Stuff. What is it? When it comes to financial matters, “stuff” consists of bank statements, brokerage accounts, life insurance, health insurance, retirement accounts and of course taxes along with the documents needed to prepare them.
All too often a client will call with upsetting news about their spouse becoming ill or even death. As upsetting as this news is to receive, the person left behind is now solely responsible for the household finances. A problem almost always arises because the healthy or surviving spouse is completely unprepared to take on this new role.
I recently received a phone call from a potential new client whose world was turned upside down after the death of her spouse. This person had no knowledge of their bank accounts, savings accounts, retirement accounts, life insurance, health insurance nor taxes.
The famous words, “my husband took care of all of that stuff,” were already being spoken in my head. However, with the review of their most recently filed tax return and a look at their checkbook and bank statements, I was able to figure out their receipts and disbursements to a point where I compiled a list of all these items.
But, there was another problem emerging in the background that unleashed itself about two weeks after the passing of her husband. An IRS notice indicating over $80,000 was due for taxes in arrears. This woman was beside herself. She not only had no money to pay the tax bill but also had no idea they jointly owed this money to the IRS. I asked, “Did you not review your tax return before signing it”? Again, those same words were being spoken in my head, “my husband took care of all of that stuff.”
The point here is to educate yourself on your finances. Whether you are single, head of household, married with a family or just the two of you, education is key. It is ok for one family member to take care of the household bills, but make sure you discuss them regularly.
Know where to get the banking information, know your life insurance, know what investments you have by reviewing monthly statements and most of all, review your tax return together. Today, most, if not all tax returns are e-filed. Make sure you understand it. Ask your tax preparer to review it with you. Be aware of any tax due because if it is a jointly filed return, you are responsible for it whether or not you are aware of its contents. Both spouses must sign Form 8879 which equates to your signature for that year’s return.
No matter the life situation, there are many other reasons besides illness or death why educating yourself on your financial affairs is vital. It can help with managing money, setting long-term financial goals, or just simply understanding credit. Financial literacy can be achieved together!
—Lorraine Lang, CPA
Stay tuned for a comprehensive financial literacy plan coming soon from WAGE!