How to create a financial survival plan

Protect your spouse in case you die

If you suddenly passed away, would your partner know how to pay your household's bills? Does he or she know how to collect on your life insurance policy? Does your spouse know where you keep your will?

Having a plan in place that enables your partner to manage household finances and account for your assets will alleviate stress at a time when your partner is already miserable with grief. But it also will prevent your spouse from making emotional or uninformed decisions he or she might come to regret.

"The best way to help a partner handle the finances after you're gone is to make them a part of managing the finances while you're still here," says Ann Arceo, a financial planner and founder of Savvy Duo Financial Planning in Los Angeles.

Our 9 smart moves will show you how to create a plan so your partner can step in and confidently manage the household finances without your help.

Document what bills you pay

If you pay your bills online, you might never receive a hard copy of your statement. Payment reminders arrive in your email. And only you hold the user names and passwords for online account access.

Does this scenario sound familiar?

Without this information, your partner might never know about a debt until it became seriously delinquent. Insurance policies could get canceled; credit card accounts could rack up major late fees and interest.

A simple list of each account, what it’s for, when the bill comes due, how much it’s usually for and how you pay it will solve this problem. You’ll also need to create a list of all your user names and passwords for bills you pay online. Wherever possible, make your partner a joint account holder so he or she will have an easier time gaining access, making changes and talking to customer service.

Make a list of your assets

Your partner shouldn't lose out on an asset you worked hard to acquire because he's unaware of it or doesn’t know its location.

"In many states, the state becomes the custodian of any unclaimed property," says financial adviser David Hollander, president and CEO of Liberty Group, a financial services firm in Oakland, Calif.

Of these assets, $2.3 billion are not reclaimed, according to the National Will Registry (www.nationalwillregistry.com), a free service that helps families securely manage their estate documents.

Your partner might not know which institution holds your Roth IRA funds.  He might not know at which bank you have a safe deposit box or where you hide the key.

Make sure your partner is aware of any valuable items around the house, like family heirlooms. Share the code to the home safe, if you have one.

Don’t forget about assets stored off-site, such as boats, RVs and items in storage facilities and second homes.

Don't forget about your debts

Your partner needs to know what debts you have (both joint and separate), their amounts and how the law treats them after death or disability. You don't want your partner's credit to take a hit over a debt that gets sent to collections, nor do you want debt collectors suckering her into paying a debt she isn't liable for.

If your partner is a joint account holder, she is responsible for any credit card debt. If she is only an authorized user or not on the account at all, she isn't responsible for the debt; the deceased's estate is. But in community property states, your spouse may still have to pay off your credit card bills.

Federal student loans will be discharged if you die or become totally and permanently disabled.

Joint debts, such as student loans that a parent or partner cosigned for, become taxable to the surviving cosigner as canceled debt. Make sure your will leaves money for that person to pay the tax bill.

Add transfer-on-death designations

You can ensure the seamless transfer of many assets from one partner to the other by placing transfer-on-death designations on your assets.

Applying a transfer-on-death designation is usually as simple as filling out paperwork and submitting it to the institution that holds your asset. You can use transfer-on-death designations with bank accounts, retirement accounts, investment accounts, real estate, vehicles and more.

Your partner will gain complete control of these assets immediately after your death instead of waiting months for the courts to settle your estate through probate.

While you're at it, add secondary beneficiaries like parents or siblings in case you and your partner die simultaneously.

Transfer-on-death designees have no rights to the asset while you’re alive, however, so you’ll usually want your partner listed as a joint owner of your assets. A transfer-on-death designation won’t give your partner access to an old savings account that could be used to pay your medical bills if you became mentally incapacitated.

Collect key documents

If you have a trust or estate plan, you've clearly already taken a major step toward protecting your household's financial security. Your partner needs to be aware of these plans, be able to find them and know which financial professionals are helping to manage them.

Also gather copies of wills and advance directives. Make sure they're legally enforceable and up to date. Your partner should also know where to find your tax returns and who prepares them.

One way to ensure your partner can find your documents and that they won’t be lost or damaged is to use a free service like National Will Registry to consolidate and protect your documents. Don’t assume documents stored at home, online, or even with legal and financial professionals are safe and secure.

You and your partner can each create an account naming the other as an authorized person. When one of you dies, the other simply visits the National Will Registry website to claim your documents. National Will Registry (www.nationalwillregistry.com) will verify your partner's identity and your death before granting access.

Create a spending plan

Your partner's budgeting needs will change if he loses you or if you remain alive but can no longer work. If your partner isn’t accustomed to budgeting, draw up rough budgets for each of these scenarios to give him an idea of how to manage the household finances.

For example, if you become disabled, how much disability income can your household collect and from what sources (e.g., Social Security, a disability insurance policy)? How much of a hit will household income take? Which expenses are likely to change? Which services should be canceled?

If you die, how much will your partner collect from your life insurance policy? Draw up a plan for how he can use the money wisely, because many people have no idea what to do with a windfall. They become paralyzed, blow it or get taken advantage of.

Create instructions covering what accounts the money should be held in; how much should be invested, where and in what; and how it should be allocated among possible priorities like paying for children’s educations and paying off the mortgage.

Know your benefits

Make sure your partner knows what benefits to expect, their amounts and how to collect on them.

  • Your partner’s human resources department can help in collecting unpaid wages and employer-provided life and disability benefits.
  • Collect on individual life insurance by filling out the company’s claim form and submitting a copy of the death certificate.
  • If you have a private pension, your spouse may be entitled to a lifetime minimum annuity; some plans also pay death benefits.
  • The Social Security and Supplemental Security Income disability programs pay benefits based on your work history and financial need in the event of total disability expected to last one year or longer.
  • Spouses become eligible for monthly Social Security survivors benefits at age 60. Your spouse may receive a smaller benefit if she collects before reaching full retirement age.
  • Spouses of service members and veterans who die or become totally and permanently disabled through their service are eligible for benefits and services, including a survivor’s pension, VA mortgages and financial counseling.

Explain household investments

Suppose your partner has a 401(k) through work, but you manage his account. Your partner may trust you to make these decisions, but he should know what investments you’ve chosen and why so he has a foundation for making his own decisions if necessary.

You might even want to provide sources, like the names of helpful books, that you used in learning how to make these choices.

If you use a financial adviser or attorney, make sure your partner knows who they are, how to contact them, what they do for you and how they are compensated. Make appointments to visit these professionals together, and have them get your partner up to speed on your accounts and other affairs.

It pays to have someone trustworthy looking over your loved one’s shoulder so they don’t make poor financial decisions at a time when they’re overwhelmed, says certified financial planner Steven Elwell, vice president of financial advisory firm Schroeder, Braxton & Vogt in Amherst, N.Y.

Put it in writing

Put together a file, book or binder containing all of your household’s essential financial information. If that sounds too daunting, there are many templates available to guide you through the process.

After Hurricane Katrina, Katie Schwartz realized that her own records weren’t in order, so she created the Financial Overview Template (https://sites.google.com/site/myfinancialrecord/home) to help people organize documents, account numbers, policy numbers, phone numbers, Social Security numbers, driver’s license numbers and more.

Her template helps people gather rental agreements or mortgage documents, vehicle titles, storage unit information, professional and business licenses, employment benefits, loan agreements, bank and credit card statements, insurance policies, investment information, retirement account documents and more in one convenient location.

Schwartz recommends updating the file each time any detail of your financial affairs changes, printing a hard copy and keeping a password-protected electronic copy on a flash drive that you can take with you.

If you work with an accountant, financial planner or lawyer, ask if their company has a template you can use.

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