Break in Case of an Emergency: What to do to Help Loved Ones if You Manage Your Family’s Finances
You may have managed your family’s finances and investments throughout your life. Do you have a plan for what happens when you become unable to do so? Is your spouse or other loved one equipped to do what you have been doing?*
The digitization of our lives and proliferation of account types makes this question increasingly important. While previous generations may have had a few types of accounts and policies and maybe a pension, we are juggling an array of financial assets and accounts accumulated over a lifetime of job changes, rollovers and other life events. When helping organize my grandparents’ accounts, I relied on paper statements to decipher who owned what and where. Now, we are encouraged or forced to rely on online access to retrieve account details behind a gauntlet of passwords, smartphone facial recognition and multi factor authentication.
The key is to take steps to empower your loved ones to continue your prudent management of your resources, for your and their benefit, when you are unable to do so.
Here are some practical tips for what to do:
Organizing & Simplifying
Simplify your financial life by consolidating your accounts and closing ones you no longer need. Throughout life, we accumulate accounts, often for good reasons. We are used to working with them, so underestimate the effort and complexity they will create for others who may have to step in when we can’t.
Set up monthly bills to be paid automatically from your bank account. Make sure paper statements are turned on for each bill so that you or others have an easy way to check to confirm you are being billed correctly.
Prepare a list of the major expenses that are not set up to be paid automatically from your accounts, such as property taxes and HOA dues. Include the month they are paid and any other details that will help your spouse.
Each year, prepare a balance sheet listing all of your assets and liabilities (such as mortgages, credit card balances and auto loans). Review this with your spouse.
Prepare a list of all insurance policies with key details, such as the names of the owner and insured, the type of policy (for example, term or whole life) and death benefit.
Create electronic copies of key financial documents like tax returns, insurance policies and annuity contracts. Save them in a secure cloud folder (like Google Drive) and make sure your spouse has access.
Keep your estate planning documents in a place where your spouse can find them. Include a note with the contact information for an estate planning attorney they can contact with any questions.
Think about any assets that are locked away (in a safety deposit box, for example) or otherwise hidden. Make sure your spouse knows that they exist and how to access them.
Digital Housekeeping
Confirm that your spouse has valid login credentials for all joint accounts, including any apps needed for two-factor authentication. For accounts in your name, consider granting your spouse view-only access and/or trading authority, so that they can access the accounts using their login crednetials.
Use a password manager and make sure your spouse knows how to use it and has the master password. I like bitwarden.
If you have an email account where you get important financial communications, confirm that your spouse knows about it and that the password is saved in your password manager. If you receive notices via text, then save your phone passcode as well.
If you own Bitcoin or other cryptocurrencies directly (as opposed to through an ETF, for example), provide your spouse with any digital keys necessary to access the currencies.
Empowering
Add trusted contacts to your investment accounts.
Consider converting individual accounts to joint accounts for immediate family access.
Confirm that your estate planning documents are in order, including documents that are relevant while you are alive but incapacitated, such as a durable power of attorney, healthcare power of attorney and living will. A planner or estate attorney can help.
Taxes
Tax preparation can be an unnecessary source of stress for surviving spouses if the other spouse has handled tax issues in the relationship. Often, one spouse is skilled through years of practice at preparing annual returns using software and views it as a routine annual task. They know which forms to watch for each year and when to get a new version of the software that syncs with the previous year’s information. If you use a tax preparation firm, giving your spouse the information they will need to coordinate with the firm will make their life easier and decrease the chance of missed deadlines.
If your spouse isn’t interested in shadowing you during the next tax season—and most aren’t if they haven’t done it by now—then you need to prepare a cheat sheet they can use to make sure things don’t fall through the cracks. Include the following items:
the location of your tax returns (state and federal) for the past five years
the contact information for your tax preparation firm, or if you prepare your own taxes, the names of at least two preparation firms they can reach out to for assistance (I recommend local firms if available)
a list of each of the forms you receive annually that are necessary to prepare tax returns (for example, social security benefits on Form SSA-1099 and Forms 1099-INT and 1099-DIV for interest and dividends from banks and brokerage firms)
key deadlines
notes on any unusual things about your return that you have had to spend extra time on over the years
Arrange Help if Needed
Finally, to end on a slightly self-interested note, if you don’t have a financial advisor, consider selecting one in advance who can step in to assist at the right time. This will save your spouse from having to make that decision at the same time as they are managing other difficult issues. Alternatively, consider engaging an advisor now, even if in a limited planning capacity. This will ensure that your spouse has someone who is already up to speed on your financial situation when the need arises. Look for an advisor who is willing to work with you holistically beyond investment management. My firm offers engagements that accommodate this approach.
*Note that for simplicity I will refer to your “spouse” in this article, though this is interchangeable with other trusted loved ones if appropriate for your situation. Of course, you should absolutely trust someone before sharing any financial details with them or giving them any authority to act on your behalf.