If you are single, what would happen to your financial life during an emergency, such as a serious car accident or a sudden illness? To protect your wealth, it’s important to designate someone who has knowledge and access to your money and other financial documents, such as bank accounts, life insurance policies and your will. If you are the only person with this information, it could pose a big financial risk.
Everyone needs a financial “backup,” a person who can gain access to your money and help make some important financial decisions in certain situations. For singles, this person may be the executor of their will, a financial or health care agent or a family member or friend who will be the first one to jump in and help.
I recently had a client experience the time-consuming, costly and frustrating process of trying to track down assets, and the will, of a loved one who suddenly passed away without a backup plan in place. A year later, she’s still not sure she’s accounted for all of her loved one’s assets. The client is now determined to never leave her teenage daughters with that type of mess.
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Your personal financial information is a sensitive topic. And women, in particular, tend to be less comfortable opening up about this area of their lives. According to a 2015 Fidelity Investments Money FIT Women Study, 80% of women refrain from talking about finances with friends or relatives, saying “it’s uncomfortable” and “it’s too personal.” Unfortunately, it is often difficult to help anyone during an emergency if they don’t have access to at least some of your financial data.
Here are five tips to help singles establish a financial backup plan without putting their financial privacy at risk:
Make a list of assets and debts, and how to find them.
Start by writing down a list of all assets, including bank accounts, 401(k) and IRA plans, and provide a street address, financial institution or employer’s name for each one. Everyone should track their finances annually, so one way to create a backup plan is to place a copy of this list in a sealed envelope and give it to your trusted loved one each year. Also provide your backup person with contact information for any professional adviser, such as a financial planner, insurance agent, mortgage broker, lawyer and accountant.
Provide instructions to access valuables.
These include your home, safe, safe-deposit box or storage unit. Important identification items, such as passports, birth certificates and Social Security cards, are likely located in one of these safe places. If you are stranded somewhere, you don’t want to be left without access to these documents. Finally, if you are comfortable, give your backup person a key so they can access your home, storage unit or other properties.
Make copies of insurance documents.
Most people periodically make changes to their car or health insurance. Each time you purchase a new policy, or if plan benefits change, keep updated records. Your backup person will need a list of your life insurance, long-term care and disability insurance benefits, as well as policy numbers and the companies that administer those policies. Don’t forget about home, auto and liability insurance information as well. Finally, keep these documents in a safe place and let your loved one know how to access them.
The same goes for wills, financial and health care power of attorney documents.
If these documents are needed in the event of an emergency, it’s best to have a “grab and go” physical copy that your loved one can show a doctor, judge, law enforcement officer or any other emergency provider.
Round up all your passwords.
Provide login information for banks, credit cards, airline miles and other points programs, email and social media accounts. If you are incapacitated, a trusted person may need to access these online accounts. And while it may seem unthinkable now, it will also be easier for them to administer your estate in the event of your untimely death.
Designating someone as your financial backup and providing them with key documents will not only protect a single person’s assets in an emergency; it will make life less stressful for loved ones who are looking out for you. Proper planning can also ensure the assets you’ve worked hard to build, and insurance you’ve purchased to protect those assets, will be accessible. Taking the right steps now will provide financial security and peace of mind if it’s ever needed.
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