Think you have to be rich to worry about having your bank accounts and documentation in order if something were to happen to you? Think again. You are not immune to the curve balls that life throws at you. The purpose of this article is to help you to think again — now.
Let’s start with the basics:
Married or cohabitating? You may want to have a joint bank account to pay all of those household expenses. A joint bank account is also very helpful in the case of a partner's death, so your partner will have access to funds. In most cases, a joint account holder’s rights will supersede what is in a written will. This is called the Right of Survivorship, and there is no documentation required in order to specify whether or not the surviving owner has the right to withdraw money upon the death of the other joint owner. Both parties have complete rights to the account.
That being said, you need to be aware of problems that can arise from a joint bank account. Drama can crop up if there is discord, and either party could drain the account. The court will not listen to, “But, he had a girlfriend, and I didn’t realize that his new exercise regime was leading him to slip away to Brazil.” It is a legal mess to go after the offender.
According to Bankrate, “Account co-owners enjoy the right to spend, give away or transfer funds to other accounts, without the consent or knowledge of the other account holder(s). In many cases, the 'wronged' party can get back some of the money, but legal action is required.”
Safety Deposit Boxes
Essentially, the same joint rules apply with a safety deposit box. If the box is jointly owned, each person with access has rights to go into it at any time, regardless of a death. My advice is to avoid a sticky probate situation and only put a trusted spouse or family member on your safety deposit box list.
I am not a great proponent of “Do-it-yourself legal work,” but if you are young and short on assets, go for it. There are tons of websites to help you with this that are free or close to it. The documents will usually ask you some of the following questions:
- What are the names of the beneficiaries you want to leave property to? (This can be family, friends, charities, your dog or other loved ones.)
- Who is the person you want to appoint as the executor? (That is the person who is legally responsible for your wishes to be carried out.)
- Who will care for your children? (This one is so important; I can’t stress it enough. In fact, I’m going to write a special article about this topic. In some states, if you do not have a will and have not designated a legal guardian, your kids can become a ward of the state until the next of kin is located.)
Nolo.com indicates that you can create a basic will, “if you are under 50 and don’t expect to leave assets valuable enough to be subject to estate taxes” That means that if you don’t have a lot of stuff, don’t worry about it. Again, the big thing is for the kids to be provided for and to discuss that with them before something happens to you.
Financial Power of Attorney
Power of attorney is a written document that gives someone you choose the right to act in your place. They can execute stock sales, pay bills, handle tax audits, maintain a safe deposit box, etc. The power of attorney usually ends when the principal dies or becomes incompetent, which is why I recommend setting up a Durable Power of Attorney. A durable power of attorney will remain in effect after the principal becomes incapacitated. As AARP puts it, “A power of attorney can give her the peace of mind of knowing that someone she trusts will have the authority to make financial decisions for her when she’s no long capable.”
Durable Power of Attorney (for Healthcare)
This is a legal document where you name a trusted person to oversee your medical care and make health care decisions for you if you are unable to do so. This person should work with your doctors to make sure that you receive the kind of care you wish to receive.
Rocket Lawyer indicates, “While a last will and testament is often considered the backbone of a complete estate plan, a living will is essential in spelling out your end of life decisions. If at any point you’re unable to communicate your wishes… a living will allows your family and physicians to rest assured that your own personal choices are being respected.”
I realize how scary it is to think about a situation where you might be unable to care (or think) for yourself, but life happens. Your family will thank you.
Don’t wait for the following words of Henry David Thoreau to ring true, “Not until we are lost do we begin to understand ourselves.” Resolve to work on one tip each week until they are in place.