I recently attended my son’s class celebration and during the event I started talking to one of the moms. We exchanged the normal pleasantries and started talking about our boys and life in general.
In the course of the conversation I learned that this lady was a widow and her husband passed away a little over a year ago, leaving her and her son behind. She told me she was in the process of trying to sell her home and relocate but “things” were stuck in court proceedings.
I quickly looked at her and asked, “I guess your husband didn’t have a will?” She nodded her head and said they talked about making a will so many times, but things just got in the way, life was busy and they really never thought it would be needed, especially not at such a young age. Here she was, trying to put her life back together while having to deal with courts and rulings.
All of this frustration could have been avoided very easily with a simple one-page document created at home and then signed by a few witnesses. No lawyers, and no expensive attorney fees.
Regardless of the size of our financial assets, all of us should have our financial house in order. Even though it sounds like a daunting task, it’s really quite simple and most of the work can be done at home over a weekend.
Those who have spouses and children should pay special attention since this advice, if applied, can not only give peace of mind now, but also spare you, your spouse or other family members from unnecessary frustration and lengthy court battles in case something were to happen.
Basic Information Sheet
Start with creating a basic information sheet that would include the following:
- All bank accounts, bank phone number and a contact person.
- All loan and debt information including the name of the creditor, all necessary contact information and the purpose for the loan.
- Utilities information including log in and passwords for on line payments.
- Employer contact information for both spouses.
- School contact information for all children.
- All other login and password information.
- Healthcare providers, names and contact information.
Make sure that this document is stored in a safe place in order to protect your privacy. Only you, your spouse and possibly another family member should be able to locate this document.
Important Document Copies
Now that you have created a list of important information, it’s time to set aside copies of some important documents. Keep the some of the originals in a safe deposit box, or other secure location, and keep copies at home. Here are some examples:
- Latest statement from each bank account. Including any money market, CDs and investment accounts. Using an online budgeting software can help you consolidate much of the financial information all in one place!
- Copy of your home loan documents.
- Copy of your life insurance policy, including any life insurance that your employers provide.
- Income tax documents going back 5-7 years.
- Health records, including vaccination records.
- Warranty for any items you may have recently purchased.
- Latest statement for your 401k / other retirement investments.
- Photocopy of your passport, driver license and social security numbers.
- Car insurance policy.
- Home insurance policy.
- Birth certificates.
- Marriage license.
- Vehicle titles and tag records.
- Receipts for large purchases.
- Copy of your will.
Making a Will
Many assume that since they don’t have large family estates and millions of dollars in assets that having a will is unnecessary and that it’s hard to create. Both assumptions are very far from the truth!
First let’s establish why having a written will is a good idea and then we’ll look at how easy it is to create one.
The basic premise of a will is to establish how your assets, no matter how few, will be distributed in case of your death. If you don’t have a will that provides specific instructions, the state will determine who will get what, even if you have a spouse and children. Here are some items to include in your will: home, retirement funds, investment accounts, and life insurance.
The second important reason for having a will is to specify guardianship over your children, in case something were to happen to you and your spouse at the same time. This is especially important for couples who have young children!
So what do you do in order to make a will? In most states, in order for the will to stand, you’ll need two witnesses to sign your will – these witnesses should not be part of your estate distribution. You must date and sign the will. That’s it! Once you have your will written and signed, keep your original copy in a safe deposit box and make a copy and keep it at home with your other important documents.
For those who have broader assets, having a living trust may be the right way to go. Establishing a living trust will require more work and legal counsel.
Life Insurance
Life insurance should not be looked at as a fool-proof protection plan, but rather it should be viewed as a way to provide for specific needs in the event of you or your spouse’s passing. In the life insurance market, there are two basic products: whole life and term life insurance. Term life is usually much less expensive and can be purchased for a specific term: 5, 10, 20, or 30 years.
So how should you gauge if you need life insurance and how much to purchase?
If you have a spouse and children who depend on your income (especially if one of you is staying home and there is only one source of income for your household) you should purchase enough insurance to protect against the potential loss of income for a specific period of time and also enough to cover all liabilities (mortgage, credit card debt, car loans, etc.).
There are many great FREE online calculators to help you determine how much insurance you should purchase based on your income, your financial obligations and the size of your family. With so much competition, don’t forget to shop around and purchase only A++ or A+ rated insurance policies.
For many of us, organizing our estate is the last thing on our mind. We are so busy with our daily activities that even something as important as this tends to get overlooked.
To make it easier, block out some time or even a full day on your calendar in order to focus on organizing your estate without interruptions. You will be glad you did!
Megan Pacheco is a writer and content manager for Finicity (provider of Mvelopes and Money4Life Coaching). She comes with 13 years of experience in the area of personal finances and her tips on budgeting, debt, saving, giving, money and marriage and more have been published by Yahoo Finance, AllParenting, FoxBusiness, DailyFinance, REDBOOK and others. You can contact megan at: megan.pacheco@finicity.com
Publication date: January 6, 2013