5 Ways to Leave a Lasting Financial Legacy
Financial newsletter writers don’t always write from personal experience.
For example, many of the financial and wealth management strategies I write about only apply to people with a bigger net worth than mine. But that doesn’t prevent me from becoming well-informed about them and providing guidance.
Recently I discovered one topic area where direct experience is by far the best teacher. One of my close relatives passed away after a long illness.
Because I was close to him and his wife, over the last few months, I tried to help them prepare for his passing. After the funeral, it fell to me to take care of some matters, and to advise on others.
Because the death of a loved one is an important financial and wealth event as well as a personal one, I want to share some of the lessons I learnt.
Get Everyone on the Same Page
You might think that the first step in helping someone prepare for their passing would be to talk to the couple involved. But I found it better to consult with the broader family first, for two reasons.
First, nobody likes to be told what to do. In the stressful time before a person dies, it doesn’t help to have family members approach a couple individually with potentially conflicting advice. That simply adds to the stress.
By agreeing to act as a group, my relative’s broader family was able to speak with one voice.
Second, my relative and his wife had children from previous marriages. They are scattered and have varying levels of knowledge about their parents’ affairs — including some misconceptions.
Getting them together on the phone before my relative died allowed everyone to operate from the same information base. That in turn enabled them to make well-informed decisions about what course of action to take before and after his passing.
In this case, the estate arrangements were straightforward. He had a proper will, which left everything to his wife and appointed her executor. All decisions about asset distribution are up to her.
But that’s not always the case. Especially when a will contains specific instructions for inheritance, it’s important to try to agree beforehand to the distribution to avoid conflict.
That’s especially important if the executor is too old or too far away to perform that role. In that case, it’s up to the family to agree to a substitute executor.
Gather as Much Information as Possible — Early
My relative had a long and interesting life. He had acquired many financial and physical assets, both real estate and movable.
But he was also a bit of a pack rat, and liked to be in charge. As his death approached, I realized it was critical to assemble all the financial information needed to manage his estate, since I knew his wife didn’t have it. At the top of that list was login information for his bank, brokerage, retirement and other accounts.
It turned out that the login information was recorded on old notepaper with usernames and passwords scrawled in his indecipherable handwriting. One result of our consultations before he died was to assign one of his children to sit down with him and transcribe it. That ended up saving his wife days — even weeks and months — of additional hassles after his passing.
My relative exercised sound wealth protection strategies, including physical ownership of precious metals and other portable assets in case of emergency. He also owned a substantial stock of inventory for his part-time trading business. And of course, there were mountains of important documents in his rather chaotic office.
By getting it all together well before his passing, his family was able to identify these assets and records and make plans to secure them.
Take Stock of Financial Accounts
Another benefit of the family’s early exercise of support was to identify and inventory my relative’s credit cards and other accounts. There wasn’t much debt, but there were balances on some of the cards, as well as a bank account that his wife didn’t know about. (He wasn’t trying to hide it; he had it before they were married and never thought to tell her.)
Because the family had helped the couple to itemize all this before his death, his wife knew exactly which credit card companies and banks to call, so they could freeze the accounts to prevent any further transactions.
(Freezing his credit cards also stopped several automatic bill payments. But that’s fine since creditors must wait until the will is executed to receive payment from his estate.)
Remember that any financial accounts or assets that aren’t titled jointly can only be managed by the executor of the estate. Not even the surviving partner can access information about accounts and assets held in the name of the deceased only.
In this case, although he and his wife had wisely transferred the title deeds for their cars and other assets into their joint names some weeks before he died, his individual credit card and bank accounts would have been off-limits to his wife until the will was executed. The same would have been true of IRS matters if they filed their income taxes individually rather than jointly.
In this case, this process was easy because his wife was also his executor. She was empowered to deal with all relevant institutions in that capacity.
If his will had appointed someone else as executor — say, one of his children from a previous marriage — that person would have had to handle all these matters themselves.
Finally, after his death, it fell to me to go through his personal and business effects. As I said earlier, he was a pack rat, and his office was, frankly, a mess.
As I went through everything in that office, I was careful to inventory it. That included physical assets and important documentation. I let everyone in the family know what I had found and where I had put it, so that everyone was on the same page.
And although it is unlikely in this case, doing this covered me if someone were to accuse me of running away with anything.
Like Taxes, It’s Coming … so Prepare
Thanks to excellent medical care and a strong constitution, my relative lived for many years beyond the doctors’ prognosis. But everyone knew what was coming, which enabled his family to intervene helpfully before the fact.
Unfortunately, that’s not the way all of us leave this mortal coil.
So my final lesson is this: It’s never too early to do everything I’ve described here. If you haven’t, for their sake, get started on it now, no matter how young and healthy you may be.
Your family will thank you for it.
Editor, The Bauman Letter
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