Family wrapped up in your finances

Mixing financial and family matters is difficult.

The situation gets stickier when it comes to discussing how to handle your fiscal matters after you die.

Who comes first – your spouse, the one you wed after a divorce, or your children from your first marriage? Should you're ne’er-do-well eldest son who dropped out of college and drifted all his life receive the same financial benefits as your daughter who married and raised a family of her own while remaining a loveable and loyal child to you?

You may feel that, since you won't be around to hear the squabbling after you're gone, you really don't care. That may be fine if you really don't care about any of your heirs-to-be or whether lawyers and the government take it all.

Even if it's just to keep your estate out of the hands of the lawyers and government, you might find it satisfying to sit down and looks seriously at how you would like to dispense your estate – your stuff and financial fruits of your life – among the members of your family and any friends you might feel belong in that picture.

You might begin with who gets what scrapbooks, grandpa's pocket watch, grandma's wedding ring and other memorabilia to get you into the mood. You might even ask everybody what they think they might like to have to make your chore easier.

This leads you, without you realizing it, to the realization that you're going to need someone to manage all this when you're gone, either physically or mentally. A legal term for that is power of attorney. Someone given that designation not only will distribute your assets as instructed but also can handle decisions regarding our medical status should you become disabled or struck by dementia. And he or she can also manage your finances both before and after you've departed.

No matter what your situation, your spouse should come first.  So discuss this with him or her.

If he or she is your second, or third, spouse, talk about who's children should get what and how much.

This will probably call for an audit to determine who owns what. If you owned the house before the marriage, should that be bequeathed to your children only? Who should be beneficiaries named in your spouse's insurance policy?

This exercise includes collecting all documents, such as house deed, insurance policies, pension and investment statements, and the names of your tax preparer, attorney, financial advisors, and insurance agents.

You'll also need to name an executor. In most cases, each of you will be the executor of the other's estate to oversee matters. An alternate can be another member of the family, a trusted friend, or an attorney. 

Some advisors suggest you have your beneficiaries meet with the financial and legal professionals you work with so the handing-off process can be seamless when you exit the picture.

A popular process is the establishment of a trust. This document states precisely how each of you wish your assets distributed after the death of one or both of you.

Whichever way you set up your plan, it should be reviewed regularly to accommodate any changes, such as the death of a beneficiary has died, birth of another grandchild, or a debilitating illness to one of you that requires a costly change in the use of your finances.

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