Early in my career as a freshly-minted CPA, an event occurred which continues to have a profound effect on me to this day. A new client came to our offices dragging an old fashioned Samsonite hard-sided suitcase to have her tax return prepared. When she came in, I asked her what was in the suitcase and she said, “These are all the papers you’ll need to prepare my return.” When I looked inside I saw a hodgepodge of credit card receipts, checkbooks, brokerage statements, insurance policies and other assorted pieces of paper that she had been accumulating since her husband’s death several months earlier.
She went on to tell me that her husband of more than 30 years had died unexpectedly and quickly added that she had no involvement in the family finances as her husband “took care of all those details.” Hence, the need for the large suitcase now sitting on my desk. Needless to say, preparing her tax return was a challenge because she lacked knowledge of the family finances and provided a disorganized pile of records.
Thirty-plus years later, that widow’s story still resonates strongly with me. It serves as a real life reminder of what can happen when one spouse unexpectedly passes, leaving the other spouse behind to deal with the day-to-day realities of financial life. To prevent this from happening in your household, please consider the following practical steps:
Begin the conversation
The most important thing couples can do to chart their financial future is to start talking about their finances. Surprisingly, discussing the unpleasant topic of the financial issues that may arise after one partner’s death can actually help ease the transition from a one-spouse money management household to a two-spouse household. It also lets each partner know how the other would want his or her money handled.
The spouse who has been uninvolved in the couple’s finances needs to learn about the household’s investments, assets and monthly bills. Couples who set aside time each month to discuss their financial situation significantly decrease their chances of experiencing surprises down the road. Make sure to discuss big picture items such as the timing for paying off the mortgage and whether to prepay the loan to move up the payoff date.
Create an organization system for finances
Online services, like Mint.com, can help pull all your accounts and financial obligations in one place. Personal finance programs like Quicken are another way to get organized. For the less tech-savvy, consider at least setting up a large binder to hold all your valuable records. Keep this in a secure fire-safe box.
Create a plan
With your spouse, start to create your financial life plan. Talk about your goals and vision for the future. Gaining clarity together will go a long way in making sure you both are on the same page and working toward the same goals.
It is never too soon to start talking to your spouse about the finances and taking a proactive step toward getting more involved. The sooner you organize your finances and create a plan, the better prepared you’ll be when a major life event occurs.