The First Step to Preparing for This Worst-Case Scenario

One day, many of us will face a worst-case scenario... the death of our spouse.

If and when the worst-case scenario does happen, there are a few simple steps you can take to keep your loved ones safe from unscrupulous folks who might take advantage in their deepest hour of grief. We're sharing the first step today...

When a spouse passes away, the breakdown in one's day-to-day operations makes a hard time even harder. In a time of loneliness and trauma, you have to sit down and weed through insurance papers or brokerage accounts that you haven't thought of for 30 years.

Research shows that those who are more dependent on their spouses endure more anxiety and yearning in the wake of a spouse's passing. But no matter your relationship, everyone is dependent on their spouse in certain aspects of day-to-day life.

When you die, your knowledge goes with you. And if you're the financial planner in your household, the loved ones you leave behind could spend months piecing it all together.

To start off the new year, I want you to take some time to sit down with your spouse and lay out a clear road map for your loved ones in regard to investing and finances.

And I want to help you get started...

Step One: A Simple List

You should never procrastinate on getting your estate planning in order. You could save tens of thousands of dollars in taxes or lost assets for your heirs by setting things up the right way.

That process takes time and money, but it's worth it. Today, though, we're only talking about what you can and must do for free and in just a few hours.

This is a matter of organizing information. Some of you maintain a clean and organized record-keeping system. Others keep a sloppy pile of papers or no documents at all. Most fall somewhere in between.

That's a problem.

If you're not the organized type, shaming you into keeping an impeccable paper trail isn't going to work. Most folks simply don't have the time.

But you can give your loved ones a major leg up with just one document. It's not a legal filing or a particular form. An estate planner may call it a "letter of instruction."

We simply call it The List. It details where your money and accounts are, and it passes on all the information your spouse will need. Here's what you need to include...

Will or other estate plans

If you've set up an estate plan, you need to include where exactly to find the original copy of the will or other documents. This may be in a safe-deposit box or with an attorney. Include exact details and contact information.

If you have a trust, your heirs will need a copy of the trust document to make claims.

Insurance policies

Insurance companies are under no obligation to make sure a policyholder is still alive. If your wife, husband, or children don't know that you have a policy, they may never make a claim.

Write down the insurance company, the policy number, the name of an insurance agent, and an estimate of your expected payout amount.

Take care not to forget about insurance policies offered through your employer. As a benefit, many companies offer term-life policies for little to no cost. Be sure to include these and a contact number for your human resources department.

Real estate and other assets

Your spouse or children know whether or not you own your home or maybe a vacation property, but do they know everything?

Have you purchased a burial plot? Do you still make payments on your car? Do you have an interest in any partnerships or other businesses?

Take stock of all the hard assets you have. List the things you're still making payments on. Include specific contact information. For those that require proof of ownership – like titles and deeds – detail where they are stored.

A single missed mortgage or property-tax payment will cause a lot of problems. Save your spouse the chore of checking the mailbox for notices of missed payments to figure out what is owed.

Retirement brokerage accounts and pensions

If you're keeping your investments sheltered from taxes, you'll have a retirement account or two, perhaps with different brokerages. You probably have some old 401(k)s that you haven't rolled over. Even if you've done a good job consolidating, you might have several accounts. (I still have one from my days at Duke University 20 years ago, and another small one from 40 years ago. Maybe I'll consolidate them, too.)

In a worst-case scenario, after an account goes untouched for five years and your broker can't contact you, they can apply for an "escheatment," in which they claim and liquidate the assets. Your heirs still have a chance to claim them (without any subsequent growth), but it's a headache they would prefer to avoid.

Make a list of your account numbers, approximate balances, the account type, and contact information.

Checking and savings accounts

Make sure to document every cash account you hold so no money gets lost.

Important documents

Where have you stored important documents like birth certificates, marriage certificates, or divorce papers? Whether they are in your own fire safe or a safe-deposit box at the bank, write down where these are. They'll be needed in the immediate aftermath of your passing.

Your bills

Do a quick roundup of any bills you regularly pay, especially things that loved ones may miss. If they miss payments on a storage unit you rented, the contents can be claimed and auctioned. Missing utility payments can result in shutoffs and expensive reconnection fees. Your loved ones may miss mailed – or especially e-mailed – notices, so help them keep track of everything.

You should also include a list of your online accounts (including e-mail) with the up-to-date user IDs and passwords.

Once you've compiled your List, check each account you've listed and make sure the beneficiaries for each are up to date. If you'd like, consider adding the names of your family members to the accounts so they can access them and easily talk to representatives when the time comes.

You may say this is a bit of a no-brainer. Of course, it'll be easier for your loved ones if you've written this down for them. We haven't broken much new ground yet. Still, many of you have yet to do it. Please make your List now... Just take 30 minutes today.

Even then, that's just the start...

We know thinking about your or your spouse's death is uncomfortable. But planning now will save you from a lot of stress – and potential problems – later.

Have you started planning? Let us know at [email protected].

What We're Reading...

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
January 12, 2023