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Brace yourself, things are about to go up a notch! It is a sobering thought to consider that whether by accident, disease, or act of God, I might not live to see my son’s first birthday. Although the likelihood that this will occur is significantly low, as a father, the fact that this prospect exists is reason enough for me to make arrangements now.
Mother’s Day 2019 was conveniently close to my wife’s expected delivery date, and in the weeks leading up to it, I was thinking about what the implications would be for my wife and child if I were to die unexpectedly. My most pressing thought was if they would be able to manage financially without me. There were of course other concerns, but these did not take up as much of my mental energy as the subject of personal finance. As a result of my considerations, for Mother’s Day 2019, I presented my wife with a Legacy Letter.
Easily Completed Tasks
After contemplating the matter, I determined that one of the easiest steps that I could take to help my wife through such a situation was to create a document that outlined our finances. To start, this included:
- My life insurance policy;
- My accidental death or dismemberment insurance policy;
- My retirement accounts;
- The institutions with which we have financial relationships;
- The accounts at each of these institutions;
- The specific URL addresses for each of the online portals; and
- All of the needed login credentials.
Within this section, I also included all of the relevant phone numbers, account numbers, and policy numbers.
Next, I outlined all of our recurring automated payments, like the mortgage and electric bill, with the corresponding auto debit accounts that I have setup for these transactions. In this section, I included a specific area which identifies all of our recurring expenses that are linked to my credit cards. The purpose of this subsection is to easily identify for my wife what transactions would need to be setup to process from a different account, so that she can close my credit cards.
In this section, I included a note to not close my two primary credit cards without first determining if my death qualifies for the accidental death or dismemberment insurance policies which are listed in the credit card holder benefit policy manuals. In the note, I included both of the needed phone numbers so that my wife can easily contact the institutions.
It is worth noting that these policies are a benefit for my Travel Reward credit cards, and are only applicable if I were to die in a manner that is specified in the card holder benefit policy manuals. For example, if I were to die in an airplane crash, and the flight had been purchased with one of these cards, my death would likely qualify for the benefit payout.
For my employer sponsored retirement account, life insurance policy, and accidental death or dismemberment insurance policy, I included my employer’s Human Resources contact information so that if my wife were to encounter any difficulties with the plan providers she would be able to easily contact the plan sponsor, my employer.
After completing this document, although now confident that my wife would have a clear understanding of our monthly personal finance operations, I still wondered if my wife and son would be financially stable without me. This led me to perform a few more tasks.
Using our Personal Capital account, I reviewed and summed our last twelve months of expenses. Next, I added my life insurance benefit amount to our current savings, and subtracted out all of our debts, like the mortgage. Then, I compared an adjusted twelve months of living expenses to the remaining figure in order to see how many years worth of expenses my wife would have available to her if I died. Based on my assumption, I had to adjust for things like having no more mortgage interest or principal payments. I did not factor into this calculation my employer’s accidental death or dismemberment policy because there are several strings attached to receiving the benefit. I also did not account for any tax implications associated with receiving a life insurance payout.
Performing these simple calculations led me to this conclusion: my wife, if she decided, would be able to stay home with our son for nearly 15 years without having to earn another dollar. In reality, since our young son would likely be less costly than I am, this figure could reasonably last more than 15 years.
With this knowledge, I reviewed my employer sponsored life insurance benefit options. I realized that if I increase my benefit amount, my wife and son would have nearly 25 times our yearly expenses at their disposal. However, as mentioned before, given that a young boy likely costs less than a grown adult male, the figure may potentially be higher than 25 times their actual yearly expenses.
As a result, come November 2019 (my employer’s open enrollment), I will be increasing my life insurance benefit to the maximum amount. I know that this will result in a larger monthly expense to pay for the policy, but with the knowledge that implementing this change means, if I die, my wife could theoretically never have to work again, I feel a great peace knowing that if I unexpectedly pass away, my wife and son would be able to spend an incredible amount of time together since she would likely never have to be concerned about their financial future.
Although I hope that an unexpected death is not awaiting me, I am glad to have performed this exercise in order to better position my family financially.