Show Me the Money – Keeping Your Spouse Informed
By Maria C Blair, EA
This past year, I’ve talked with several recent widows who had no idea where their money was. Their spouse took care of all of the finances for the household. So, in the midst of a time of grief, they also needed to learn how to handle the family finances. While this division of labor in families can be fairly typical, each partner should at least have a working knowledge of the assets and liabilities of the household.
Bringing a partner up to speed on the family finances is not difficult. Together, you should start with simply writing down everything that you own. Start with bank accounts, brokerage accounts, IRA’s, 401K’s and life insurance policies. Write down the account numbers, how the account is titled, addresses, contacts – like brokers or insurance agents, internet logon ID’s and passwords. Show your spouse where monthly statements are kept. Discuss how much money is in each account and how to access it. Most people know how to access cash out of a bank account. Accessing money from a brokerage account can take several days. IRA’s and 401K’s have different rules for withdrawal than a bank or brokerage account. Review those with your spouse. Taking money from an IRA can result in unnecessary taxes if done incorrectly. Also, don’t forget to write down and review items that are work related, like stock options and deferred compensation. If your company has provided you with a supplemental life insurance policy, then note who to contact. Make certain that you review beneficiaries on each account too. There have been many cases when a former spouse is the named beneficiary on an account and the current spouse ends up receiving nothing.
Lists should also be made of physical assets, like cars, boats, art work or jewelry. Many spouses are not aware of the value of items in a jewelry box.
You also need to discuss bills. Write down a list of bills that occur on a regular basis and be certain that each spouse has an idea of what a typical bill should be. Suddenly receiving a $200 water bill when a typical bill is usually $30 should ring warning bells. But if you don’t know what a typical bill runs, you’d miss the warning. Further, many bills are paid on line today. Be certain each person knows the logon ID’s and passwords or at least where they are kept. Many bills are automatically paid with a credit card, like I-Pass accounts. Write down those too.
Each spouse should know where the prior tax returns are kept, as well as the name and phone number of their accountant. Accountants have a wealth of knowledge that can be accessed in times of need. Each spouse should know where the Will and other legal documents are kept, as well as the name and number of the attorney. Discuss who else should have access to this information, like adult children.
Don’t forget about your children’s accounts. Many families have separate accounts for each child, as well as college 529 accounts.
Ask your parents to prepare these lists also. Should you need to step in on their behalf and they have already prepared this information, your work is half done.
Once organized, all of this information should be updated and reviewed at least once a year. It should also be stored in a safe place, like a safety deposit box or a home safe. If a copy is kept on your computer, be certain that your software antivirus protection is up to date.
This all might look like a daunting task. Finances are probably working well in your household and this can seem like unnecessary work. Unfortunately, death is not an option and circumstances can change in an instant. Having everyone with a better understanding of the household finances avoids much panic and uncertainty.