Do you have a written financial plan?

Key takeaways

• A written financial plan helps your family stay prepared if life changes unexpectedly.
• It should include assets, debts, goals and next steps.
• Families should know how to access financial accounts and important contacts.
• Planning for shared debt can help avoid surprises later.
• A financial professional can help you keep your plan clear and current.

A financial plan is a clear roadmap for managing your money over time. It lays out your assets, debts, goals and next steps so you and your family know what to do if life changes. That matters most when a family is forced to handle loss before it feels ready. Life doesn’t always play out as expected. That’s what Tara F. found out when, at age 13, she lost her father after his battle with kidney failure and congestive heart failure. He was just 36 years old.
 

Tara’s father didn’t leave a written financial plan or a life insurance policy. “My stepmom and I lost our spouse and father, but also our primary source of financial support,” Tara said. They received survivor’s benefits through Social Security, which provided some help in the short term. Still, her father’s loss and the tough financial situation that followed shaped the way Tara planned her own financial future.
 

Tara’s story helps illustrate the importance of having a written financial plan, especially in the event of an unexpected loss. It can help bring more clarity, reduce financial strain and give loved ones a clearer path forward during an already difficult time. Here are a few reasons why it is so important to have one in place.

A financial safety net can lessen the impact of loss

Processing the death of a loved one is never easy–especially when it also means a change in income. Tara and her stepmother had to quickly adapt to the reduction in family income. Tara’s step-mother worked two jobs while, at the same time, she built new skills by pursuing a degree. At age 14, Tara started working, too, so she could help the family pay their bills.

Tara’s experience isn’t the one most parents envision for their children—or their spouses. Even so, many of us postpone planning for the unexpected, particularly if we’re young or healthy. Tara’s father was just 36. Still, an unanticipated death can leave loved ones strapped for cash at a time when they’re most emotionally vulnerable. Here are a few precautions you can take to help plan your family’s financial future.

Make sure your family knows how to access all financial accounts

It’s not uncommon for family members to split household responsibilities. That sometimes leaves one partner responsible for handling finances, from bills and insurance policies to investments and even written financial directives. To be financially prepared in the event of an unexpected death, both partners should be aware of and know how to access all debt and asset accounts. Both partners should know how to contact any hired partners including attorneys, financial professionals, and estate planners.

Educate yourself about shared debt laws in your state

In common law states, family members are not usually responsible for the debts of their late loved ones, unless the names of both spouses are listed. This can relate to things like co-signed mortgages or jointly-held credit cards. However, in community property states, the opposite is true; both property and debts are considered joint, meaning the remaining spouse would be on the line for a late spouse’s debt. Make sure you learn the laws in your state and create a plan that takes them into account.

Think about how your family would cope without you (or your spouse)

This is a difficult practice for many people. Still, failing to plan can leave the people you love most in a precarious financial situation, particularly if you’re a family breadwinner.  

A term life insurance policy can offer a family financial support while they figure out how to put their lives back together. A financial buffer could have allowed 14-year-old Tara the space to focus on her studies, instead of working a part-time job. It could have given her stepmother the option of full-time schooling, boosting the time it took to get career-ready after her loss. It’s never too early to start planning.

Decide how you may want any available assets distributed

Without a written will or estate plan, families sometimes disagree about the distribution of assets. Written documentation about how and to whom assets are distributed after death saves your family from additional strife and ensures that your wishes are respected.

Consider your family’s long-term goals & create a written roadmap  

Have you thought about where you and your family want to be in the next 10, 20, 30, or even 50 years? Those who develop a written financial plan to help guide them as they save for a family home, a college education, or that far-off retirement are more likely to achieve those goals.

A financial professional can help you draft a written financial plan, which should include any current assets and liabilities, an outline of your short-and long-term goals and any future action steps you expect to take while on your financial journey. It should also include any contingencies back-up plans for things like unexpected deaths.

How Tara is planning her financial future today

Today, 28-year-old Tara is married. She and her husband even plan to have children in the next few years. That decision “absolutely has an impact on the financial decisions I make today,” she said. Her husband carries a reliable life insurance policy. Even though she’s young, she’s currently considering life insurance for herself so that her future children won’t have to worry in the event of her sudden loss. Learn more about the benefits of life insurance and how it can help provide you and your family peace of mind. 

This material is not an endorsement of any particular product, service or organization; nor is it intended to provide advice. It is intended to promote awareness and is for educational purposes only.

Trusts should be drafted by an attorney familiar with such matters in order to take into account income and estate tax laws (including the generation-skipping tax). Failure to do so could result in adverse tax treatment of trust proceeds. There can be costs associated with drafting a trust.

Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02116 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595.
 

MLINY0716265720902-2