In today’s fast-paced world, it’s easy to take things for granted—your comfortable home, the bounty on your table, the functional and attractive clothes in your closets, the rewarding educational opportunities for your children—all the amenities that create your family’s quality of life. Unfortunately, the tragic death of a spouse could dramatically alter this picture.

While many families insure the life of the primary breadwinner, not all think to insure the life of the spouse. However, as families increasingly depend on two incomes to maintain their standard of living, or rely on a stay-at-home spouse’s non-cash contributions, the death of an uninsured spouse can have a devastating impact on a family’s well-being.

Life insurance can help address this problem. The proper insurance can help replace your spouse’s income or provide additional funds to care for your children and maintain your family’s lifestyle.

To quickly assess your need for spousal life insurance, consider your family’s “real dollar” income. If your spouse works, what would the loss of his or her earnings cost your family? Or, suppose your spouse is a stay-at-home parent or homemaker. How much cash would it take to replace his or her non-cash contributions? If your spouse is the primary caretaker for a special needs child or aging parent, the situation could be even more dire. How much would it cost to pay out-of-pocket for those duties your spouse once provided?

Preserving Your Family’s Future

With a few moments reflection, it’s not difficult to see that the untimely death of your spouse could easily unravel your family’s lifestyle and financial outlook. Funds that you earmarked for a child’s college education or marriage, or your own legal descriptions below provide a guide to designating the distribution of your policy proceeds. The terms may be unfamiliar to you, but using them correctly is essential.

Per stirpes and per capita are terms that describe methods of distributing property to family members and heirs. Per stirpes means “by branches of the family” or “through blood lines.” Per capita, on the other hand, means “by heads.” A per capita distribution will give one equal share of the proceeds to each beneficiary.

The life insurance policy owner’s intentions may not be easy to determine. For instance, assume that a mother, Janet, plans for the proceeds of her policy to be paid to her children (Evan, Angela, and Gail) or her grandchildren. Suppose Evan and Angela die before their mother. Evan is survived by four children. Angela has no children. How shall the proceeds of the policy be distributed at their mother’s death?

A determination must be made regarding what Janet’s intent had been when she made the beneficiary designation.

Under a per stirpes distribution, Gail would take one-half of the proceeds and Evan’s surviving children would divide the other half among themselves. On a per capita basis, Gail and each of Evan’s four children would receive one-fifth of the proceeds.

It is important that the distribution desired by the owner of a policy be set forth clearly in the beneficiary designation. If you are unsure of how your beneficiary designation has been recorded, check your policies. A review with an insurance professional can help ensure that your life insurance policy beneficiary arrangements properly reflect your intentions.

Suppose you receive an urgent telephone call from the local hospital informing you that your elderly, widowed father has been the victim of a serious car accident and lies unconscious in the emergency room. When you arrive at the hospital, you learn that your father has died as a result of the accident. After the initial shock, you realize you don’t know any of your father’s financial particulars, including the numbers of his bank accounts and insurance policies, whether or not he has left a will, and the location of key documents.

What will you do? Where will you begin? Unfortunately, this scenario is not uncommon. To avoid leaving your loved ones in this difficult situation, consider taking the time to prepare an inventory of your pertinent financial information. Update it regularly and let your family members know where this list can be found. This record will help those who must manage your financial affairs after your death carry on smoothly and without undue delay.

The following information will give you a good start on what to record:

• Basic Data. This should include your full name, maiden name, date of birth, and Social Security number.
• Financial Contacts. List, among others, the names of your lawyer, accountant, broker, and insurance agent, and their contact information.
• Financial Assets, Liabilities, and Account Numbers. Identify all financial assets, including bank accounts, brokerage accounts, investments, credit cards, and company benefits along with relevant identifying numbers. Also, note any outstanding liabilities, including mortgages and loans.
• Location of Key Documents. Finally, identify the location of your will, any trust documents, tax returns, and insurance policies.

Handling the death of a loved one is never easy. However, an updated inventory of vital financial information can help you make this process easier for those you leave behind.