31 Days To Fix Your Finances, Day 28: Preparing For The Inevitable

The Simple Dollar offers a month-long plan for fixing your finances. All you need is an open mind and an hour each day.

Today, we’re going to talk about planning for your passing in the form of a will or a trust, something that many people haven’t done. The truth is that it’s not something that’s necessary for everyone – but if it is necessary, you need to set aside a bit of time to get it done.

First of all, determine whether or not you need such a thing at all. I usually ask two questions: do you have any dependents besides yourself? and do you have any relatives or friends that you wish to have your things or money when you pass on? If you answer yes to either question, then it’s time to get legally binding plans set in place. If you answer no to both (many young people will, in fact), then don’t get one, as intestate (the state’s default method for handling your leftover assets) will take care of things for you.

If you do need to make a plan, though, don’t go cheap and get a kit – contact a lawyer and do it right. Ask around for references to one who can handle your will or trust preparation easily and clearly and can make sure that it is in fact legally binding in your locality. The fee for this is usually not too high, but knowing that the document is properly prepared makes it worth all of the effort.

There are a few basic things you should know before you go, though:

First, a will is the actual document that lists what you wish to happen to your estate upon your passing. There is one big drawback to a will: in most jurisdictions, for a will to be legally executed, it must go through a legal process known as probate to ensure that the statements in the will are actually carried out, which can be expensive.

Thus, some people choose to set up a trust (often called a revocable living trust), a legal entity to which a person can assign all of their assets while they are alive. This trust is legally bound to follow the rules of the trust, which usually kick in when the person who set up the trust passes on. Since these assets are owned by the trust and not by the person, they’re often not subject to probate. The only drawback is that it can be expensive.

Again, to make sure that everything goes right, ask for appropriate legal advice to ensure that you know what you’re doing and the document is in fact legally binding. For me, it was the best money I ever spent.

Spend an hour piecing together what your wishes are for your estate, then contact a lawyer. Knowing that things are taken care of when you enter the afterlife is a huge relief to many people.

Ready? Let’s continue on to the next day.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.