I recently had a friend send me a rather sobering email. I received it while traveling with my wife for our 10th anniversary, and it prompted the kind of conversation you rarely find time to have. My friend’s email was short and simple, but the title was “Hopefully Unnecessary.” He said he would be flying in a private jet several times that week, and though he expected it would be perfectly safe, he felt the need to forward an email written for his wife. He explained to her where they had invested money, what companies he’d invested in over the years, how much these items were worth, when she would need to sell ownership in the companies, and who she should look to for help when it comes to managing it all. I read through the weighty words of his email and felt an immediate rush of thoughts.
The first was that though I feel healthy and as if life will just continue as it has, the chance of death is always possible. Just saying it is hard for many people because it acknowledges the possibility of a tragedy. Our superstitions set in and we fear the mention of death will become a self-fulfilling prophecy.
The truth is, we’re mortal. As depressing as it sounds, we will die one day, and we have no idea when that will be. My friend was willing to acknowledge the possibility of death and knew the moment to organize his financial affairs and plan for the end of his life is now.
When you contemplate death, many things that seemed important two hours ago begin to fade. You have this moment of clarity about what really matters. It provides a high-level perspective on life, narrowing your focus to those you love. And while the thought of death prompted my friend to write an email to his wife making her aware of the planning he’d done, some have yet to do the proper planning at all, and more than a letter is needed.
I was in a hotel room with my wife when I read the email. After I looked it over, I started thinking about my own situation. Handling the financial affairs of others is my job, so it’s natural in our family that I’ve largely handled our financial situation over the years. With that being said, and I believe this is incredibly important, Kelly and I make decisions together. I may pull the information together and present the options, but I believe it is important to make financial and family plans together as one unit.
What If I Die?
I mentioned the context of the email to Kelly and asked her if she felt like she had a good grasp on what would happen if I died. She talked through what she could remember from conversations in the past when plans were crafted, what we have invested, the amount of life insurance in place, etc. However, some time had passed. With the financial picture constantly evolving, it was clear we needed to talk about it again. We talked about the assets we have and what money would be available. We began discussing how she would use that money, the best way to invest it to create the ongoing income she would need, what she would give away, how the cash flow would be taxed, how much money each of our kids would need (weddings, honeymoons, therapy, college, etc…).
I asked her if she knew where all the assets were, and she said, “Yes, mostly, but Caleb would know where everything is, right?” Caleb is our firm’s operations manager.
“Yes, I believe he would be able to help you find everything” I said. I knew it was important to have everything organized, but just as it was important to my friend to list who his wife should talk with and make decisions with, I learned the same was equally important to Kelly. We talked through the numbers and plans as they are today, tested a few scenarios, and felt we had a good plan of action in place.
I thought the conversation was done, but then Kelly asked another important question I didn’t expect:
What If She Dies?
I didn’t think to flip the question, but Kelly did. She asked what I would do if something happened to her: would I stay home with our three kids for a while? Did we have enough life insurance on her, so I could step away from work for a time and focus on the kids as they grieve the loss of their mother? I explained that I would probably ask my parents to move a little closer to help with the kids. I would continue working and would likely take a good deal of time off to be with the kids immediately after if that happened. I knew we had life insurance on Kelly, but I couldn’t remember how much. I looked it up while we were sitting together and she said, “ I think you may want more than that.”
She was right.
We had just painted this picture of what life would be like after her death; the kids would need significant attention from me, and I would need time to struggle and grieve on my own. In that situation, I would not want to worry about financial matters or feel like I have to return to work by a certain time. Plus, adding $1,000,000 of term insurance on Kelly would cost roughly $30 a month. A small price to completely vanquish any financial stress if she dies.
As you would expect, by that point the weight of considering these alternative realities was really kicking in and tears were welling in the troughs.
What If We Die?
After discussing the first two scenarios, Kelly asked about the inevitable third scenario. She said, “Remind me of what we decided if we both die.” The question was more than relevant, because we planned to jump on a plane together the next day.
Kelly and I revisit this part of our estate planning from time-to-time and have written our directives in our Family Revocable Trust, but we made some major adjustments a couple years ago after the adoption of our two daughters. Given it had been two years, I recalled what I could about the estate plan. We discussed who we listed as Guardians and talked about the planned allocation of our assets if neither of us were here. We have a specific dollar amount that the kids would receive, and the money would be distributed at certain ages when we feel they are mature enough to manage it. We also have a certain amount that would be allocated to our parents and siblings, but anything beyond that amount would be sent to various charitable organizations after we die.
