Posted by While pregnant and expecting our first child, we watched the first season of “House of the Dragon”, prequel to the popular HBO show “Game of Thrones”.
My husband and I both thought the show had an alarmingly large number of scenes related to childbirth and a shocking amount of mothers who died in childbirth.
I’m not particularly scared or concerned that I might die in childbirth. (HBO shows notoriously lean towards over-the-top scenes for shock value.) Obviously, healthcare advancements have drastically reduced the mortality rate of birthing mothers and infants. But still, the risk is not zero.
As the “household CFO” responsible for all of the finances, I realized that my husband might not know what to do with our finances. He might even face a cash crunch if he can’t access our online accounts!
So, I needed to be sure that Mr. LJ (and Baby LJ) would be ok if something happened to me. I started writing out a Letter of Last Instruction.
Letter of Last Instruction: personal document outlining other information or wishes. This could include your preferred funeral arrangements or instructions to help a spouse who didn’t manage the family finances
Making sure Mr. LJ and Baby LJ would be financially alright without me
While the hope is that they never need to use the Letter of Last Instruction, writing it out gave me some reassurance. It helps to make sure Mr. LJ will be able to navigate our family finances without me. By writing it out (vs. telling him verbally), it acts as a reference guide in a time of grief when it’s difficult to think logically. I would hate for some bad financial actors to step in under the guise of “helping out” and taking advantage of them.
My Letter of Last Instruction consists of 4 sections:
- Instructions in the event of death
- General Financial Advice
- List of Financial Assets
- List of Recurring Expenses & Liabilities
1. Instructions in the Event of Death
This list of instructions ranges from immediate actions, to funeral arrangements, to settling the estate.
A few immediate or short term actions include:
- Passwords to accounts: while many of our financial accounts are already joint, there are some that are just under my name. Technically, those assets should be frozen upon my death and not utilized. However, if the family needed to transfer cash to pay off monthly expenses, I’d rather they get access to cash rather than frozen out. This list also included the passwords for my cell phone and email account, in case any institution requires 2-Factor Authentication.
- Cash transfers: our family finances comprises of a main chequing account where all expenses run through, plus several high interest savings accounts (“HISA”) to park excess cash. The main chequing account has less than one month of expenses held in cash. To make sure recurring payments (e.g., mortgage) goes through, cash transfers need to be made manually from our HISAs to chequing.
A few long term actions include:
- Funeral arrangements: outlining my personal preferences for caskets, burial vs. cremation, etc.
- Who to notify: contacting my employer and insurance company to kickstart the life insurance payouts. Finding a lawyer to execute the will & other legal procedures
- What to do with financial accounts in my name: identifying which assets will transfer tax-free to Mr. LJ and which assets will have to go through the estate & probate process
I found the process of identifying which assets will have tax implications upon transfer was an important financial exercise. It made me set my beneficiary and successor designations appropriately to minimize the taxes payable upon death (e.g., TFSA with Mr. LJ as successor, RRSP with Mr. LJ as beneficiary).
2. General Financial Advice
I added this section after Mr. LJ asked me what he should do with my life insurance payout: pay down the mortgage or invest?
It’s a thought that didn’t even cross my mind until he raised it: how should Mr. LJ manage the financial decisions when I’m not around?
My general advice included the following:
- Taking 6-12 months to decide what to do with the money: with the insurance payouts and emergency funds we have, Mr. LJ doesn’t have to rush. He can stop/pause his full-time work and take some time to decide what do to next.
- Repaying the whole mortgage: to me, this is a personal decision more than a financial one. Perhaps he doesn’t want to stay in the house where we made a lifetime of memories. Perhaps he wants to keep the house, because moving with Baby LJ is much too difficult. While I’ve also outlined the financial implications (e.g., find out what the prepayment penalty is), I believe the numbers are much less important than the family’s personal preferences at the time.
- Finding a fixed-fee financial planner: I don’t envision Mr. LJ wants to take on the role of “Household CFO” in the same way I did with our investments. Given that, it’s better he work with some professionals to manage the assets. (I also noted he should not go to a financial advisor that charges annual fees based on a percentage of the portfolio)
3. List of Financial Assets
To make sure we don’t have “stranded accounts” that he’s not aware of, I listed out all the financial assets within the household, including the financial institution name, account numbers, account holder name, and a description of what it is.
Here’s an example of the financial assets table:
| Institution | Account Holder | Account Number | Description |
|---|---|---|---|
| RBC | Mr. LJ & Mrs. LJ | 123-456-78 | TD joint chequing account |
| Manulife | Mr. LJ | L23456789 | $500K life insurance policy |
| Sunlife | Mrs. LJ | ABC56789 | Employer DC Pension Plan |
By writing out all the accounts in one place, there’s no need for Mr. LJ to scrounge through physical mail or my email inbox to figure out what accounts our family has.
4. List of Recurring Expenses & Liabilities
Similar to the list of financial assets, this list outlines all the recurring monthly bills or long term liabilities for the household.
Most of our bills are on automated payments through our chequing account or credit card. Since some payments are made on my credit card, Mr. LJ will need to transfer those to his credit card or cancel the vendor payment altogether.
Here’s an example of the recurring expenses & liabilities table:
| Billing Company | Account Holder | Account Number | How payments are made |
|---|---|---|---|
| RBC Mortgage | Mr. LJ & Mrs. LJ | 123-456-78 | Automated bi-weekly withdrawal from RBC Chequing |
| RBC Mastercard | Mrs. LJ | 5560-1234-5678-9012 | Online billing emailed to Mrs. LJ |
| Rogers Home Internet | Mrs. LJ | 1234-56789 | Auto-payment through RBC Mastercard |
Final Thoughts
Ever the planner, I found the process of writing out a Letter of Last Instruction very reassuring and cathartic. While some might find it morbid to do this, especially while pregnant, it gave me comfort that Mr. LJ has a financial blueprint to use if he needed to.
I intend to update this “Letter of Last Instruction” whenever there’s a major financial change (e.g., changing jobs, adding/removing financial accounts, etc.)