Personal financial matters should be shared with your spouse
Being Certified Financial Planner in Kolkata, we have been seeing that family members experience intolerable pain during contingencies because of casual approach of family’s bread earner. Quite often, the bread earner does not share personal financial matters with potential family members. Common excuses are, “My spouse isn’t interested in taking control of investments, insurance, etc.”or “If my spouse is looking after investments and insurance, I do not need to interfere.” As a result, in emergency situations, the family members get frazzled.
It’s not about interference or taking control. It’s about awareness.
You need to unquestionably share your personal financial matters (both quantitative & qualitative information) with your spouse. If you’re unmarried or divorced, then, if possible, share with your major child or close and dependable family members.
Why it’s important to share personal financial matters?
If husband and wife don’t know each other’s financial situations, they will fail to effectively tackle family financial matters at different life stages.
If you share your financial information with your spouse, you can follow your family’s financial road map together.
Additionally, by providing entire financial information to your spouse you’ll be relived. In case of an unfortunate event, the spouse can play significant role to manage your financial assets. He/she can prudently manage your incomplete responsibilities like children’s education including paying attention to your elderly parents’ expenses, repayment of outstanding loan’s etc.
Keeping your spouse in the dark about your personal financial matters means you’re putting your spouse and other potentially depending family members in uncertainty. Unknowingly, you’re doing injustice to your loved ones.
All financial solutions are not for future provisions. There are solutions if you die prematurely or become totally and/or permanently disabled due to accident or illness. Consequently, you may lose your memory or may not be in a position to write/sign. Your financial solutions (investments/insurances) may become ornamental if not utilized appropriately. When those solutions are supposed to work, they ideally lie in your locker. It’s very important to know which financial instrument is to be used, when and how they are to be used. This is where the role of a qualified Financial Advisor can guide you suitably.
Financial solutions which are fruitful for such contingencies are intangible in nature. While you own those products, just inform your spouse or potential family member about the ideas/benefits of those solutions. This will enable them to utilize these financial solutions and combat such contingencies. Being intangible products, insurance and other financial products can be perceived indirectly.
In case of living dead
Due to critical illness/ fatal accident, you may be living dead and become an unproductive consumer. You should have a contingency plan in place. Accordingly, you can park contingency fund in suitable financial instruments. Mechanism should be such that withdrawal of funds can be done with ease. You would not want to complicate things for your family members during the difficult times. Make your family members aware of your contingency plan. Keep those solutions as simple as possible so that your spouse or other family members can use it in a proper way. It shouldn’t be complex one.
In case of death
Provided the life insurance policy is in-force, the death benefit shall be payable to the nominee. The nominee may not know how to use the death benefit amount. Due to lack of awareness the said benefit amount may be misused. As Fee Only Financial Planner in Kolkata, we advocate that our Financial Plan should clearly lay down the strategies to be adopted in your absence. The mechanism should be lucid enough for your family members to understand and utilize the money towards requirements. Requirements are subjective and may include corpus to meet recurring/onetime expenses for food, clothing, shelter, education, other financial commitments, repayment of loans, etc.
Nomination may not be enough to ensure inheritance of asset in some financial or non-financial assets.
How insurance can work for you?
From the above discussion, let us understand that one may file claim against losses to insurer due to the following:
- Premature death.
- Permanent and total disablement due to accident or illness.
- Temporary and total disablement due to accident or illness.
- Permanent and partial disablement due to accident or illness.
- Temporary and partial disablement due to accident or illness.
Therefore, having adequate insurance coverage is a primary need for all. Insurance should always be viewed from the point of view of protection against financial losses. The question arises if you’re not in a position to explain about the benefits of your existing insurance policies or any other financial solution, what will happen to the family? Can your spouse or close dependable relative take necessary steps to settle the insurance claim and utilize the money prudently? Let your spouse or family members be aware of all the insurance policies you own.
Do you read insurance policy wordings?
Insurance policy is a contract between insurer and insured. Insurance contracts are constructed to meet specific needs. In case of insurance (both life & non –life) you must read and highlight the policy wording carefully. Policy wording is the terms and conditions of insurance coverage. They are written down in the insurance policy.
Therefore, you must write or keep a copy of the terms and conditions of a life insurance policy separately. You should compulsorily make your nominee/family member aware of the facts of the policy and how the beneficiary or nominated person can utilize the policy.
As SEBI Registered Investment Adviser in Kolkata, we urge you to check the benefits under a life insurance policy and update the same to your spouse/dependable relative. For example,
- Critical illness insurance;
- Mortgage payment protection insurance;
- Short-term income protection insurance;
- Disablement benefits insurance due to accident; etc.
Real life situation
I’m sharing a fact. Recently I got a call from a lady, Mrs. Rima Das (42) (name changed) that her husband Mr. Amlan Das (49) (name changed) had been in hospitalized due to paralytic stroke. Paralysis has affected entire right side of his body and face. Neither can he speak, nor can he recognize anyone. Mrs. Das got my mobile phone number from Mr. Das’s friend as she couldn’t unlock his phone. He has a construction business. Mrs. Das is a homemaker. Mr. Das never involved his wife regarding their personal finances. He kept her in dark. They have a son aged 19. He is a college going boy. Before he was afflicted, there are two potential dependents- wife and son. Now, Mr. Das is himself a dependent. Mrs. Das does not understand what to do!
As her husband did not share any financial information with her, currently she has no idea about the followings:
- Insurances (both life & non-life);
- Bank details;
- Investment details;
- The details of borrowers and lenders (on account of business) etc.
I asked her to bring the documents she can at least trace. She came to me with insurance papers (both life & non-life), only one bank detail. But she couldn’t find any other details. The doctors think Mr. Das may get back his memory, but it’ll take some time. The question is all about the interim period. Mr. Das cannot to come back to his business. So, what is going to happen to his family?
While I was checking his life insurance policies, I found one relevant policy. The policy covers the most common lethal diseases viz. malignant cancer, coronary artery disease where bypass surgery has been performed, renal failure of both kidneys, paralytic stroke leading to permanent disability, paralytic stroke leading to permanent disability, etc. Mrs. Das naturally was unaware of the benefits of the said insurance.
I shared the process to lodge a claim against said life insurance policy as his husband was afflicted by paralytic stroke and may become permanently disabled.
Personal financial matters are confidential. Only you can share the information with your spouse/ potential family member and Financial Advisor. Among married couple, single earning partner takes care of everything, i.e. from earning to spending; one person looks after everything. In case of double earning spouses, most of the cases husbands take decisions of savings, investment, loan and insurance, etc. We ignore that we are exposed to risks like death or disablement due to sickness or accident, critical illness etc.
How can anyone handle personal financial matters all of a sudden if you are incapacitated?
It is your responsibility to make your family members aware of all personal financial matters so that they can take decisions in times of need.
As Financial Advisor in Kolkata, we always ask our clients to bring their spouse or close relatives (in the absence of spouse, may be major son or daughter, parents) to join during financial planning. The only reason behind this if the key person is unable to take any financial/personal decision due to death or disablement, his/her spouse or nearest family members can at least finish the unfinished responsibilities/commitments.
To conclude, as Financial Consultant in Kolkata, we urge you to involve your spouse or close relative with regard to your personal finances. If you fail to do so, you and your family may be a victim of undesirable situations. It’s better to share details (quantitative & qualitative information) of personal finances so that he/she can take financial decisions even during crucial times in your absence. Moreover in an increasingly digitized world, intangible goods play a vital role in your lives. You can’t ignore the role of your nominee or beneficiary at all.
