Even with modern-day family dynamics, the role of a “financial leader” in a household typically still falls on one person. While most leaders in their pre-retiree years rightly focus on accumulating assets and risk management strategies for protection, a new set of challenges are introduced as one crosses the finish line and enters retirement. These challenges relate to contingency planning and family preparation for those who aren’t in the financial leadership role but may have new responsibilities. Be it illness, unforeseen death, etc.; things happen when we least expect it. If you are the financial leader of your family, ask yourself – are others prepared to take over in your absence? If not, below are some effective ways to set your family up for success:
Organize Important Documents
The first step in developing a strong contingency plan is to get organized. Ensure essential documents, including, but not limited to, estate documents, tax documents, insurance policies, investment account statements, deeds for real estate, etc., can be quickly found and referenced. Depending on your specific situation’s complexity, this process can take some time, so get started as soon as possible!
Consolidate Documents and Investments
After organization, a great next step is to simplify your financial life by consolidating important documents and investable assets in a central location. For documents, I recommend creating a handbook (Physical or Digital) where you can easily access your vital information. Keep in mind these handbooks should be in a safe location to guard against physical damage or cyber threats in the case of a digital handbook. For investable assets, I recommend using a single custodian, or at most two. While custodians like Charles Schwab make it easier than ever to monitor assets through their digital platforms, using more than one custodian creates complications with multiple passwords, tax management issues, and potential confusion around investment strategies.
Educate and Delegate
With the organization and consolidation steps complete, the most critical step in building a solid financial contingency plan remains – the education/delegation step. As the family financial leader, it is your responsibility to ensure those who MUST act in your absence can do so. Having answers to a few questions can go a long way in educating other family members.
Where is the family handbook, and how can it be accessed? Who is the custodian of investable assets, and who is a good point of contact? How are bills currently paid?
My recommendation is to bring those family members into the process to be comfortable with their potential responsibilities. If the responsibilities seem to overwhelm them, then I would recommend engaging a CERTIFIED FINANCIAL PLANNER™ professional for help.
For weekly insights, follow The Welch Group every Tuesday morning on WBRC Fox 6 for the money Tuesday segment.
Fox 6 Talking Points:
Creating Financial Contingency Plans
- Organize Important Documents
- Consolidate Documents and Investments
- Educate and/or Delegate
Marshall Clay CFP, JD, is a Partner and Senior Advisor at The Welch Group, LLC, which specializes in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™. In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters.