Let's Talk About Money: Discussing Finances with Your Loved Ones "We're in love — and love is more important than money." "I'm single and free to do whatever I want with my money." "I'm not good with money. My wife handles everything — I don't need to know the details." Sound familiar? Death and taxes may be certain, but most people hate talking about money and death, even with those they love. Communicating about your finances is important, regardless of your relationship status. Here are some common statements you may hear (or say) and why it's important to address each appropriately. "We're in love — and love is more important than money." Love is important, but if you love someone, honesty and financial security should also be important for both of you — especially in case of one partner's death or illness. Even if you don't have joint accounts, your partner should be aware of your credit history, your retirement savings, financial wishes in case of your death, and the current state of any joint assets. Talking about money together can empower you both to know and fulfill your wishes. "I'm single and free to do whatever I want with my money." Ever hear the phrase, "No man is an island?" If you're single, it's important for you to share your financial wishes with a close friend, adult child, or other family member. For example, when you were hired or first enrolled in your company's retirement plan, you probably completed a beneficiary form. It's important that your designated beneficiary knows your wishes. For married couples, assets usually default to a spouse in case of death, but if you're single, your assets could be given to your closest living relative (which could be complicated to determine)— or the government. You may want to create a will, so that in the event of your death, your loved ones can avoid confusion or dispute and your assets will go where you want them to. Your financial health is up to you alone. While exciting, this places great responsibility on your shoulders. As a single person, you may need to place more emphasis on specific financial goals like saving more for retirement, setting up a stable emergency fund, or obtaining disability insurance. "I'm not good with money. My wife pays the bills and files our taxes. I trust that she'll make all the right decisions — I don't need to know the details." If you're married, it can be effective to divy up responsibilities according to your talents. But when it comes to your finances, both partners should have a basic knowledge of where things stand, even if one takes responsibility for sending or paying bills. Discuss goals and expectations together. Make sure that both of you are aware of individual and joint investments and savings accounts, wills, durable power of attorney documents, and other key information that could help each partner in case of one's death or illness. "I've got a long life ahead of me. I feel uncomfortable talking about money, death, or illness with my loved ones — it's really unnecessary right now." Most of us don't like to talk about death, but as healthy as you (or your partner) may be, death and illness are unpredictable. It can feel awkward talking about these issues, but by making plans and setting financial goals, you can prepare yourself and your partner for future financial security. You need to be completely honest, but discussions about money don't need to get ugly, boring, or completely awkward. For example, you could choose to have a monthly "State of the Budget" meeting where you discuss needs, goals, and the current outlook for your finances. Make it fun by talking about your dreams for home ownership, vacations, and retirement, but also discuss concrete steps to help you reach your goals. "I don't know what documents I need or where to start." Regardless of your relationship status, there are probably a few key documents that could help you to communicate your financial wishes with loved ones, especially in case of death or illness. You may want to talk with your financial advisor or an attorney to determine if you need any of the following documents or others not listed below: Beneficiary Designations A beneficiary designation tells your employer or investment provider who should inherit assets from your employer-sponsored savings plan or IRA in case you die. If you're married, your assets may go to your spouse, but you may also want to choose a secondary beneficiary — possibly your adult child, a close family member, or friend. Even if you're married, it's important to include your secondary beneficiary in discussions about your wishes. If you are recently divorced or involved in a new relationship, you may want to update your beneficiary forms to reflect your current wishes. Wills Wills can cover a variety of topics, but most typically describe who should care for your children and financial assets if you die. Wills can be really important if you're single (especially if you're a parent of minor children) or if you have a committed relationship, but are unmarried. When a single person dies without a will, his or her assets are usually given to the nearest living relative (which could be complicated to determine). If you have no living relatives, your assets could go to the government. Durable Power of Attorney A durable power of attorney authorizes someone to make legally binding decisions about your finances in case you're unable to make them on your own and can be especially important if you're unmarried. If you're married, these decisions usually defer to your spouse. However, married couples may want to consider having a durable power of attorney in case both are simultaneously incapable of making financial decisions. Disability Insurance Disability insurance helps to provide assets for you in case of serious illness or injury that hinders your ability to work. The amount you need is dependent on your age and income. Disability insurance may be critical if you're single, since you may not have a spouse's income to fall back on in case of serious illness or injury. Conclusion Communicating effectively about your finances with your spouse, partner, adult children or other loved ones can help you to ensure that your wishes are fulfilled. Protecting your wishes and the financial security of your loved ones is important. By taking your relationships into account, you can determine which financial goals and documents suit your needs. Copyright© Russell Investments 1998 - 2009. All rights reserved. This is a publication of Russell Investments. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company. Strategic asset allocation and diversification do not assure profit or protect against loss in declining markets. The opinions expressed in this material are not necessarily those held by Frank Russell Company, its affiliates or subsidiaries. While all material is deemed to be reliable, accuracy and completeness cannot be guaranteed. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. Date of first use: February 2005 USI RC:494   Related INFO Investor Education Planning Central Printer friendly version of this page