28 Dec Debt Does Not Die When You Do, Part One
Do you know what your family would do without you? Do they know where to find information necessary to pay your bills? Do you or your family believe that your debts will go away if something happens to you? This is not ‘estate planning’, it is emergency planning. You and a select group of people around you need basic information on how to handle your finances if you can’t.
Recently a good friend and family member died. People die all the time, but this time was different because it was someone my own age. At the same time, a client visited whose husband died unexpectedly at the age of 32. In both cases, the widows had no idea of their family finances and expected that with the death of their husband somehow the family debt would go away.
In the first case, this was a successful self-employed individual with a wife, two kids, a house, cars, a boat, and all the debt that goes with that. After the funeral, the widow came up to me and asked me if I would write the letters to the credit card companies telling them of the death so the bills would stop coming. Her question told me two things; she believed that the debt died with her husband and that she had no idea how her family finances worked.
The second case was a young woman in her early thirties, three months pregnant with her second child. While her husband was not in business, she did not know what debts he had, what he actually owned or how to pay the family bills. Neither family had wills and may not have needed them.
A recent article suggested that when you are in business, it is a good idea to have a ‘White Binder’ listing out all the important information about your business; bank account numbers, computer passwords, location of important documents and keys etc. I would extend that recommendation to any regular family as well. While the widows knew where the family checkbook was, neither had any idea about the ownership of their home, mortgages, car titles, retirement plans, life insurance, etc. Worse, they did not know which debts they would be required to pay.
What should the ‘White Binder’ contain? You can do it any way you want, but it should contain at least four parts: List of all assets and where they can be found, a list of all liabilities and who is responsible to pay the debts, a list of potential post-death sources of money such as life insurance, annuities, retirement funds, stocks and bank accounts and a list of the monthly expenses that must be paid and won’t wait.
The assets second should contain a list of all major or valuable bits of property. Obvious items include copies of the real estate deeds, titles to cars, bank account locations and numbers, and miscellaneous information such as passwords and keys. Other items can include collections that might be valuable and easily sold such as jewelry or art, coins or baseball cards.
Liabilities should include the name addresses and account numbers of every credit card, loan or mortgage and whose names are on those accounts. Balances will vary from month to month, but with periodic updating, the numbers can be relatively current.
Sources of income should include paychecks due and other immediate sources of money such as life insurance policies, retirement account and annuities, stocks, and bonds (including those U.S.Savings Bonds you got for birthday presents). Anything that can easily be converted to ready cash should be listed.
Finally, there should be a list of those things that need to be paid every month. Obvious items include rent or mortgages, utilities, car payments, insurances or other regular monthly bills. The once thing you don;t want to happen if you can’t be there to do it is to have your family sitting a home in the dark without power or facing eviction.
Continue on to Part Two of Debt Does Not Die When You Do...