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Investor’s column: Here’s why financial family instructions are so important

Every family has its own way of managing financial responsibilities. Generally, I see one spouse who takes the financial lead while the other manages other sundry obligations. My wife pays our bills while I manage the remainder of our financial affairs.

In my opinion, the important thing is that both partners know how their finances work and where everything is held.

By the time I meet a client, they may have been married for more than 35 years. In many cases, the division of labor has gone on for so long that the non-financial spouse has complete confidence and faith in the abilities of the financial spouse. They likely want to have veto power in who they work with and the decisions being made, but often don’t have much interest beyond progress reports.

I enjoy working with couples who are comfortable with one another and have established a solid foundation from which to move forward. Unfortunately, life can throw us curveballs and such disruption whether by death, dementia or another unanticipated event can greatly impact the non-financial spouse.

Consider some of the following statistics:

According to the U.S. Census Bureau, at age 85, there are twice as many women as men.

The Women’s Institute for a Secure Retirement states that one-third of women who become a widow are under age 65.

The World Alzheimer Report of 2015 states that 5.2 percent of people over age 60 are living with dementia globally.

The World Health Organization in 2017 reported that dementia is likely to increase 204 percent over the next 30 years.

A best practice is to have a set of family instructions whereby the non-financial spouse can quickly step into the financial shoes and continue to manage the household affairs as needed.

But who wants to talk about such things? Nobody wants to be the Debbie Downer.

Gardner Sherrill.jpg
Gardner Sherrill is an independent Wealth Advisor with Sherrill Wealth Management in Bradenton.

In my experience, both spouses usually want to have this conversation but are concerned with disrupting the peace by some unintended error in communication. Hopefully this will help you start the conversation.

Family instructions don’t need to be a complete operation’s manual. A starting point can be a simple binder with documents and statements or an online filing system.

What’s important is that your loved ones have the ability to efficiently find all of financial information in one easy to access place.

Start with the big picture items and add to it over time as you continue to manage your affairs. If you keep your important documents in a safe-deposit box, be sure to include the location, box number and where to find the key.

If you don’t have a safe-deposit box, indicate that on your form so no one spends time looking for one. Consider easy-to-overlook items such as automatic bill payments and smaller insurance policies.

List the names and phone numbers of your advisory team: your attorney, accountant and financial planner. Try to include your spouse in your meetings so that they have familiarity and comfort with the team.

Once you have your family instructions in place, it’s time to have a fire drill. Walk through the action steps your spouse should go through to address the most pressing issues and review a punch list of lessor items.

Try to do this annually — to keep everything up to date and to create more comfort around the likely future transition.

This concept of family instructions is not limited to couples but can be used for singles and their successor trustees or power of attorney.

Remember, this is only a test.

Gardner Sherrill is an independent Wealth Advisor with Sherrill Wealth Management in Bradenton. To learn more, visit sherrillwealth.com.

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