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Tom: This morning we have a bit of a serious topic: estate planning.

Mellody: Obviously, no one likes to think about their own mortality, but I don’t see this as a dark topic. Rather than taking the negative view of this, you should consider all of the positive outcomes of that task, such as ensuring that loved ones are able to benefit from your generosity, and protecting them from the difficulty of sorting everything out when you are gone.

Tom: First things first: what makes up your “estate?”

Mellody: Great question. A lot of people hear estate and think it is only for well-off individuals, but it isn’t. In legal terms, an “estate” is simply all the property individuals own, both outright and jointly – including real estate, investment and bank accounts, cars, personal belongings, even your pets!

Tom: What happens if you have not planned?

Mellody: If you don’t make any formal estate plans, then decisions about your property, you medical care and your final arrangements will be made by others. Property will be divided and distributed at your death according to the process specified by state law. Any medical decisions will fall to individuals specified by law as well. And the decisions made may not reflect your values or your priorities.

Tom: So what do we need to do?

Mellody: There are two key documents that you have to draw up: a living will, and a last will and testament. A living will dictates your medical wishes if there is an emergency and you cannot communicate your wishes, including decisions about life support. A living will can also allow an autopsy, organ donation and dictate whether you wish to be buried, or cremated, or other options. Most financial actions will fall into your last will and testament. A last will and testament spells out how your assets will be distributed and utilized following your death.

In your last will and testament, you will want to specify a number of things. They include:

1) what property and assets you wish to leave to family, friends, or charities, and how they will be distributed. You have to be specific here. If you want to pass along your grandmother’s earrings to your daughter, spell it out.

2) who you wish to act as guardian for any dependent children. If you have children you should talk to this person and get their permission before putting them in your will.

3) what individual(s) should manage your estate at death, pay debts and taxes, and distribute remaining property as you specify. Think hard about this one, because you do not want to just have your random uncle do it. You also have to decide if the executor should be compensated for their time.

4) how outstanding debts and taxes should be paid, and whether you want to cancel any debts still owed to you.

You also want to make sure that your will is accompanied by documentation of important financial information, such as bank accounts and insurance policies, and that copies are held by a known responsible party, which could be a lawyer, accountant or the executor of your estate.

Tom: Do you have any other advice for communicating our wishes?

Mellody: I am a big proponent of sharing your thinking by talking through all of the eventualities to ensure there are no secrets or surprises. Better that your heirs are able to ask you questions while you are alive than have to ponder your thinking after you are gone. On the other hand, if you have parents who are getting older, you should take the time to ask if they have a current living will as well as an up-to-date will. Also inquire about their long-term care insurance coverage and their overall retirement preparedness. They may have some expectation that you will help them financially, which would be good to know sooner rather than later.

 Tom: Who should we talk to to get the ball rolling?

Mellody: There are really three options these days – do it yourself, use online software options like Legal Zoom, or consult with an actual lawyer. I strongly advice against the do-it-yourself option. After all, you don’t really want your final wishes recorded on the back of a napkin, because you are very likely to make mistakes. A great example?  Supreme Court Justice Warren Burger wrote his own will, and made enough mistakes to cost his beneficiaries a bunch of legal fees and more than $450,000 in taxes. In terms of the online options, they are a solid start if your assets are straightforward and your finances are not complex. However, if you this is not the case and you can afford it, you should almost certainly find an estate attorney. The key takeaway here is that whether you decide to go the online route or to a lawyer, you need to have both a last will and a living will.

Tom: Thanks for joining us, Mellody. This is a really important topic for everyone.

Mellody: It really is. Have a great week, Tom.

Mellody is President of Ariel investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.

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