How to Achieve Financial Peace of Mind for When the Time Comes
“The best preparation for tomorrow is doing your best today.”
― H. Jackson Brown Jr., ‘P.S. I Love You’
Today I heard some awful news.
Dear clients of mine, in their early 70s, met with me. I was expecting our usual banter, catching up on our lives, our families. I’ve known this couple for almost 20 years, and I always look forward to our visits. They’re more than clients. They’re friends.
But today was different. I could tell from the moment I greeted them in our reception area. They were somber, serious.
Turns out, the husband has cancer. And it’s incurable.
I was devastated. They’d been planning their retirement together and looked forward to traveling, hobbies, and most of all, time with family. Time with children, grandchildren…
And each other.
Remarkably, they were pretty composed. More so than me, I have to say. I was amazed, but later on I understood how they kept it together…
They were focused. The husband’s condition crystallized for them what was most important about their relationship with me…and what they wanted my help with. Do you know what they wanted?
Peace of mind.
And peace of mind to them meant ordering their affairs in such a way as to make things as easy as possible for the wife when the time came.
No surprises, no delays, no hassles, no headaches.
The truth is, you don’t always get advance notice – like my client did – that death is knocking on your door. But that doesn’t mean you don’t value peace of mind just as much, right?
No matter what, these are the best ways to achieve that peace of mind that means so much.
- Update your will and other legal documents.
Seems obvious, right? And chances are, you probably needed to do this anyway.
According to Gallup only 44% of Americans have a will, and the number is declining1. Older Americans – those over the age of 72 – are most likely to have completed an estate plan2, but when planning for the unexpected, you want to start as early as possible.
Already have a will in place? That’s great! But when was the last time you looked at it? Years? Decades?
If the answer is ‘yes,’ make reviewing your will a priority.
While you’re at it, you may also need to update or create a durable power of attorney, a living will, and a health care power of attorney.
A Durable Power of Attorney (POA) is a document that allows a designated person to make decisions on your behalf should you become incapable of doing so. One of the most stressful aspects of an unplanned disaster can be deciding who gets to make decisions – and when.
A POA gives financial authority to the person you trust most, when you need it most.
On the surface, a Living Will and Healthcare Power of Attorney look very similar. Like a Durable POA, they each designate a person to make vital choices on your behalf, specific to medical decisions. However, a Healthcare POA is broader, pertaining to all health care concerns for the duration of your incapacitation, while the Living Will is only concerned with terminal decisions, such as prolonging life support.
These ancillary documents are often overlooked, but they’re vitally important. Why? They allow you to map out important decisions about your finances, your medical care, and end of life issues, so that when they time comes, all you have to do is follow the plan.
- Reduce or eliminate the need for a will.
Yes, this is opposite of number one. But…
It’s possible to leave assets and investments to others without a will through something called a beneficiary designation.
Often, proper ownership or beneficiary designations allow assets to transfer to heirs much faster and with a lot less hassle than when assets pass through a will. Here are the beneficiary basics you need to know.
For example, property owned jointly, like homes and bank accounts, can pass contractually by a named beneficiary without going through the delay and cost of probate. Same goes for retirement accounts, investment accounts, or life insurance.
The biggest mistake I see is when clients hire an attorney to draft a will, name beneficiaries in that will, and assume their new estate plan covers their assets. In reality, if the ownerships and beneficiary designations on your accounts don’t match the will, guess what?
The account trumps the will. If the will says the account goes to Peter but the named beneficiary on the account is John, then John gets the money.
Not updating your designations to match your new will is a mistake that can completely undermine your attorney’s work!
On the other hand, sometimes it’s better to pass assets through an heir or trust. I suggest confirming this with an attorney to make sure things are set up correctly.
- Update your net worth statement.
This is simply a document listing all of your assets and all of your liabilities. It will change over time, depending on the stage of life you’re in. Get detailed and leave no questions on where your money and assets are.
You’re probably the only person who knows where everything you own is, and you don’t want your loved ones trying to guess after you’re gone.
Another important reason to keep your net worth up-to-date? Estate tax. If you’re fortunate enough to own over $11.18 million in gross assets, you’ll need to file an estate tax return3.
This won’t affect most of us – anyone with $11,179,999 or less need not apply – but if you suspect your wealth is climbing towards the threshold, tally everything up and consult a tax professional to prepare for the possibility of estate tax.
- Make a list of all your user IDs and passwords.
Don’t leave this laying around…but do make sure your spouse knows where to find it.
Include passwords for your computer, phone, tablet, all investment and bank accounts, health insurance sites, etc. This can be a huge time saver should something ever happened to you.
Be thoughtful about who can access this list and how. In the event that both you and your spouse become incapacitated, leaving instructions for your attorney or a trusted family member might also be a good idea.
According to FindLaw.com4 there is one place to avoid when storing your password list, and it might have been your first choice: a safe-deposit box.
Many banks will not open a safe-deposit box until after the will has been probated. But what if the crucial information necessary to probate the will is stored inside that very box? Your spouse is in a Catch-22 scenario.
