7 Most Common Mistakes People Make With Their Money Before They Die
Today’s post is on the 7 Most Common Mistakes People Make With Their Money Before They Die
Do you know where your money goes when you die?
That’s a question that all the wealthy people I know have thought of a great deal…
…if you want to be financially free then you need to think about this question…
…where is your money?
…where will it go if you were to die today?
An Unplanned Death
…if you died today and had done nothing about your money and things…
Let’s be honest and think about what would really happen…
…your family and loved ones would be sad and mourn your death…
…they would have to plan the funeral, clean up your things from your work or in your home…
…they would have to plan for the funeral…
… then they would have to pay for your funeral…
…and as they cleaned out your stuff they would figure out what you have left behind…
…maybe it’s debts, and later on debt collectors start calling…
…maybe it’s your house, car, or jewelry…
…maybe you have stocks or investments…
…a savings or checking account…
…if your spouse is not joint on these accounts, then they will have to get access to the money by going to the bank with your death certificate…
…if it is a lot of money, they will have to go through the court and a legal process called probate…
…and they will have to pay the legal fees to do that…
…and at the end of the year, they will have to pay taxes on anything you left behind (about 40%!!!)…
…that includes all of your investments, money, jewelry, valuables…
…and if there’s a fight over what you have and who should have it, then all chaos breaks loose…
Mistake #1 – You Do Not Have a Will or a Trust
…if you have a will or a trust, now your loved ones know what you wanted to do with your things…
…they will know if you wanted to give money to your spouse, children, or grandchildren, or a charity…
…they will also know how you want to be buried, if you want to be cremated…
…and, they will know any other parting thoughts that you wanted to tell them…
…if you have a lot of money and would be taxed at the higher estate tax, then you probably know all of this already and have a trust…
…a trust allows you to keep your money and property in a business entity called a trust…
…the trust states who will be the trustee of your trust, and also what the trustee will do with the items in your trust…
…usually you are the trustee of your own trust until you die…
…after your death, the successor trustees take control of the trust by providing proof of your death or incapacity…
…with a trust, your successor trustee doesn’t have to go to court to follow your wishes…
…they just need to prove your death and accept the appointment of trustee…
Mistake #2 – You Didn’t Update Your Beneficiaries on Your Retirement Plan
One of the most tragic mistakes that I have witnessed was when a co-worker of mine at a bank passed away and didn’t update the beneficiaries to their 401K!
…you would think a banker would know better!
…so their 401K did not go to their current spouse, it went to their ex-wife…
…have you updated the beneficiaries on your IRA, 401K or other retirement plans?
Mistake #3 – You Didn’t Update Your Beneficiaries on Your Life Insurance
…this is the same mistake as I just mentioned…usually if you didn’t update your retirement plan, you also didn’t update your life insurance…
…what if your life insurance goes to your ex-wife, or to your mother or sister, instead of to your wife or husband?
…do you know who your beneficiaries are on your insurance plans?
Mistake #4 – You Didn’t Let Your Relatives Know About Your Safe Deposit Box And Bank Accounts
If you have a Safe Deposit Box with valuable documents in it, such as your will or trust, then you need to let your relatives know that you have it, so they can find it!
If you don’t, and no one comes to claim it, eventually the bank has to drill it open and give the contents to the State…
The same happens to your bank accounts…if your relatives don’t know you have accounts at a certain bank, then they will not go to claim it when you die…
…so the bank will eventually close it down due to inactivity and again, it will go to the state…
You need to let your loved ones know where your money and valuables are!
Mistake #5 – You Don’t Have Any Life Insurance
This is a common mistake that can completely change the future of your spouse and children…
…I’ve seen kids have to leave their private schools because the family can no longer afford to go there…
…they have to sell their house, because they cannot afford the mortgage to live there…
…a spouse that was a full time homemaker now has to work or apply for welfare…
…it’s important to protect your family, and it doesn’t matter if you are the main bread winner or the homemaker…
…because a homemaker also provides over $100K a year worth in services such as cooking, house cleaning, driving the kids to school and sports, shopping that you will probably have to hire other people to help you do…
…or you will have to sacrifice a clean house, after school activities…etc.
If you have a family, you need to have life insurance…
Mistake #6 – You Left Behind Debts That Your Family Has To Pay
…I remember when I was in my graduate program at National Chung Cheng University in Taiwan, and one of the undergraduates in my Kung Fu club had to drop out of College when their father died…
…he was really good at Kung Fu and enjoying his classes at the time and it was a big disappointment for us to see him go…
…he left because when his father passed away, they found out that he had left large debts that had to be paid to various creditors…
…so he had to go home and work to support the family and pay off their father’s debts…
…I have also have a friend here in Hawaii who had to apply for bankruptcy because of a large debt that her ex-husband had…
…she didn’t find out about it until after the divorce and the creditors started chasing her for the money…
…if you have a lot of debt, then it’s important you get life insurance to cover the debts in case you pass away…
…otherwise your family is going to have to pay…
Mistake #7 – A Large Portion of Your Money Goes To The Government In Estate Taxes
…if you had no plan, or even just a will and no trust, and you had a house that was valued over $250,000.00, or monies and valuables worth more than the limit for estate taxes…
Then your decendents have to pay a 40% estate tax…
…that’s a lot of tax!
…so you will then force your decendents to sell your house just to pay taxes…
…and that doesn’t even include the legal fees they will need to pay in the whole court process (which is called probate)…
Conclusion
…when you die, are you going to create a burden for those that you love or are you going to be a help?
…if you do your estate planning, and execute a will or a trust, it will be more likely that when you die, your loved ones will know what to do with your money and your possessions…
…in the end, your family will be better off, happier and at peace…
…and if you have made a large fortune, then the community and the world will also be of benefit…
…as long as you have the right plan in place…
P.S.
I blog about money and financial freedom because I believe everyone can be financially free…
…I believe the world would be a better place with people who enjoy more time with their family, and spend less time working for money…
…and I believe when we have that freedom to do the work that we love, the world will get more value and we will live better quality lives…
…do you have something that you would love to teach others?
…are you highly skilled in some area of your life?
…then consider teaching others your talents and leaving a legacy on the internet…
…and make money doing it at the same time!
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