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Financial planning

It’s always a good time to dot the i’s and cross the t’s.

Financial planning is a lot like life. It has clearly defined stages but it’s a work in progress. There are times when making financial decisions that have long-term consequences attracts special attention. One of those times is when you’re ill, because feeling vulnerable makes you focus on your own and your family’s financial security.

Just as you depend on healthcare professionals for advice in making treatment decisions, you’ll probably want to turn to financial and legal experts for help with immediate and long-term planning. Here, too, you need a team that will work together to put your finances in the best possible shape and help you make choices among the alternatives you have.

Step one: Get your records together

If you know where all your financial, legal, and insurance documents are — and so does the person, or people, who might need access to them — you’ve already resolved one of the major problems family or friends may face when you’re ill.

But if that’s not the case, or if you don’t have a system for keeping track of your assets and liabilities, it’s time to put one in place using either financial software or a paper-based system.This is especially important if you’re the person in charge of the day-to-day finances.

It’s also a good idea to consolidate savings and investment account statenments, retirement plan documents, insurance policies, and outstanding loan notes in one place. If you keep electronic records, make sure to share password and user ID information.

If you don’t have a joint checking account, and if there aren’t two names on your safe deposit box, you may want to change that. If a family member or friend can write checks on your account, that person can keep the bills paid while you concentrate on recovery.

An alternative is to select a payee representative who can receive your income and pay your bills, but doesn’t have the right to make other financial decisions on your behalf.


Step two: Facing the bigger issues

Making decisions about who should inherit your financial assets, receive your prized personal possessions, and assume responsibility for your children or elderly parents is an important part of financial planning. So are formalizing your feelings about extraordinary life-extending treatments and determining who you would want to make heathcare decisions on your behalf.

These are things people tend to postpone until an illness, the death of a friend, or similar experience spurs them to action. It’s easy to see why, as they’re subjects people don’t like to think about. But they’re critical. The first, and most important reason, is that planning makes the lives of family and friends easier. The second is that unless your wishes are expressed in legally binding written documents they may not be followed.

Review your will. Making a will and keeping it up-to-date is one of the most considerate and long-reaching things you can do for the people and institutions you love. You’ll want to be sure that your bequests reflect your current wishes, and that, if you have minor children, you’ve named guardians. If you don’t have a will, your state’s probate court — sometimes called surrogate’s court or orphan’s court — will probably follow a fairly rigid formula in disbursing your assets, and more of your estate may go to pay court costs and estate taxes than is necessary.

Consider a trust. You may want to use one or more trusts to transfer assets to specific family members or friends, direct how the money will be spent, or reduce estate taxes. There are a variety of trusts, designed to achieve different goals. However, you should be on your guard against sales people who market living trusts as the solution to your financial planning needs. When you’re considering a trust, it’s essential to talk to an experienced attorney who specializes in this area to be sure you’re making appropriate choices.

Sign a living will and healthcare proxy. A living will, also known as an advance directive, lets you specify the treatment you prefer if you’re unable to make healthcare decisions on your own. If your wishes are not in writing, your family may not have the authority to choose what they believe you would want. You use the healthcare proxy to name the person whom you authorize to make your healthcare decisions if you are not able.

Investigate a power of attorney. You may want to give someone the legal right to handle your financial affairs by signing a power of attorney. Your lawyer can explain the reasons for signing such a document, the potential drawbacks, and the differences between ordinary, durable, and springing powers.