It is common for one member of a household to handle all or most of a family’s financial affairs. If that person passes away, another member of the household will likely need to immediately have access to funds for expenses but have no idea what they need to do. The person left behind may also lack the experience, desire, interest or time to manage the family’s finances. Even worse, they may not have the authority to access funds that were solely in the name of the deceased.
Here are some tips to consider:
Communication is Key
Couples should communicate frequently and be open and honest with each other about their finances. That sounds like plain common sense, but all too often one of the people in the relationship has no idea what their household’s sources of income are, what they own, where their assets are located, how much money they owe on their mortgage or credit cards, when life insurance premiums are due, or when and how they need to pay regular bills. While one half of the couple may have no interest in becoming a learned expert, they should at least know the basics about their financial circumstances.
Share a password manager such as 1Password, LastPass or Dashlane to make it easier to gain access to accounts online. Create a filing system for your records for your family’s finances and make sure your significant other is aware. A simple three ring binder, Excel spreadsheet or a digital storage provider such as Dropbox may do the trick for your family. Have a document with contact information for important family advisors such as attorneys, financial advisors or accountants. Include important estate planning documents such as your family’s Trust, wills, health care directives, and powers of attorney. Don’t forget about your bank account statements, life insurance policies, investment account statements, or retirement plan account beneficiary designations. Have a section for any deeds on real estate and any mortgage statements.
Consider Sharing Accounts
Think twice about leaving accounts solely in your name. If you have an account in your name only, you may want to add your significant other as a joint account holder with rights of survivorship or as a beneficiary with the account being Payable on Death (POD) or available to them as a Transfer on Death (TOD). If you have a living trust where both you and your significant other are co-trustees, consider updating the title to assets you hold in your name to your trust so your co-trustee has access to and can manage those assets. IRAs and other retirement plan accounts must remain in your name only, but they are problematic should you become incapacitated. Make sure you have a power of attorney set up so someone has access to those accounts should they need to withdraw funds for expenses or to satisfy any required minimum distributions after age 70 ½.
If you do not have a financial advisor that you know, like, and trust, start interviewing now so you have a team or person the family can turn to in a time of need. This tip is for the “self-directed” family where there currently is no relationship with a trusted advisor because the family’s financial affairs are being handled mostly or exclusively by one person within the household. If that person deceases or becomes incapacitated, wouldn’t it have been a good idea for them to have met with potential successors to them as the family’s money manager while they could help their significant other reach a conclusion on who they would want their loved ones to turn to in the time of need? Having such a discussion with a fiduciary wealth management firm such as GBB may be worth your time.
If you would like to speak with a financial advisor about this subject, please call (916) 269-0671 or complete our contact form.