Making Cents: Your personal financial Checklist
Your Personal Financial Checklist
by Kate Rhoten
October is here and school has been in session for a couple of months now. We held checklists in our hands as we shopped for back to school clothes and supplies. Then the collective sigh of relief as all went well the first day, first week, and month for our children.
Now that we have settled into the new school year and checked off a lot of to-do items for the kiddos, it’s time to turn to our own important to-do list.
The to-do list I am referring to is the personal financial checklist. As a parent, I think about my children needs first. This does not end with clothing, supplies for school or some fun stuff. What if I am not here to provide emotional and physical support? As parents, we have an awesome responsibility and it’s important to think about what life would be like for our children if we were not here.
The financial checklist includes items ranging from an emergency fund to life insurance. Over the next couple of columns, I will briefly highlight the financial checklist we use. There are eight categories on this list.
The first item on the list is life planning. Life planning is one of the most important areas as parents we need to tackle. There are multiple components to life planning:
- Power of Attorney
- Health Care Proxy (aka as a medical POA)
The will is a legal document that names one or more persons to manage a person’s estate and distributes the decedent’s assets. Within the will, you can outline specific items you own and to whom they are to be given. In real life, with kids, it’s necessary to think about the worst-case scenario: what happens if both of us pass away unexpectedly?
Many of us do not need a living trust unless our assets are above the inheritance tax limit as outlined by the Federal Government. If needed, a trust can be established for the surviving children after the passing of their parents. Within this trust, you name a guardian for the surviving children and a person accountable for the financial assets. This person is responsible for any of the cash assets from life insurance benefits, bank and investment accounts that are placed in a trust for the benefit of the children. Some lawyers recommend having a separate person for these two roles, guardian and financial steward, to minimize the temptation to use the money inappropriately. Often a bank representative is involved as well to help with the management of the assets.
During this process of setting up the guidelines for a trust, the parents may outline specific cases of when the children would receive lump sum proceeds from the financial accounts. These may be milestones such as graduating high school, finishing college, getting married, the purchase of a home, etc. As you see, one can tie many “triggers” to disburse cash assets to surviving children.
I recommend finding a good family lawyer to walk you through the process. Should a tragic event happen to your family, you will have already done your part to take care of the kids after you are gone.
It’s not a topic we like to think about. We are going to live into our 80’s or 90’s and see our children have children and maybe those grandchildren have children. However, if that ends up not being the case, wouldn’t you rather have taken care of your family with a little planning? Fail this and the state will get involved and will not have the same sense of concern for your children as would someone you select.
Next month, more about the financial checklist. In the meantime, please visit 4wallsmoneycoach.com for more information about life planning as well as power of attorney and health care proxies.
Kate is a financial expert of what to do and not do with money as well as owner of 4 Walls Money Coach, A Coaching-Focused Company. She has attended and completed Dave Ramsey’s Counselor Training. Follow Kate on Twitter 4WFCoach, reach out to her via email at firstname.lastname@example.org or visit www.4wallsmoneycoach.com. Feel free to share ideas or questions for future articles.