We never know when our time will come, especially as we retire and grow older. What we can do is to leave our spouse or loved ones instructions to help them navigate their new financial situation. Each of us will, of course, have a different list. If you are unsure about providing such a list just think about what your loved one will be going through when you are deceased and maybe these instructions will help ease some of the burden.
To My Loving Wife,
We both worked had for many years and made many sacrifices so that we could be financially secure at this stage of our lives. We equally shared responsibilities and one of mine was to plan and manage our finances and investments. I wanted to make sure that when I’m no longer at your side you’ll feel a little more comfortable because of the planning I’ve done.
Your Loving Husband-
Here are my Top 10 Financial Instructions:
- Please review the document called “In Case of Emergency”, a link to it is located on my computer screen. It is a long detailed list of everything in our lives that involves money, property, investments, utilities, insurance, accounts and so forth. It will provide you with details, names, account numbers, phone numbers, passwords, etc. In this document you also find contact information on a preferred real estate broker, tax preparer and other professionals you may need. I kept this document updated monthly.
- As you are aware we have a complete Estate Plan, Trusts, Separate Wills, Medical Directive’s, Power of Attorney etc. all set up. Copies are stored both in the house and in our safety deposit box at the bank. You know our attorney and he is always available to help you.
- As a safety net and in case of emergencies, we always maintain 2 years’ worth of complete living expenses in cash between our bank and Fidelity accounts. Take your time making any decisions.
- I waited until I turned 70 to collect Social Security, this provided for the maximum benefit payable by each of us. You must notify Social Security of my death, and you will receive Survivor Benefits equal to my monthly Social Security Benefit amount. You will no longer receive Social Security Spouses Benefits (they were ½ of my benefit). See similar instructions for my two pensions in the “Emergency” document.
- You don’t have to worry about the investments in our joint Fidelity taxable account for an extended period of time. They are blue-chip and high growth investments that can remain as they are if you so choose. Keep in mind that any stock you sell in our taxable account will generate a tax bill, seek trusted advice regarding taxes before making any big stock decisions. If you are ever in doubt you can sell all remaining individual stocks and just add them to the Index ETF’s that are already in the account. You can view this account as your legacy and leave it to whom you see fit, you’ll probably never need the money in it to live on.
- The money in each of our Roth IRA’s is 100% tax free, you can use it in an emergency if ever needed.
- When I turn 70, by law I must start taking RMD (Required Minimum Distributions) each year from my personal IRA account. For years I’ve been planning for this and have invested in good dividend paying stocks. Each year the total dividends will cover the RMD, so you don’t have to sell any of the stocks themselves until you are well into your 90’s. You can decide who to pass this along to after your death. However, you must make sure that Fidelity transfers the RMD by December 31 of the year each year including the year of my death to your bank account. Fidelity will transfer the RMD amount from cash in the IRA account that is generated from dividends all year. My former IRA will now be in your name. Over the years we converted your IRA account over to a Roth IRA (100% tax free) so that you don’t have to worry about a RMD in your name.
- Regarding taxes, for the year that I die you will file taxes as a Joint Return and just sign my name. For the 2 following years after I’m deceased you will file taxes as a Qualified Widow, a favorable tax category. After those two years expire you will have to file as “Single” and will be in the higher tax category. I have provided some tax suggestions in the “In Case of Emergency” document, for your consideration.
- Simplify your life, don’t worry about things like getting the best deal in selling the house and so forth. Make everything as convenient as possible. All of our monthly bills are automatically paid, we don’t write checks. The lawn and pool care companies will take care of the property. Again all of this detail is in the “Emergency” document.
- We have saved, planned and invested well. You will not have to worry about money the rest of your life. You will be able to pass on to our other family members and charities the wealth you too will leave behind. Seek a trusted family advisor to help you make decisions as necessary.
You can learn more about an “In Case of Emergency Document” here.