If your husband died today, would you know the user names and passwords for all of your bank and investment accounts? If your wife were to die next week, would you know which bills are set up for automatic payments and which bills need to be paid by hand? If tragedy strikes your family, how will you pay for your day to day expenses?
None of us likes to think about the worst. But we will all die. And when it happens, adding financial chaos and confusion to overwhelming grief amounts to a very heavy burden for survivors. Many a surviving partner or child can testify to the frustration of being locked out of a bank account and the unexpected consequences of closing it (automatic bill paying instructions vanish, for example). Others relate sad stories of being forced to quickly sell a home and move when the primary breadwinner died unexpectedly without life insurance. Although you will probably overcome these challenges, sorting through them can cost thousands of dollars and years of your time.
Take a few steps now to get financially prepared for death.
What you can do
Get organized. Find the deed to your home, your marriage/divorce documents, any paper stock certificates, vehicle titles, corporation papers and other official documentation and proof of ownership. Store these documents in a fire-proof safe, safe deposit box or attorney’s office (make sure your family members know where to look for them.) Include a list of all retirement, bank and investment accounts, pensions and insurance policies, including account numbers and contact information.
Prepare a will. Your will dictates how to dispose of your assets and who should take care of your underage children. Include contact information for your attorney and accountant.
Prepare a living will and durable health care power of attorney. Spell out your desires in the event you cannot communicate or make decisions on your own behalf, and the person(s) who you authorize to make decisions for you.
The original copies of your will, living will and powers of attorney should all be stored in your safe, safe deposit box or attorney’s office.
Put your spouse’s name on all assets, including real estate, stocks, bonds and bank accounts. The more you keep things separate in life, the more cost and difficulties your survivors will endure in the event of your death. If you bought your home before you were married, you can easily add your spouse’s name by filing a quitclaim deed at the county real estate records office, thereby helping your spouse avoid probate and estate or inheritance taxes. You do not need to add your spouse’s name to the mortgage or refinance the loan in both names.
Organize your passwords. Experts recommend against writing down passwords, but you need to maintain an updated list in a safe place. A written list can go into your safe, or use SecureSafe, a free site for storing passwords and important documents.
Consider life insurance. Add up your mortgage balance, car loan, credit card debt, student loans, any other debt and at least six months of living expenses and shop for insurance in that amount or more. This is especially important if you are the primary earner or you and your spouse split expenses in a manner that would make it very difficult for one spouse to cover everything alone.
Consider disability insurance. If you survive an event but are left unable to work or to earn the same amount you used to earn, disability insurance can replace all or a portion of your lost income.
Prepay for your funeral. Death is expensive. Possible expenses include the casket, urn, burial plot, preparation for viewing, cremation, professional service fees, reception, transport to another city and state for burial and more. Decide how you want your death to be handled and price it out. (You could include these expenses in your life insurance coverage, too.)
Chanel Reynolds, who lost her husband at age 43 in a tragic bicycle accident, created this website to help average people make basic preparations and hopefully avoid the financial nightmare she endured. She provides a checklist and several document templates, all downloadable free of charge.
Everplans is a site dedicated to helping you ease the burden of death by providing guidance for dealing with the logistics before and after death.
Consult a lawyer in your state. If you can afford a family vacation this year, you can afford to hire a competent professional to help you ensure that your paperwork is in order.
Set aside time each week to tackle a little more until these tasks are done, and then review and update everything at least once a year. Choose your wedding anniversary or some other significant date as your designated time to review.
To be financially prepared is truly a gift to the survivors.
Image © Julián Rodriguez Orihuela