Rewind: What If You Had Time to Plan?

Physician's Money Digest, November 2006, Volume 13, Issue 11

A sudden death or serious illness in the familycan knock spouses and other family membersfor a loop. If the primary breadwinnerdies, what will happen to that income? If the familymember is underinsured for a particularly costly illness,how do you cover the debt? These and dozensof other questions may pass through your mind ifthis happens to a member of your family.

Now imagine this: What if you had 3 months toprepare for such an emergency? Granted, it's tough tothink about. But if you had that warning, the followingare some major things you should have in place:

•An emergency fund. If a primary breadwinnergets seriously ill or dies, what will you need in themeantime? Cash. While most experts recommend youkeep 6 months worth of living expenses in a joint account,consider establishing a standby line of creditwhile times are good if you haven't yet built up an emergencyfund. The credit line won't cost anything unlessyou use it, so designate it only for a serious emergency.

•A centralized location for important papers.Buy a fireproof box you can keep safely in your homeand make it the centralized place for life and healthinsurance documents, notes on funeral arrangements,wills, and advance directives and durable powers ofattorney for health care.

•A list of critical phone numbers. Whenyou're in a stressful situation, it's tough to think ofwhat you should do first, much less who to contactfor help or support. Depending on your personal situation,take some time to create a phone list you canrefer to in an emergency. Include everyone—doctors,babysitters, human resource managers at your andyour spouse's place of employment, attorneys, financialplanners, bankers, and credit card companies.Put it in your important papers file.

•Updated wills. If you and your spouse havewills that are more than 5 years old or you've nevermade them in the first place, make them now. If oneor both of you dies, there may be complications settlingthe estate, particularly if you have children fromprevious marriages.

•Current health care advance directives,health care powers of attorney, and financialpowers of attorney. A health care advance directiveis a formal, preferably notarized instruction sheet fordoctors to follow in case you are incapacitated. Themost commonly known health care directive is a donot-resuscitate order. A health care power of attorneydesignates a particular individual—a spouse, a friend,an adult child—to carry out your medical wishes ifyou are incapacitated. Meanwhile, financial powersof attorney designate an individual to handle financialaffairs if the sick or deceased are single or did notdesignate joint tenants for certain assets.

•An index of assets. Thinking in terms of gettingsick or dying 3 months from now puts a finepoint on your survivors' need to know the locationsof your assets. The process of putting together a willmay help you focus on estate issues, but a really helpfulgesture would be the creation of an index of allyour savings, investments, and other key assets—what they are and where they are located. A goodfinancial planner will keep you on schedule with listingand updating this information.

•Care for pets. It may seem trivial, but pet care isone of the most often overlooked areas of planning.You should prearrange for their care with a friend orloved one in the case of your incapacity or death.

Reprinted with permission from the Financial Planning Association (www.fpanet.org),the membership organization for the financial planning community.