This is not a glamorous topic, but it is timely. Covid Season has brought a lot of things front and center and as we gear up for re-entering this new normal, I want to highlight the importance of planning for some worst-case scenarios. Personal finances doesn’t only include you, it includes family or loved ones that would be impacted financially by your passing. This is emotional to consider but you should prepare for the unexpected. I have included three must have when planning for your family in the event of an untimely death or health event. Use it as a checklist with your family!
All of your accounts should have beneficiaries named. A beneficiary is someone you declare on a legal document who will be entitled to the money in your accounts / assets upon your passing. You will have to fill out different forms online or by handwritten form, it depends where your accounts are being held.
Check that these are up to date. If you’re already one it check that you submitted it and it’s accurate!
Are you married now, have kids, divorced, are your beneficiaries still living? I’ve seen it all. Take a moment to check the accuracy, even down to the spelling!
Each account will need to name a beneficiary. Just because you fill out a form for one account at your financial institution or bank, do not assume they are all updated. That is not the case. Retirement accounts cannot be held jointly for IRS calculations because of the tax benefits involved with those accounts. So you name a beneficiary or two or three, it’s up to you! But add them and check for accuracy.
If you have a joint account, you can typically open these with beneficiaries in mind. So if you open a joint account with your partner and it’s your wish that your partner would receive all of the money if you were to pass, that’s commonly called joint with rights of survivorship. That’s typically included in the account title but you don’t have to do it that way. You can set up joint account with something called tenants in common. That language separates out your portion of that account. If you pass away, your portion of that joint account would go to your beneficiaries rather than the other account owner and vice versa.
If it’s an individual account you can set up something called either POD, payable on death or TOD, transfer on death. Titles change depending on the institution you work with. This will directly name your beneficiaries in the event you pass away; they can easily take ownership of this account.
When you directly name beneficiaries on your accounts, that supersedes any Trust documents. What do I mean? The legal system will give your money to the beneficiaries you name on your account first regardless of what your Trust or Will says. Keep that in mind that you’re keeping things up to date.
2- Guardianship for your children
Guardianship for your children- make sure this is up to date, if you’ve named your parents in the past, and they’re aging, health issues or physical issues may arise. You may want to consider who you have named in the past. Make sure you have legal documents are up to date in the event this heartbreaking scenario occurs.
3- Healthcare proxy
The third must have is a healthcare proxy. A health care proxy is a document that names someone you trust as your proxy, or agent, to express your wishes and make health care decisions on your behalf. This is only activated if you are unable to speak for yourself. Often times a doctor will have to certify that you are incapacitated before your proxy starts making decisions for you.
Although it would be in your best interest to review your legal situation in great detail, these are the three must have’s you should consider if you are pressed for time. This is always an emotional part of financial planning but you will sleep better at night knowing your family know what to do and be taken care of in the event of a tragedy.