How to Prepare Your Family’s Financial Future When You Depart

Photo by NORTHFOLK on Unsplash

 

Proverbs 10:4 says, “Lazy hands make for poverty, but diligent hands bring wealth”.  Many families are dual income; one person is usually the primary financial bookkeeper.

If you or someone who has a significant impact on the family dies, can the family pick up the fiscal pieces to ensure the home remains intact and continues to function as needed?  Can they gain access to all the financial records, bank accounts, life insurance policies, brokerage accounts, etc. that they need?

Below is one way you can diligently help prevent financial chaos from happening to your family.

For me, “The Binder” came after a life-altering event unfolded and revealed to me that I did not have my family fully prepared if I were suddenly not around (i.e. if I died).

Although I had our financial plan in motion and running well, I had not kept my wife aware of where she could find things easily.  As a couple, we talked about our financial future and made decisions together, but I executed the day-to-day plan.

My mistake was not listening to her concerns and ensuring she was in the loop on where to find important financial material.  “It is in my desk drawer”, was my usual answer to her questions.  That was not good enough.

That desk drawer was full of files with monthly statements and other documentation that we typically keep for our record keeping.  But to ask someone to go through the paperwork, as well as 15 banker boxes full of files in the closet, to find very important documents that are needed (while going through an emotional tragedy) is akin to asking her to cut off her own arm.

I finally heard her and I made “The Binder” so that whatever might happen to me (or her), the family will be prepared to weather the financial storm that will inevitably ensue.

 

Table of Contents
  • Will / Advanced Medical Directive / Disposition of remains
  • Life Insurance / Retirement (military pay)
  • Retirement (her – IRA)
  • Includes Social Security
  • Retirement (his – IRA)
  • Includes Social Security
  • House / Home Inventory

 

So, what can you do?

Get a large binder that can be easily recognized in the home office.  Make sure anyone you deem has a need to know and that you trust is aware that this binder exists and where it can be found; your wife, husband, Executor of the Estate, etc.

There are two sections to this financial file.

The first is a big picture view of what you have, the locations of those items (if they are not in your binder), and a very short synopsis of what the financial documents mean.

The second section is about each member with a financial impact on the home (usually the husband and wife at a minimum) with every important financial document needed; Will, life insurance, mortgage company info, bank accounts, brokerage accounts, a document with userIDs and passwords, etc.

 

SECTION ONE: The Big Picture

In “The Binder”, I wrote a document that explains the concept and basic intent of the information that can be found in section two.  I started with some notes and a table of contents so that she (or the Executor) knew what they would find and where.

 

1. What to do if I (We) Move on to a Better Place

NOTE:  This document was written on July 2, 2017.  The wills were completed on June 27, 2017.  I cannot guarantee a regular update so view this as a guide to help make your life easier as you execute the estate.

NOTE:  There are other important documents not in “The Binder” but will be in the Fireproof safe.  Besides my DD-214, titles to vehicles, birth certificates and social security cards are in there as well.  These documents I kept there should the house be engulfed by fire and this binder is lost.

NOTE: Passwords to various accounts we have is located within this binder but may not be as up to date as the electronic file located on her computer at…

NOTE:  At my desk, the lower right hand drawer has files that pertain to day to day stuff (utilities, loans, etc).  The lower left hand drawer has stuff to access as needed (car maintenance, life insurance, etc)

 

2. Will / Advance Medical Directive / Disposition of Remains

We both have Wills that we recently updated on June 27, 2017.  They are located in this binder.

We wrote them together through the legal assistance office at Fort Belvoir, VA so there should not be a conflict between them.

There is also an Advance Medical Directive document as well as a Disposition of Remains document.

The Advanced Medical Directive gives decision authority regarding medical decisions to someone else should the hard choice need to be made.

The Disposition of Remains tells you what it is we want done with our remains (organ donor, burial, etc.). Bottom line is we don’t want to be cremated, we want to be buried together and be buried close to our son (Quantico).

 

3. Life Insurance

We have four life insurance policies; $1,000,000 on me, $500,000 on her and a $2000 accidental death and dismemberment policy on each of us.

 

Him:

My life insurance policy is with Navy Mutual.  It is for $1,000,000 with her as the primary beneficiary. The policy is in this binder.  There is also a rider on this policy for all the kids for $10,000 as long as they are dependents (age 21).  The policy is in effect until July 20, 2033 and the benefit plan number os 01234567.  There is an additional folder in the left drawer of my desk with statements and other information.

 

Her:

Her policy is also with Navy Mutual. It is for $500,000 with him as the primary beneficiary.  The policy is in this binder.  The policy is in effect until August 10, 2035 and the benefit plan number is 01234568.  There is an additional folder in the left drawer of my desk with statements and other information.

