health-related decisions prior to your death will be executed. This document will come into play when you are deemed incapable of making coherent decisions for yourself (i.e. end stage of life). It specifies if you want life-saving or life-prolonging procedures such as: tube feeding, assisted breathing, blood transfusions, or resuscitation. You can also list any religious or philosophical beliefs about how you want your life to end in this document so those wishes can be carried out by medical professionals. Think of this document as a guide for how decisions will be made when you are on your deathbed.
- Why is it useful? It provides precise details about key healthcare decisions to be made. Plus, it allows you to specify your last wishes rather than leaving it up to strangers to decide your future (i.e. healthcare providers).
- Who benefits from it? Relatives and/or friends who outlive you will benefit from your having a living will. Instead of guessing whether you want life-prolonging procedures to be applied, they will have the security of knowing for sure based on this document.
- What’s the moral to the story? Minimize uncertainty and confusion by specifying your intent ahead of time. End of life decisions are extremely difficult and having a roadmap or decision framework can ease that burden.
- What else should be considered? You can prepare a valid living will yourself; however, it’s better to take the extra step to decrease the likelihood your will is challenged in the future. The will should at least be witnessed and ideally prepared by an attorney to ensure quality and legal integrity. Specificity is of the utmost importance in this document because life and death decisions will be made based on the language therein. Most attorneys will have standard, prescriptive language that makes it considerably easier to interpret your wishes at end of life. Always check your state’s requirements to be sure you are compliant.
- Draft a healthcare POA
- What is it? A healthcare POA—or durable healthcare power of attorney—is a document that gives someone else or even two individuals you designate (your agent and/or proxy) the ability to make healthcare-related decisions on your behalf. Similar to a living will, it applies to end of life treatment but is broader than that in the sense that it applies to other areas of medical care. If, for instance, you have a stroke and are in a vegetative state for months or years leading up to your death, your attorney-in-fact would make medical decisions on your behalf. This power expires upon your death.
- Why is it useful? It identifies a proxy who will legally be able to make key healthcare decisions on your behalf if you become incapacitated and are unable to do so. Thus, it places responsibility for those decisions in the hands of people you trust rather than leaving it up to strangers to decide your future (i.e. the court system). Without this document, your loved ones may have to appeal to a court for legal guardianship or conservatorship to take control of your healthcare decision making.
- Who benefits from it? Relatives and/or friends who outlive you will benefit from your having a healthcare power of attorney. Whomever you designate to make healthcare decisions on your behalf will have an easier time executing those decisions because they can bypass the court system and save time and energy they can devote to your care. Once you’ve been determined by a physician to be incapable of making coherent decisions on your own, this document would allow your proxy to access personal health information (medical records) and make decisions such as: whether to accept or withhold treatment plans on your behalf, admit or discharge you from a hospital or long-term care facility, nursing home, etc.
- What’s the moral to the story? Minimize uncertainty and confusion by specifying your intent ahead of time. Medical decisions are difficult to make on behalf of another person, so specifying an individual you trust to make decisions for you is crucial.
- What else should be considered? You can prepare a valid healthcare power of attorney yourself; however, it’s better to take the extra step to decrease the likelihood your document is challenged in the future. Most states have a standard form that will suffice, but the document should at least be witnessed and ideally prepared by an attorney to ensure quality and legal integrity. Always check your state’s requirements to be sure you are compliant. You are able to designate two individuals to look after you in this arrangement—one who is the proxy (makes healthcare decisions) and one who is an agent (pays for your services). To avoid disagreements between the two, it’s typically best to identify one person to cover both duties. Also consider the ages of individuals you name in this document relative to yours. Best practice is that you wouldn’t name your mother or father or other older relative as agent or proxy because they will likely predecease you. It’s also advisable to list successor agents in case your primary agent dies or becomes incapacitated between the time the document is generated and the time it goes into effect. For instance, I named Mrs. Sow a Dime as my attorney-in-fact, but in the event she is unable to perform those duties, I named my brother as successor agent.
To conclude and reiterate, these are not pleasant topics to discuss or consider. No one is fond of thinking about their death and how that will affect whomever is left behind. However, I submit to you they are crucial steps to ensuring your wishes are documented and followed to future-proof your financial life.