As the end of the year approaches, it may be necessary to evaluate your family’s contingency plan in the event of a crisis. Have you ever considered what would happen if you or your loved ones were suddenly faced with some hefty expenses? What if you are unable to explain what sources of funding and assets you have to draw on to pay for the crisis?
Many people do not have a contingency plan in place, but this is something that is critically important to address before the crisis hits. Keeping your family informed of your wishes and the way in which you would handle a crisis financially ensures that when the crisis occurs, you are not overwhelmed with questions about this account or that asset. Your family can help you when you need it most, and you will be able to devote your energy to getting through the hard times.
Some families are concerned about maintaining confidentiality about their financial status. For example, are the family dynamics complex already? Would divulging account balances and specifics about assets perhaps make the adult children less likely to strive for financial independence? Would that information stress adult children, when they begin thinking about potentially funding a portion of their aging parents’ expenses? There are as many reasons as there are family situations to want to keep financial information like accounts and balances private.
However, there is a price to silence, especially during a crisis situation. You or your spouse may not be thinking clearly, and trying to educate your family members about your financial situation and assets during the crisis is going to be nearly impossible, not to mention highly stressful.
To alleviate some of the stress and struggle during a time of crisis, having a written contingency plan and financial statement of resources is one of the best solutions. Both spouses and perhaps one “lead child” should know where the financial and estate planning documents are kept, and have authorized access to them if they are kept under lock and key. These documents should include some basic information, but obviously, this is just a guideline; individual circumstances will dictate what type of information and how much you should include in your crisis plan.
Types of income
By listing the type of income, and who earns what, you ensure that whoever is handling your finances during the crisis knows what types of income they can expect to continue receiving while the crisis is ongoing, and which incomes might taper off or stop during the emergency. Things like pensions, Social Security, or actual wages and salaries (if you or your spouse are still working) will need to be known by whoever is helping you handle the crisis, so that they can have a full picture of your financial situation.
Emergency financial resources
This list can include life insurances, long-term care plans, joint accounts, power of attorney documentation, IRAs and other investments, and any estate planning documents like a will. By listing the type of resource, how to access it or who has access, and what it should be used for, you can lay out how you want a crisis to be handled. For example, if your life insurance policy should not be cashed in, except in the event of death, you can note this information in your contingency plan. If your joint accounts should be accessed in a certain order to maximize benefits or reduce repayment costs after the crisis, explain the reasoning in your documentation.
Your contingency plan is meant to explain things that you may not be able to explain during a crisis, as well as to ensure that your wishes are followed in the event of an emergency. Make sure to be clear and concise, and then take a deep breath. You’ve done all you can, and it’s time to enjoy the new year!
The recommendations contained in this article are designed for informational purposes only. Essential Lending DBA Wise Loan does not guarantee the accuracy of the information provided in this article; is not responsible for any errors, omissions, or misrepresentations; and is not responsible for the consequences of any decisions or actions taken as a result of the information provided above.