As we talked about how the money would be allocated, Kelly asked me a question I didn’t have an immediate answer for. “Matt, if you die or if we both die, is there a specific need or problem you want to address with the money we plan to give away?” I had been resigned to the idea that the money would be given and directed as the charitable organizations see fit. I had yet to consider how our financial situation could impact a person, group of people, or situation directly, and to what extent. We spent some time discussing what the funds could accomplish, and then moved away from dreaming about ways we could help to a conversation about each other.
The conversation ended in sitting with Kelly for a while. As I said earlier, when you contemplate death, you have clarity about what matters. This article is partly about the urgency of planning for an unexpected death sooner rather than later, but it’s also about remembering to live every day with your loved ones like it’s your last. I would be remiss if I urgently plan for my family in the event of my death but forget to tell my son I’m proud of him, tell my two daughters they’re beautiful, and tell my wife I love her - no matter what. Worse than the tragedy of death is the pain and regret that follows when we don’t share our love, gratitude, and memories with a person before they’re gone. Create and make time to prioritize these moments with those you love, even if it means sacrificing your own personal pursuits. The conversation ended with “I love you” and “I love you, too.” Not “Good meeting.”
What to Consider
The list is long, and it can be overwhelming, but I’ll try to break this down into questions worth considering. Most of these items need to be customized, not generalized, and developed as a family unit. Your family is unique, and your wants and desires for the future of your family are specific to you. The legacy you wish to leave, which is your so-called mark on the world, should reflect who you are and what you care about. It’s not as simple as printing off a template of a will or finding a trust document you can put your name on. Preparing for death requires that you give mental and emotional energy to a variety of serious questions. The answers to these questions will become the Family Revocable Trust you need, and help you decide what should happen in each of these situations and how much money will be needed.
How much time would you want to have off, or would you stop working, if your spouse passed away?
Would you work less to be available when the kids are home and help with after school events? Would you continue to work the same schedule and need funding for assistance with pick-up and after school activities?
If you passed away, how much income would your spouse need each year to comfortably manage lifestyle without worry? (If your surviving spouse does not currently work, you will need to consider retirement and make plans for the income to continue until the expected age of death.)
In addition to lifestyle expenses, how much would need to be set aside as a lump sum today so that your surviving spouse can pay for the kids’ future expenses such as college education?
Do you have any family members you planned to help financially during your lifetime? Ex: Aging parents, siblings with significant debt, special needs etc.
Do you have a desire to continue giving on a regular basis or as a one-time gift to any religious or non-religious charitable organizations that you supported during your lifetime? (Many of these organizations rely on your donations, so thinking about your giving potential over the course of your lifetime should be included in your planning.)
In the event you and your spouse pass away, who will manage the money on behalf of the children until they’re no longer minors?
In the event you and your spouse pass away, who will be the primary caretaker/Guardian for the children? (The person handling the finances on behalf of the children doesn’t have to be the one that takes care of the children and vice versa.)
In the event you and your spouse pass away, do you want the children to receive any remaining inheritance when they are no longer minors, or would you like for them to receive installments at certain ages? (You can specifically state in the Trust that the children must meet certain qualifications such as graduating from college, not being in jail, passing a drug test, etc.)
What is needed as a lump sum to pay off any existing debt? (For psychological reasons, I would recommend removing the need to manage debt for your surviving spouse if you die.)
These are helpful questions to consider. However, we want you to know that we’re here to process each of these scenarios with you. Calculating the present value lump sum needed to provide for a variety of needs in several different situations can be a complicated task. With one chance to get it right, we want to make sure the numbers are accurate.
Though I know this is a heavy conversation, as your financial picture and family evolve, you really need to have this discussion every couple of years. Not only will the need to replace income, the amounts you need to set aside for college and retirement, and the amount of debt to repay in the event of death be reduced with each year you live, but you may also find that the people serving in the role of Guardian and Executor of your estate need to change as well.
Fortunately, I was challenged to revisit the big “what if” questions with my wife because of my friend’s email. It’s my hope that this blog will challenge you to do the same.