While much is written on how to adequatelyprotect your family, retirement, andestate through proper planning, a companioncomponent to consider is that of the contingencyplan—a type of financial fire drill that'sdesigned to take care of your loved ones' needs andsimultaneously preserve the integrity of your familyfinancial picture. The financial fire drill is a proactivestep that can save considerable stress—and dollars—for those administering the family finances.
What's the Plan, Stan?
Bills have to be paid, and big decisions have to bemade about whether to sell the home or refinance themortgage. Many of these decisions must be made eitherimmediately or within a fairly short period, at a timewhen financial responsibility and decision-making areway down on the list of pressing tasks.
In one instance, a physician's wife called me inprofound discomfort over the fact that she had runout of cash to pay her bills, even with real estateand investment holdings in a healthy seven-digitrange. The quickest remedy was to guide her onestablishing a home equity line of credit, since therewas a substantial position in unencumbered realestate. Still, this would involve more paperworkand processing time.
The following are the fundamental questions to askto determine if you have covered all the bases: Will myspouse know what to do and whom to call if there is afinancial emergency? What will they need to know?Will there be liquidity, so that assets and investmentstrategies won't be disturbed for at least 6 months?
It Will Pay to Know the Details
Specifically, a consolidated registry of need-to-knowdata is ideal. Your family will need to know accountnumbers, contact information, contact persons, andpasswords for starters. The more they know, the better.
Discussing and training ahead of time—like financialpreparedness—should also be a part of your planning.Ideally, your partner will have met your team of advisorsand will be comfortable talking with them.Furthermore, having your financial papers organizedand keeping up-to-date records is critical. Dealing withthe maneuverings required to process an estate isalready a challenge, but when compounded by grief, theprospect of managing document procurement andmeeting nonuniform identity verification requirementsfor accessing the funds can feel insurmountable.
One physician whose husband had managed the filingsystem for important documents found that over the35 years of marriage, they had accumulated five differentinsurance policy documents, when in truth therewere only three. Mergers of earlier companies accountedfor the disparity, but this required 3 hours of trackingaccount numbers and firm names.
Remember that money doesn't just arrive withoutfilling out copious amounts of paperwork anddetailed identity verification processes. Always counton unexpected delays.
The Beneficiary Book
Retirement planning andestate planning should alwaysgo hand in hand. A greatresource for collecting andgathering information invaluableto your surviving heirs isThe Beneficiary Book (www.active-insights.com). This book can be helpful to virtuallyany person who has information that will benefitthose they will leave behind—information typicallyonly stored in their head that can be lost forever atdeath or incapacity. The book comes with a custom,easy-to-identify, 3-ring binder, complete with tabdivider sections. Each section contains a series ofquestions and simple fill-in-the-blank forms.
Teresa Dentino founded theFinancial411 to provide unbiasedfinancial education through sales-free consultation and guidance.A 21-year veteran of financial services, she is responsible fordeveloping the first financial education programs for women inthe United States and lectures frequently on the subject. She welcomesquestions or comments at 650-851-8959 or email@example.com.