 

Group accidental death:

We both have a small $2,000 policy with CUNA.  The benefit amount changes at 70 to a $1000 value.  We pay nothing for this coverage as it is a benefit for being members at our bank.  The certificate numbers are: him – 012345, her – 012346

 

4. Retirement

Military pay

My military retired pay is set.  When I die, she will continue to receive a survivor benefit of 55% (of my full retired pay (Gross).  Her amount will be $x,xxx (before taxes).

 

IRAs

Him:  I have two IRAs with Ameritrade

-2345678 (Traditional IRA)

-This means taxes are owed when withdrawn.

-The account is also subject to Required Minimum Distribution (RMD).

-2345679 (Roth IRA)

-This means taxes are NOT owed when withdrawn.

-The account is also NOT subject to Required Minimum Distribution (RMD).

Her:

-2345670 (Roth IRA)

-This means taxes are NOT owed when withdrawn.

-The account is also NOT subject to Required Minimum Distribution (RMD).


5. Passwords

Although everyone says not to write down passwords, the sheer number of websites and the complexity of password requirements have made it impossible not to keep a password protected and encrypted record of your passwords.

I keep a copy of our passwords in this book to help make sure access to our accounts is retained.  It simplifies the ability to maintain financial freedom.

I readily admit and point out this section to my wife (or Executor) that this may not be the most up to date.  My computer however, does have the most up to date set of passwords and I try to replace this file every 6 months.

Bottom line is, don’t be fooled.  It is hard enough to keep track of your own passwords.  Your wife (or husband) probably will not have any idea of all your passwords for each account.

 

SECTION TWO: The Concept in detail

This section is for each member of the family with a significant financial contribution to the home.  Identify everyone you feel needs to be in “The Binder” and then subdivide the section to each member.  I started with me so that my wife could quickly and easily get to it.  Then I had to organize the documents basing it on relevance and importance.

 

1. DD-214

The very first thing she will see is my certificate of discharge from the active duty, also known as a DD-214.  It is only a copy and not the original.

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I keep the original in a fireproof safe, but I identified on the copy where she can get the original.  The original is the only thing the Veterans Administration will accept to execute VA benefits.

 

2. VA Benefits Letter

Next, I included my VA benefits letter which details the benefits I received when alive.  This will help as she communicates with the VA regarding benefits and the discharging of my remains – getting me buried in Quantico National Cemetery.  It will help identify all benefits she and the children will get from the VA.

 

3. Life Insurance

Life insurance is the next item in my documentation.  I have a $1,000,000 term life policy that was designed to replace my income for the household for at least 10 years should I die before I have fully established our financial retirement nest egg.

I hate betting on my death but this is probably the best peace of mind I got for our family.  My wife also has a policy and this is the first document in her section.

 

4. Payable on Death Designations

Payable on death (POD) is an arrangement between a bank or credit union and a client that designates beneficiaries to receive all of the client’s assets. The immediate transfer of assets is triggered by the death of the client.

Though morbid, these structures are important to understand.  An individual with an account or certificate of deposit at a bank can designate a beneficiary who will inherit any money in the account after his or her death.

A bank account with a named beneficiary is called a payable on death (POD) account. People who opt for POD accounts do so to keep their money out of probate court in the event that they pass away.1  

We both have POD’s for our bank accounts with each other named as beneficiaries.  It doesn’t affect our joint accounts but it covers all others.

Footnote:  1.  https://www.investopedia.com/terms/p/payableondeath.asp, Julie Kagan, Updated Nov, 16, 2019

 

5. Will / Advanced Medical Directive / Disposition of Remains

Finally, in the back of each member section is our Wills and other documents related to incapacitation and/or death.

These documents were developed through a lawyer to provide legal standing/directions/protection of our estate.  Both my wife and I have all of these documents to ensure that each of our desires is fulfilled.

  • Disposition of Remains is a legal document that allows me to provide specific appointments and directions regarding my physical body after I die.
  • There is also an Advanced Medical Directive. This provides directions regarding the medical care I desire should I become incapacitated and unable to speak for myself.  It expresses my wishes on things such as dying naturally and withhold artificially prolonging my life if I have a terminal condition.  It also states my desire to live out my last days at home, not in a hospital.
  • A general Financial Power of Attorney was also designed and legally bound. Sometimes general powers of attorney are not honored by financial institutions. This document is very specific and pertains strictly to financial matters for the home and is far more apt to be accepted.
  • Finally, is our Last Will and Testaments. Fairly self- explanatory, our Wills close out our estate planning and provides for how our estate is to be divided amongst our heirs.

 

Conclusion

What I am trying to say is to organize all your important documents to make it easier for the person left to deal with the emergency/life event so that nothing is left undone or ends up in probate court.  I have them in two places now; “The Binder” and our fireproof safe.

Every family is different financially.  What you would put into your Family’s Financial Future binder will be different from the one I put together.

I continue to think of things and update this book as our financial position changes.  I have this on my calendar to review and update at least once a year.

The planning you have put into your family’s future should include something like this so that your wife or husband can continue to thrive in this word until such time as they can join you in Heaven.  Don’t be lazy.  Ensure your family’s success when you are gone.

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