Rebuilding a Family's Finances After Unexpected Loss

NEW YORK (MainStreet) — While many struggled to understand how the world had changed in the weeks and months after the Sept. 11 terrorist attacks, Michael Bonevento worked with those households who lost loved ones in the disaster to help them grasp how their financial reality had shifted.

Bonevento, a New Jersey-based financial adviser, worked for American Express Financial Advisors at the time and coached the families of 9/11 victims in the days and weeks after the attacks. In the process, he found that many of these households had failed to have even the most basic discussions about end-of-life planning with their loved ones or professionals, let alone to have had a plan in place to protect the family’s finances in the event of an unexpected death.

“The biggest mistake was a lack of preparedness,” said Bonevento, who now works as a private wealth adviser for Ameriprise. “Many of the people I met after the event had never spoken with a financial professional about what types of documents and powers of attorney should be put in place should a tragedy occur.”

Ten years later, our national security may be better prepared for potential terrorist attacks, but Bonevento feels that little has changed in our personal finance preparedness.

“I’d love to tell you that many, many more people are prepared today than was the case 10 years ago, but I don’t think that’s the case at all,” he says. “The same issues – procrastination, a sense that it won’t happen to me – are as prevalent today as it was then.”

The main problem, as Bonevento and other planners point out, is the natural aversion most have toward planning for their own death, especially earlier in life when it seems like a remote possibility. But as the tragic events of 9/11 showed, one can never know for sure. Failing to put a plan in place early could put your family in fiscal danger later, particularly if you are the primary earner in your household.

How to Prepare for the Unthinkable

As a general rule, the more steps you take now to handle the arrangements for your own death, the less burden you will place on your family later. But at the very least, one should purchase a life insurance policy to provide some financial security for your family.

“If you do nothing else, get a life insurance policy to cover the loss of income from that breadwinner in the family,” says Rose Greene, a certified financial planner with Rose Greene Financial Services in Santa Monica, Calif. Studies show that less than half of all households actually have life insurance, yet as Greene points out, these policies generally cost just a fraction of the overall payout.

Just how much life insurance one needs will vary based on the household’s financial situation, but according to Greene, the primary income earner will likely want a policy that covers at least five times their annual salary; those in two-income houses may look for a smaller amount.

Beyond life insurance, one should also take the time to get their paperwork in order. Bonevento urges individuals to take the time to create a detailed list of all their accounts, including any user names and passwords necessary to access these accounts online. Be sure to review the beneficiary designations on bank and retirement accounts and whenever possible add the name of the spouse or loved one who should receive the money directly.