Why Preparing for the Unexpected Death of Your Spouse is a Good Idea

The passing of a spouse is one of life’s most devastating events.

Intense grief often leads to indecision and confusion when dealing with the economic and legal challenges that come with widowhood. While the thought of planning for the death of your partner may be unsettling, it can actually bring you both peace of mind.

Here’s a list of important steps to ensure that the surviving spouse in your marriage will remain financially secure.

 

Get involved in the family finances.

It’s not uncommon for each person in a spousal relationship to take the lead on certain activities. When it comes to household finances, it’s essential that both members of a couple have at least a working knowledge. It can be helpful to document how day-to-day finances are managed. For example, if there are multiple checking and savings accounts, how are they used? What recurring bills exist and how and when are they paid? If you have a financial advisor, you should both be involved in meetings and any other communications.

Why Preparing for the Unexpected Death of Your Spouse is a Good Idea

Create or update your estate plan.

If you don’t have estate planning documents in place, including wills, trusts, advance directives, living wills, durable powers of attorney for health care, and physician orders for life-sustaining treatment, it’s time to talk to an estate attorney. If these plans already exist, it’s wise to review them every five years and after any major life changes to ensure they still reflect your wishes.

Write a letter of instruction.

Also known as a letter of intent, this document that provides specific information regarding your preferences on anything from medical care to your funeral to the distribution of your assets and property. Unlike a will, a letter of instruction isn’t legally binding. Rather, it’s meant to ease the burden on your loved ones by providing guidance regarding the management of your affairs.

Make sure your life insurance is adequate.

Americans are generally underinsured. Nearly half of all adults have no coverage of any kind. Twenty percent only have life insurance because it was offered through work, which is typically one or two times their salary—not enough for survivors to live on for long. Term like insurance is relatively inexpensive and pays out benefits quickly, which can be particularly important following the loss of a breadwinner spouse. Your financial advisor can run a survivors scenario to determine how much life insurance you need for your specific situation.

Check your beneficiary designations.

Even if you have a will in place, your beneficiary designations will supersede it. These designations remain in place until they’re changed by the account owner. It’s not uncommon for an ex-spouse to receive retirement funds or life insurance benefits instead of the current spouse. To avoid this scenario, make a list of every place you’ve worked and contributed to employer-sponsored retirement plans. Do the same for your life insurance plans, bank and credit union checking and savings accounts, and titling on real property. It’s worth double-checking your beneficiary designations to ensure that the correct people inherit your wealth.

Inventory accounts and organize financial documents.

Make a list of all accounts, both those that are owned individually and jointly. Include account numbers and the websites to access them. Store this list and any important relevant documents in a safe at home or in a safe deposit box. Make sure your loved ones know where to find everything and that they have access. Revisit your inventory annually and update it as needed.

Don’t forget your digital assets.

It’s important to have a safe storage place for your online passwords so your spouse can access the associated accounts. One of the easiest ways to do this is by using a shared password manager. This will ensure that your financial accounts, social media, photos, and videos can all be retrieved should anything happen to you.

Having candid financial conversations today will ensure a smoother transition for you or your spouse down the road. FAI’s friendly, knowledgeable advisors can help protect your finances in the face of any life transition. To learn more, please contact us.

About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life's uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.

 

 

 

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