Preparing for Others to Handle One's Financial Tasks

Many times one person in a family handles the majority of financial matters, e.g. investments, bill paying, taxes, etc. This division of responsibilities is often very efficient and convenient, as long as the person handling the matters is available. However, if that person is unable to do the financial tasks, for whatever reason, it is sometimes difficult for the other members of the family to do the work, because only that person knew what and how the tasks were being done.

I learned this recently when my dad passed away. He had been handling 100% of the financial matters, with limited involvement from my mom. Although he tried to get her to be more active, she resisted. As a result, my mom was unable to take over the finances when he passed away. So the children took over and we've are still working through the details after more than two years.

Based on this experience, here are some steps we've taken to minimize the transition of financial tasks in our family.

Hire professionals. The two main areas I'd consider are a financial advisor and a tax preparer. Currently, we have a financial advisor that manages about a third of our savings. I still do our taxes on my own.

Our financial advisor works with a number of retirees from my company and, therefore, is very familiar with benefits for the surviving spouse. In addition, our advisor's style is consistent with our investment preferences, and would maintain continuity of our investment plans.

At some point, I will hire a professional to do our taxes. In the meantime, I keep very good records. For example, we have copies of every tax return we've every filed, with all the backup documentation for the past three years.

Share the financial tasks. We've each had responsibility for most elements of our financial tasks, from bill paying to investment records. Since we've each done most of the financial work in the past three years, we know what needs to be handled for our family.

Simplify. Reduce and automate is our approach. We use one bank, one financial advisor, two discount brokerages (and working towards one) and two credit cards (and a third one not actively used). Our mortgage is paid automatically each month, and the rest of our bills are paid via the Internet. We have one file for all tax receipts for the current tax year.

Keep transparent records with easy access. We have hard copy binders or file folders of all important financial records including bank statements, brokerage statements, recent bills, and tax returns. In addition, we choose to get hard copies of all our account statements. Hard copy statements helped us quickly find out all of my dad's accounts after he passed away. If he had received e-mail statements, we probably would still not be aware of some accounts.

Create a legal transition plan. Both my spouse and I have revocable living trusts that specify the succession plan for handling our financial affairs should we not be able to manage them. My parents also did this, which has helped make the transition of financial responsibility to the their children easier to do.

Of course, one never expects to have financial responsibilities transferred to someone else. However, when it should happen for me, I want to make the transition as easy as possible.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial or legal advice. Please consult a professional advisor.

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