I was scheduled to appear on both CNN and the CBS Early Show this morning to discuss the economy and the stock market. By 4:00 am, both segments had been canceled due to the death of Edward M. Kennedy. It was a good reminder that despite the focus on money, the economy and the financial crisis, there are more important priorities for all of us.
A couple of weeks ago, I delivered a presentation about personal financial responsibility. When I conduct these affairs, I try to talk about the sexy stuff (stock market, investing) long enough to hook my audience before telling them one of the great lessons that I learned as an investment adviser/financial planner: people need to think a little bit less about their 401 (k) plans and lot more about their estate planning. The biggest problem that I saw in my 15-year practice was not a poorly-allocated portfolio–it was the astounding number of people who did not have what I consider essential estate documents: a will, a durable power of attorney and a health care proxy.
A will is your instruction to your loved ones about how your assets will be distributed; a power of attorney assigns someone the power to make financial decisions if you are incapable of doing so; and a health care proxy selects someone to make health care decisions for you. Trusts may or may not be necessary, depending on your situation. In most cases, they are used to better control how your assets will pass to your heirs and can help avoid estate taxes.
Investment mistakes can be corrected easily–negligence in estate planning is irrevocable once a person dies. So as you watch the coverage of Ted Kennedy's life today and take a breather from Bernanke, the economic recovery and the current stock market, write a note to yourself which says: "See lawyer re: wills, etc." Even if you have these documents, remind yourself to revisit them to make sure they are up to date. We can always talk about the economy tomorrow.