This is part 2 of a 2 part article series discussing unexpected loss. The first part, “Navigating the Guaranteed,” was published 1/23/2022.
Preparing your finances for death isn’t a pleasant topic to think about, much less talk about. As uncomfortable as it may be, simple conversations and small steps will lead to a big impact to those left behind if done correctly. Follow the tips below on how to prepare:
- Get organized. Do you have a central spot (i.e. a physical or electronic filing system) where you keep important estate documents, life insurance information, and account statements? Gone are the days where every statement and document comes in the mail for your loved ones to easily track down the details of your financial life. As the world evolves into a more digital culture, it is crucial for you to have a central hub for these important items, and for someone to know where it is and how to access. This can help avoid a messy, time consuming scavenger hunt.
- Communicate about finances and any final wishes. It’s common for only one member of a household to handle the finances. While you may not care to be involved in day-to-day matters, you should strive to be aware of what your future financial situation looks like. Make sure beneficiaries are on file for qualified accounts, if and how life insurance premiums are being paid, and have an idea of what your debt situation looks like. The time to become aware of these answers isn’t when you are sitting across from an attorney or financial advisor after the fact.
- Review or create estate documents. At each meeting with a client, our firm reviews each individual’s estate documents: we find this review extremely important and you should as well. Make an item on your to-do list for this year to review your wills and Power of Attorney documents because life can change quickly. If you don’t currently have a will or POA documents, there are plenty of online resources and local attorneys that can assist you in getting these drafted and in place. It’s also important to note that all retirement accounts will be distributed at death based on the beneficiaries on file (see item number two) with the custodian, not your will.
- Consider your life insurance options. This can be a key component in, whether your family thrives or struggles if you experience an unexpected death. There are many different methods and opinions on how to calculate how much life insurance a person needs, but a good starting point for most is approximately ten times their income in coverage. Typically, a term life policy will provide you the most ‘bang for your buck’. If you’re unsure what sort of coverage would be most suitable for you, I would recommend consulting a fee-only advisor or CERTIFIED FINANCIAL PLANNER™ that would be able to provide you with an unbiased opinion.
Death can feel scary, but preparing for it financially doesn’t have to be. Give your loved ones the gift of a well prepared plan for the guaranteed.
Published in the Victoria Advocate
Sara Potts is a CFP® Professional and Operations Manager with KMH Wealth Management, LLC.