How to Start Estate Planning if You Are Terminally Ill

Estate planning is an important part of your financial planning, but can be confusing. And estate planning can be even more intimidating if you’re terminally ill.

In this article, I’ll answer the most common questions about estate planning if you’re terminally ill.

How to create an estate plan if you’re terminally ill?

When are you considered terminally ill?
What are the advantages of estate planning if you’re terminally ill?
When to start end of life planning if you’re terminally ill?
What estate planning documents do you need if you’re terminally ill?
How to prepare your assets for estate planning if you’re terminally ill?
Who to leave inheritance to if you’re terminally ill?
Who will make end of life decisions if you’re terminally ill?
Who is responsible for funeral arrangements?
Who is in charge of your estate when you die?

The answers to these questions will help you understand what you need to do.

When are you considered terminally ill?

You’re considered terminally ill if you expect to die within the next 12 months. This includes if you’ve been diagnosed with an incurable illness. Or if you will schedule your own assisted death within that time.

What are the advantages of estate planning if you’re terminally ill?

When estate planning if you’re terminally ill, you have a few “advantages.” You know your approximate date of death and likely cause of death. You’ll know what will be your assets when you die. And you’re have a better idea of who should be your heirs, executor, and other agents.

Usually, you have no idea if your death will be next week or decades from now. So your plan must cover all sorts of variables and contingencies. With a terminal diagnosis, you know your approximate date of death within 12 months. Or even the exact date if you’ve chosen an scheduled assisted death. So your plan can be much simpler and more focused.

You can predict your cause of death

You may also know your likely cause of death and condition preceding your death. This information helps you narrow down your health care decisions. Such as do you need do-not-resuscitate (“pull the plug”) documents? And who will be your health care agent to make decisions if you cannot.

You can predict your assets

You’ll also more accurately know your assets when you die. With most estate plans, it’s hard to predict what will be your net worth when you die. Or which banks or brokerages will hold your accounts? Will you own a home, and if so, how much mortgage will remain? With a known date of death, you’re also more likely to have accurate beneficiary designations.

Your heirs will be more accurate

You’re more likely to know who you’ll still be close with, and who is still living and hasn’t predeceased you. You’ll also know who’s still a minor (under 18 years old) and perhaps needs a trust, versus who are adults.

You’ll choose the best executor

Lastly, you’ll pick a better executor and other agents. Because you’ll know who’s living nearby, who’s still alive, and who has the time and competence to do a good job. And you’ll better know if no family or friends are suitable, and if a professional executor makes more sense.

When to start end of life planning if you’re terminally ill?

If you have a terminal illness or planned death, start making your estate plan as soon as possible.

First, pause and wait until any shock or emotions from a terminal diagnosis have passed. Then, get started immediately. Most people are prone to procrastinate estate planning, so you want to push until it’s actually done.

Second, your planning may take longer than you expect. You may need time to rearrange assets and decide who gets what, so don’t leave it to the last minute.

And lastly, your health may decline suddenly, making your mental competence more questionable. So better to complete your plan now.

What estate planning documents do you need if you’re terminally ill?

The estate planning documents you need are the same if you’re terminally ill or not.

For after your death, you need a will or revocable trust to determine who inherits. For your end of life healthcare decisions, you need a healthcare power of attorney and a living will.

You may also wish to pre-arrange your funeral. And name a Funeral Agent in charge of making arrangements after you die.

Lastly, you may make a power of attorney or revocable trust. These give someone else power to make financial decisions on your behalf. In case you become incapacitated.

How to prepare your assets for estate planning if you’re terminally ill?

There are 3 steps to prepare your assets for estate planning if you’re terminally ill. Make a list of your accounts. Write a letter of instruction to your physical assets. And finalize any beneficiary designations.

Make a list of your assets

Your executor must find and collect all your accounts after you die. Like most people, you probably have many bank, brokerage, and other financial accounts. A list will ensure your executor collects them all.

Write your letter of instructions

A letter of instruction will tell your executor where to find your physical assets. Financial assets such as cash, jewelry, or your bitcoin seed phrase. Also important non-financial items like heirlooms, your cell phone, passwords, and tax records.