Be sure to keep your password list and other important documents in a secure place that your spouse can access, no matter what.
And don’t forget to keep the list updated!
- Make a list of all your insurance policies.
Most of these will need to be updated if you pass away. Include details like:
- Type: such as Whole Life, Automobile, P&C, etc.
- Amount: such as death benefit (e.g. $500,000)
- Premium: what you pay and how often (e.g. $40/month)
- Agency: who sold you the policy? How do you contact them?
Working off of a single sheet alleviates stress and confusion for your loved ones. It also helps them understand what benefits they are entitled to once you’re gone and how to claim them.
In 2017 alone over $7 billion in life insurance policies went unclaimed5, mostly due to miscommunications between the insurance company and the beneficiaries. Keep a list so your family doesn’t have to guess.
Don’t forget to include membership policies from any organizations you’re a part of—think Knights of Columbus or NASE or even membership to a Credit Union.
- Note your secret stashes.
Got any treasure buried in the backyard? How about a safe hidden behind a picture frame?
Make sure you detail the whereabouts of any secret stashes, and make note of what you keep there. This could be firearms, jewelry, collector’s items, and important documents like insurance policies and property titles. Even cash, coins, gold, and silver.
If it’s locked…where’s the key? What’s the passcode?
The last thing you want your loved ones to deal with is a treasure hunt. Make it easy for them!
- Meet with your professionals together.
Do like my friend did. Call your attorney, financial advisor, insurance agent, etc. and make sure your spouse is confident taking over if you are the one making the financial decisions today.
Both your spouse and your professionals will likely have insights and questions you might be overlooking.
More often than not, all I do in those meetings is put my clients at ease that the planning they’ve done is up-to-date and their affairs are in good order.
Telling your spouse everything is fine is one thing. When they hear it from your advisor? It’s genuinely reassuring.
This can also serve as a time to establish relationships between your spouse and your professionals, ensuring that everyone is prepared for a smooth transition.
- Get a credit card in their name.
This may seem trivial. It’s not.
Many spouses end up having no credit rating on their own when their partner passes.
Or, if your spouse has been routinely using a card on which you are the primary account holder, they could abruptly lose access upon your death—an occurrence that is both unfortunate and shockingly common6.
Get a card now in their name to help build credit. Even if you only use it sparingly, it could prevent a jarring inconvenience later on.
“Love is when the other person’s happiness is more important than your own.”
― H. Jackson Brown Jr.
Most of us won’t have the luxury of being able to “plan” our death; if that is in fact a luxury. Take care of those that you love by looking over this list and tending to it now.
Not only will your loved ones appreciate your care when the time comes, but you’ll both get to enjoy peace of mind now!
As for me, walking my clients through these steps and confirming that their needs would be met…I could see how much that meant to them both. In a real sense, I helped add one more way that they could express their love for each other.
1GALLUP. (2016, May 18). Majority in U.S. Do Not Have a Will. Retrieved from Politics: https://news.gallup.com/poll/191651/majority-not.aspx
2Walls, B. L. (2017, March 9). Haven’t Done A Will Yet? Retrieved from AARP: Saving & Investing: https://www.aarp.org/money/investing/info-2017/half-of-adults-do-not-have-wills.html
3Internal Revenue Service. (2018, May 9). Estate Tax. Retrieved from IRS.gov: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
4Thomson Reuters. (n.d.). Estate Planning — Keep Track of Passwords, Access Keys and PINs. Retrieved from FindLaw.com: https://estate.findlaw.com/planning-an-estate/estate-planning-keep-track-of-passwords-access-keys-and-pins.html
5Marquand, B. (2016, June 11). Unclaimed billions: Are you owed a life insurance payout? Retrieved from Money: https://www.usatoday.com/story/money/personalfinance/2016/06/11/unclaimed-life-insurance-money-payout/85718732/
6Mannes, G. (2018, February 16). What Happens to a Credit Account When Your Spouse Dies. Retrieved from AARP: Managing Debt: https://www.aarp.org/money/credit-loans-debt/info-2018/debt-after-death.html
Are you Financial Advisor Compatible? Take the QUIZ HERE to find out. Byron W. Ellis, CFP®, CLU®, ChFC®, CRPC®, is a CERTIFIED FINANCIAL PLANNER™ professional and Managing Director with United Capital Financial Advisers, LLC, a Financial Life Management firm.. © Byron Ellis
This article does not constitute tax, legal or accounting advice and neither United Capital Financial Advisers, LLC (“United Capital”) nor any of its employees or registered representatives is in the business of offering such advice. It was not intended or written for use and cannot be used by any taxpayer for the purpose of avoiding any IRS penalty. It was written to support the marketing of the transactions or topics it addresses. The opinions expressed in this article are those of the author and not necessarily those of United Capital. Comments on taxation and estate planning are based on the author’s understanding of current tax law, which is subject to change. Anyone interested in these transactions or topics should seek advice based on his or her particular circumstances from independent professional tax advisers and estate planning attorneys.