Three Things to Do Before You Die

He was among the most outrageous figures in American pop culture... but the most bitter battle may have been the one he left behind.

Throughout the '80s and '90s, no pop music figure was more distinctive than Prince – whether it was cruising with models on his purple Harley-Davidson or changing his stage name to an unpronounceable symbol.

More important, his catalog of music includes some of the world's best-loved rock and R&B classics. His songbook begins with megahits like "1999," "Little Red Corvette," "When Doves Cry," "Let's Go Crazy," and "Kiss." And the list goes on and on. It rivals any of the best songwriters of the 20th century.

By 2016, Prince's work had netted him a fortune estimated at $200 million... But then he suddenly died of an accidental overdose at the age of 57.

Unfortunately, he hadn't left a will or instructions of any kind to his heirs. And ever since, Prince's six siblings – along with various companies and some individuals who were vaguely involved with Prince's work – have been fighting over the rights to his estate.

It's a complicated case that won't be resolved any time soon.

Of course, there is one clear winner so far: the lawyers...

By 2019, Forbes magazine reported that the estate had burned through $45 million on administrative expenses, including on legal fees for the attorneys trying to sort out what happens to Prince's estate.

That means lawyers have sucked up nearly a quarter of Prince's estate, while the heirs have yet to receive a dime.

The financial aftermath of Prince's death demonstrates that even when someone has the means to make sure his estate is taken care of, it's easy to miss the mark.

Perhaps you've considered where you want your money and your other belongings to go after your death, but you've never put it in writing. Maybe you set things up appropriately years ago, but the laws have changed since you last reviewed them. And many of you have likely avoided the subject altogether...

Most people don't want to talk about their deaths. But the COVID-19 pandemic has brought the reality of death closer to lots of folks... even if only because the headlines constantly focus on the death toll.

Health & Wealth Bulletin readers tend to be an independent bunch. We don't much like people telling us what to do with our savings or property. But just remember, if you die intestate (without a will or other instructions), that's exactly what happens... In the absence of clear instructions from you regarding what to do with your money and property, the government gets to decide. Folks whom you had no intention of giving any of your hard-earned wealth to – perhaps estranged spouses, disowned children, or former business associates – might be able to steal it.

We don't want the government or the courts to decide what to do with your wealth (or your health, for that matter). Nor do we want you to be kept out of medical decisions or an intended inheritance because one of your loved ones never made their wishes clear.

Today, we want you to take back control of your financial house by asking yourself these three questions. And this holiday season, take the time to explore them with your family as well...

1. Do you have a health care proxy?

This is a document that says who you want making decisions for you if you can't function on your own. I've known of families where two of the siblings thought Dad wanted everything done to keep him alive, and the other two siblings thought the exact opposite. You can't have it both ways, and either choice is excruciating. Eventually, someone has to decide, and lifelong relationships can fracture over a difficult situation like this.

I've faced this issue in my own family, and I'll live with its tragic results forever... I knew for a fact that one of my relatives wanted everything done for her, no matter the odds. But without a document giving me the right to make her decisions, I had no way to persuade her ICU doctors – and possibly save her life. Fill out the form to assign the designees you trust to make these important decisions for you. I recommend doing it with at least two family members. After you make your wishes clear to them, have them write it down themselves so you're sure they understand.

2. Does anyone else have access to your passwords?

Many Americans largely live their lives online – from social media, to online banking, to e-mail. According to a survey from the password manager NordPass, the average person has 70 to 80 passwords. I don't know anyone who could remember that many. (Unless you're one of those people using the same password for everything. If you are, read more about creating a secure password here.)

But what happens to those accounts when you die? The Revised Uniform Fiduciary Access to Digital Assets Act tries to answer this question. The law provides some amount of access to your digital assets (like bank accounts and social media) to the fiduciary, like an executor or attorney-in-fact. But not all states use this law, and it's a complicated and potentially painful process. Your grieving spouse could be the one left having to contact various companies online, with the burden of proving you're deceased to be granted access to your accounts.

The simplest solution to this dilemma is through a password manager. Most of the top password managers, like LastPass, Keeper, and Dashlane, allow you to add an emergency contact as well. This allows you to grant someone access to all of the passwords you keep in that digital organizer in the event of an emergency or your death. I use LastPass, and when my designated persons ping the account as an emergency, I have two or three days to block the request. Otherwise it defaults to open up and let them inside, where they can see a full list of my passwords stored there. And unlike a paper list of passwords taped to your computer, a password manager will update your passwords whenever you change them.

3. Can you afford to die?

Some people think that when you die, your debt dies with you. But in most cases, that's not true... That debt will still need to be paid.

Whether or not someone will be responsible for your debt when you die depends on a few things...

  • The type of debt (student loans, credit-card debt, or a mortgage)
  • Whether the debt was jointly held or had a cosigner or beneficiary
  • If you lived in a community property or common-law state
  • Your remaining assets (like a car, boat, or summer home)

In most cases, if you're leaving debt behind – home or auto loans, credit cards, or medical bills – it has to be paid. If the debt has a cosigner or joint owner, or you're leaving the asset to an heir, they'll likely be responsible for the debt. Otherwise, your estate will have to pay it.

Creditors for secured debt – like mortgages – get first dibs on your estate. Once all that debt is paid off, anything remaining goes to unsecured debt... things like credit cards and medical bills. But the good news is that creditors can't go after just any asset. Retirement accounts like IRAs, 401(k)s, and 403(b)s are safe from creditors.

If you're worried that you won't be able to cover all the expenses of dying, consider investing in life insurance. Life insurance beneficiaries can use it to cover any post-mortem expenses, but it's often used for debt repayment, burial costs, or everyday living costs. It can also be used to cover the income your family loses when you die. This removes the cost burden from your family after you die.

In this time of COVID-19, and as people start suffering through seasonal illnesses, getting ahead of this issue is a good thing. As you connect with your families this holiday season – these days, likely over Zoom or FaceTime – have a heart-to-heart with your loved ones. If it's too much for one conversation, have several. That's OK.

The important thing is to break the ice so you and your family start thinking about how to handle someone's death. Try starting with something as simple as who would get your high-school ring when you die.

In a recent issue of Retirement Millionaire, we shared our top two questions you need to ask yourself. Most Americans never do. Don't be one of them.

Subscribers can read them here. If you're not already a subscriber, click here to get started today.

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Here's to our health, wealth, and a great retirement,

Laura Bente, CFP® with Dr. David Eifrig
December 17, 2020