Review your beneficiary designations

Lastly, review beneficiary designations on your bank, brokerage, or insurance accounts. Confirm they are up to date and correctly reflect your wishes.

Typically, you don’t bother with these three steps, because so much can change before you die. But if you’re terminally ill, then it’s more likely these will still be accurate when you die.

Who to leave inheritance to if you’re terminally ill?

You have a few advantages when deciding who to leave inheritance to if you’re terminally ill.

First, you have a better idea of who will actually survive you. And therefore will still be alive to receive an inheritance from you. So you don’t need to spend as much time deciding on secondary or tertiary heirs.

Second, you know who’s closest to you. If you die years after making your will, you may have a falling out with your heirs, or simply grow estranged. Or you or an heir gets divorced within that time.

Lastly, you know which of you heirs are minors. So you can accurately decide if your plan needs to include minor’s trusts or other adjustments.

Who will make end of life decisions if you’re terminally ill?

Your living will and healthcare proxy decide your end of life decisions if you’re terminally ill. In case you are comatose, nonverbal, or otherwise unable to express your own wishes.

What are healthcare end of life decisions? Under which circumstances you want medical care and treatment sustained or withheld. Including withdrawing treatment that’s otherwise keeping you alive (“pull the plug”).

Your living will

Your living will instructs when you want life sustaining treatment withheld. Also sometimes called a do-not resuscitate (“DNR”)

Your healthcare power of attorney

Your healthcare proxy or power of attorney names a person as your healthcare agent. Your healthcare agent makes any medical decisions not already in your living will.

Without these plan documents, your heirs must go through a court process instead. Like most court procedures, this can be costly and time-consuming. And the court may even choose someone outside your friends and family. Would you want a court-appointed stranger in charge of your end of life decisions?

Who is responsible for funeral arrangements?

Your funeral agent, executor, or closest family is responsible for your funeral arrangements.

Who can legally make funeral arrangements? Funeral arrangement decisions aren’t usually disputed. But if there’s any conflict, who decides? A Funeral Agent named in your notarized burial authorization has legal priority. Then, the executor of your will (in most states). In some states, the informant named on your death certificate is next in priority. In other states, next-of-kin in next in priority.

Who pays funeral expenses when someone dies? This can be tricky. Because your executor will not have immediate access to estate funds in time for the funeral. Usually, a family or friend pays the funeral bill. Then your executor must reimburse that person from your estate. To avoid this cash crunch after you die, consider prepaid funeral arrangements.

Who is in charge of your estate when you die?

Your executor (or trustee) named in your will or trust is in charge of your estate after you die.

Your executor may be in charge of your burial and funeral arrangements. Next, your executor will collect your assets to pay your estate expenses. And of course file and pay all taxes and debts, so creditors and the IRS don’t harass your heirs later. Finally, your executor will distribute whatever’s left according to your will.

As you can imagine, your ideal executor must have ample free time to devote to your estate. Your executor should be skilled at dealing with banks, brokerages, and bureaucracies. And be very comfortable making consequential financial, legal, and tax decisions

Lastly, all executors are personally liable for everything they do (or fail to do). Meaning, if your executor makes a mistake, his personal assets are at risk. Your heirs, creditors, or the IRS may come after your executor’s bank accounts, savings, or home.

You may hire a professional executor, if you don’t know someone suitable. You’re not alone. Not many people have someone who can handle all that work and is willing to accept the burden and risks.

But doesn’t a professional executor cost more? No, a professional executor’s fees are exactly the same as what your friend or relative would earn. You’ll probably even save money on expenses thanks to a professional’s existing relationships. And an experienced professional won’t need as much time .

Lastly, hiring a professional executor frees up your time. Because you don’t have to spend as much of your remaining time preparing your assets and estate. With a friend or family as your executor, you may feel obligated to make it as unburdensome as possible. But if you hire a professional executor, you can spend more of your remaining time with loved ones. And just leave it to the pro to figure out your probate estate later.