Do You Have Access to the Money?
Defending Your Family Against A Financial Crisis
In the previous post, Money Matters in Marriage we touched upon a few basic questions and concerns regarding how to protect your family, and its individual members, in financial matters. Today’s discussion will go more in-depth into some of the issues that were raised.
1. Do both parties have easy access to all information on all financial accounts (this includes banking, investment accounts, credit cards, mortgage or auto loans, etc.)?
In order to protect both parties in the case of a life altering event such as incapacity or death, both parties should have a copy of every page, of all documents relating to any financial account that is held in either spouse’s name. All documents includes:
- The company’s name, address, and the account representative (if applicable)
- A copy of the Original application
- Any and all addenda to applications
- Any and all communication from the company or person securing the debt
- Any and all legal notices sent concerning the debt
- Any and all financial statements regarding the debt
Please note that this is not an exhaustive list. Further, in addition to the two hard copies that you have, you may want to consider scanning the documents and saving them to a USB drive and sending them to your email address and the email address of a family member, friend and/or attorney in case something should happen to you and the information is needed.
2. Do you and your spouse have separate bank accounts? If so, do you have a Pay-on-Death, Statutory Durable Power of Attorney, or other type of arrangement, that will facilitate your spouse being able to easily access the funds upon your incapacity or death?
If you and your spouse have separate accounts, in the event of death or incapacity, you will have neither quick nor easy access to the funds if you do not have something in place to give you legal access. Some of the options you may exercise:
- Payable on Death (POD) Account. This survivor still has to go through the burden of obtaining a death certificate for the financial institution, however, it is quicker than having to go through the probate process in order to access needed money.
- Statutory Durable Power of Attorney. This document gives your spouse the power to make financial decisions on your behalf in the event of incapacity. The power may be as broad or as narrow as you choose.
3. If you have any separate banking accounts with debit cards, have you exchanged pin numbers with your spouse in the case of a financial emergency? This is something that you may want to consider, because it comes in handy right after a death when you have a POD in place.
When you have separate accounts, obtaining a debit card and exchanging pin numbers with your spouse is the best choice in the case of your death or incapacity. When you have performed this action along with providing a POD and/or Statutory Durable Power of Attorney, it provides your spouse with the ability to limit the amount of contact with the financial institution holding the account and makes the process for receiving funds faster and less painful.
4. Do you have any accounts (i.e. credit cards) of which your spouse has no knowledge? If so, do you live in a community property state? Did you include your spouse’s name on the application?
If you live in a community property state, you are responsible for your spouse’s debt- period. In the case of divorce, even if you did not know about the debt and the divorce decree holds only one spouse accountable for the debt, if the responsible party does not pay, you are responsible to pay the debt. The creditor is not bound by a divorce decree. Further, consider checking your credit report monthly to verify there are no accounts in your name to which you did not apply. If there are accounts, you have the right to ask the creditor to cancel the account. If the creditor will not cancel the account, even if your name is removed, you are still responsible for the debt.
5. Do you have enough life insurance? The amount of insurance you have depends upon your estate planning goals, life style, and personal philosophy on passing along wealth. That being said, if insurance is one of your major estate planning tools, it is crucial that you obtain the correct amount.
When making life insurance decisions, it is important to do the following:
- Calculate your debt. Please note that creditors CANNOT take money from a life insurance policy. Life insurance is a contractual agreement that occurs outside of probate. The money passes to the beneficiary outside of the probate process. If, however, you desire to have all your debts paid to ease any post-death creditor harassment your heirs may receive, you need to know the total amount.
- How much money will it take for your spouse to maintain the current lifestyle while he/she adjusts to your loss of income?
- How long do you want to give your spouse to adjust to your loss of income?
- Do you have any children?
- How old are your children?
- Do you want to leave anything to your children?
- How much do you want to leave to your children?
- Do you want the insurance to cover college tuition costs? Do you have other accounts in place that are being used to cover college tuition?
- What type of policy do you want? A whole life, term, convertible term, etc?
- Have you talked to a financial planner and an attorney about life insurance and alternative methods of estate planning?
The next post will discuss your relationship with money and ask probative questions to help you begin to understand why you are where you are financially in order to be able to better defend yourself in the face of a financial crisis .