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Deathbed Financial Planning Tips

A terminal diagnosis for you or a loved one can make it seem as though your world is falling apart. While there may be nothing you can do about the illness, you may find solace in addressing issues that you can control.

I am not a doctor, so I can’t recommend any course of treatment. But as a financial adviser, I can suggest items you should address if you know death is likely imminent. While the list below assumes you are the patient, most of these tips also apply if the terminal patient is a loved one. Many of these recommendations are hallmarks of traditional financial planning, but they become urgently essential when your life expectancy is short. As with any financial planning advice, the appropriate course of action will depend on your individual circumstances.

Remember to prioritize. When time is limited, you may not be able to check off all of the items on your to-do list, even when all of them seem important. Take care of the items that have the highest emotional or monetary impact first. Focus on fundamentals. This list assumes that you have already covered the basics, such as writing a will, but if you have not, act on such items immediately.

Communicate. Be proactive. While this is understandably easier said than done, it is critical to have the uncomfortable conversations that you might have been putting off. For example, you may need to tell your beneficiaries why they have been named (or tell other loved ones why they were omitted). Starting financial conversations can be hard even in good times; my colleague Anthony Criscuolo recently wrote about initiating family meetings (“Talking About Money: The Family Meeting”), and much of his advice can be helpful in this situation, too.

Make sure all beneficiary designations on your retirement accounts and insurance policies are correct. Many assets move “by operation of law” based on named beneficiaries on an account or policy. In other words, it doesn’t matter what you specify in your will if your named beneficiary is different for certain assets. These include retirement accounts, annuities, joint accounts, life insurance policies and transfer-on-death accounts. Outdated or unnamed beneficiaries can wreak havoc on an otherwise well-planned estate.

Revisit your estate-planning documents. Make sure your will and any trusts still reflect your wishes based on current law in the state where you live. This includes naming guardians for your children if you have any who are still minors. Consider what would happen if the estate tax is eliminated or the rules change in the near term if such taxes are a concern for you. Make sure that any changes to your estate-planning documents are made while you are demonstrably of sound mind. Confirm that powers of attorney for medical and health care purposes, as well as living wills or advance directives for medical decisions, are up to date and available to those who will need access to such documents.

Discuss your final wishes for nonfinancial items. Consider writing a separate memorandum for how to dispose of tangible property. If you do, make a note of this document in your will.

Gather a list of all accounts, insurance policies and passwords. You don’t want your executor or beneficiaries to overlook any financial accounts or insurance policies, so getting a list together in advance of death is a best practice. Rules vary for who can legally access accounts of a deceased individual, so it may be to your advantage to share your website login information with a trusted individual.

Identify property owned outright in other states. Probate in other states can be costly and an administrative burden for your executor. Retitling these assets into a trust should eliminate the need to initiate probate proceedings in nonresident states.

Understand what will be subject to probate. Probate can be expensive and time consuming. It also exposes your personal information to the public. Consider moving assets into a revocable trust or into an account that would move by operation of law.

Consider making annual exclusion gifts. Each individual can give up to $14,000 per year to as many people as she wants without gift or estate tax consequences. Such gifts can be helpful if you’re concerned about reducing your taxable estate or if you want to redistribute smaller sums of money to certain people.

Consider whether the mix of assets in your portfolio is still appropriate. Is there enough liquidity for short-term needs, including taxes? An imminent death changes the time frame for planned withdrawals from your portfolio. Funeral expenses, estate taxes and loss of a salary may accelerate withdrawals; on the other hand, most of your money will likely be destined for a beneficiary with different needs and perhaps a different planning time horizon. Consider adjusting the portfolio now, while being mindful of the tax consequences.

Manipulate cost basis in your favor by repositioning, selling, holding or gifting specific assets. Under current law, the cost basis of assets held in an estate is adjusted to their fair market value on the date of the owner’s death. Therefore, it’s helpful to continue to hold assets that have unrealized gains and to sell or transfer to a spouse assets that have depreciated. Keep in mind that transfers within one year of death do not receive a basis adjustment if they were gifted to the decedent and then returned to that same beneficiary upon the owner’s death. This stipulation can be avoided in many cases by moving the assets to a trust. Remember that the decedent’s accumulated capital loss carryover, if any, is lost upon death. Therefore, it may make sense to sell appreciated assets in a spouse’s name in order to use up any carryover loss.

Consider making lifetime charitable gifts. Charitable gifts that you make during life give you an income tax and estate tax benefit, while transfers at death only provide the estate tax benefit. Getting both allows you to give more. It also simplifies trust and estate administration to avoid charitable beneficiaries.

Evaluate your life insurance situation. It is too late to purchase more life insurance, but make sure that all of your existing policies remain in force. Typically, you should make all life insurance premium payments. However, if you have permanent insurance policies such as universal life, consider stopping payments if the accumulated cash value is sufficient to allow the policy to remain in force.

Plan for the expected, but prepare for the unexpected. While a terminal illness can lead to more certainty about the timing and order of deaths among individuals listed in a will or trust, remember that life continues to be uncertain. Realize that you may live longer than a doctor’s estimate, and plan accordingly.

Make sure someone knows how to run the show when you’re gone. Succession planning is essential for those who run their own businesses. But we all have responsibilities that others will need to handle once we are unable to do so. Whether it’s a surviving spouse, relative, close friend or trusted adviser, you should ensure that someone is ready to take over your responsibilities when you can no longer manage them.

This list is by no means exhaustive, but it includes many of the top priorities that those facing imminent death should consider. Taking care of these items as thoroughly as you’re able can leave you knowing that you did your best to help your heirs deal with the practical side of your loss.

Senior Client Service Manager and Chief Investment Officer Benjamin C. Sullivan, who is based in our Austin, Texas office, contributed several chapters to our firm’s recently updated book, The High Achiever’s Guide To Wealth, including Chapter 5, “Investments: Fundamentals, Techniques And Psychology,” and Chapter 14, “Employment Contracts.” He was also among the authors of the firm’s book Looking Ahead: Life, Family, Wealth and Business After 55.