Financial Preparation for Your People
PLEASE NOTE: WE ARE NOT CERTIFIED PUBLIC ACCOUNTANTS OR FINANCIAL PLANNERS. One of the ways we simplify the end-of-life preparations process is to break it down into four pillars of preparation (financial, legal, mental/emotional/spiritual, and practical) for three target beneficiaries: your people, your person, and your possessions. In today’s tip, we focus on financial preparation for your people -- those family, friends, and associates who in some way depend on you financially, will mourn your passing, and will need resources and comfort to move forward in life without you.
For simplicity’s sake, we’re going to address the topic from a couple’s standpoint, though we recognize that not everyone is in that situation. Feel free to adjust or modify your planning in a way that fits your circumstances and those you support best.
It’s also important that you consider each set of questions from two perspectives:
How can I protect my loved ones if I die?
How can I protect myself and others if my spouse dies?
Financial Preparation for Your People
Ariana Grande is quoted as saying: “Whoever said money can’t solve your problems, must not have had enough money to solve them.” While maybe this was said tongue-in-cheek, there is some truth to it. It’s hard to focus on grieving when you’re not sure how you’re going to pay your mortgage next month.
Questions to consider:
How much do my spouse and children depend on me financially? What percentage of our month-to-month and year-to-year budget comes from my work? If my income disappeared, could my spouse and children provide for themselves? How would their lifestyle have to change to make up for the loss of my income and how do I feel about them making those changes? If I’m uncomfortable with this, how can I minimize what those lifestyle changes would be? What resources or assets can they access to cover my loss of income? How quickly can they access this money or turn assets into cash to pay their living expenses?
Also, consider the skills and services that you provide that save your family money: preparing meals, childcare, transportation for kids, car maintenance and repair, yard work, laundry, fixing appliances, cleaning, paying the bills, filing taxes, etc. If I no longer am around to provide these services, how would the family get along? What could they learn to do on their own or how much would it cost for them to hire out the services? Are there any services I provide the family that they could do without?
What kind of grief support would they need to move forward in life? Are there any new activities they would engage in or trips they could take that might help with their grief? How much would those cost and how would they afford them? What grief support will my children need and what are those costs?
What types of milestone events for my kids are important for me to support financially? Weddings, college, volunteer missions, etc.? If I died tomorrow, am I leaving enough money or assets that they can access to pay for these events later in their lives?
After considering all of these questions as if you’re going to die, now ask them as if your spouse dies and you’re the one left behind. For example, how much do my children and I depend on my spouse financially? What services does my spouse provide that my children and I depend on and how will we replace them if my spouse is gone? What types of grief support will we need to move forward in life in a healthy way?
Have a conversation with your spouse about how you would each answer these questions from both perspectives. If you don’t feel that you have a financial plan in place to accommodate the loss of income or services of either of you, make a plan to do so.
Finally, if you own a business and have employees, how would your death impact them and your business? Is there a plan in place for how the business will continue to operate and be profitable in your absence? Who will resume your leadership role in the business? Who will replace your day-to-day operational or sales contributions?
