June 29, 2007
This article is part of our Newlywed Financial Boot Camp series, designed to get new couples and their finances into shape. You can find the other articles in this series here.
Just as soon as you and your honey begin amassing your fortune, you'll want to protect it. Whether it's natural disasters, evil meanies (e.g., identity thieves), or your own mortality that threatens your family's financial well-being, there are some simple things you can do to ensure the safety of your assets.
You and your beloved will get off to a good start if you take care of these action items:
- Make sure you're adequately insured. Special recommendations for newlyweds include securing renter's insurance (if you don't yet own a home) and seriously considering disability insurance, despite its high price tag. According to studies conducted by the American Council of Life Insurers (ACLI), a 35-year-old is six times more likely to become disabled than to die before he or she reaches age 65. That means that unless you already have dependents or significant assets to protect, you are better off securing disability coverage than term life insurance at this stage of the game. Ask whether you can get it through your employee benefits package; you'll save money and enjoy the added peace of mind.
- Prepare a will. It allows you to specify how your assets will be distributed. In the absence of a will, the state defaults to its "generic" plan for dispersing your assets, which may not be at all in keeping with your wishes. Should the two of you have children, you need to be sure to update your wills to designate guardians and prepare for your children's support and education.
- Designate your spouse as beneficiary. You might think that an ironclad will would supersede any beneficiary forms, but it doesn't. If you designated your cat Fluffy as the beneficiary to your 401(k) back before you were married, when you die, Fluffy will be one wealthy, happy cat -- even if your will leaves "everything" to your spouse. Make sure you check all of your retirement accounts, investment accounts, and pensions to ensure the funds will go to the person (or pet) of your choosing.
Left the beneficiary form blank? Your will still doesn't trump the form. If you don't specifically designate a beneficiary, the funds would likely go to your estate, which may mean the accounts will have to be liquidated. This is much less desirable than allowing the accounts to continue growing in tax-favored ways for years to come, as would happen if your spouse inherited the accounts outright and left them alone.
- Protect your papers. If calamity strikes your home or your entire area, you'll need some surefire ways to keep your important papers safe from water, wind, and fire. Some experts suggest the traditional "grab and go box" that allows you to pick up your file box of important documents on the way out of the door, but for security purposes, you may be better off scanning your documents and saving them on an encrypted USB flash drive. It's portable, and if it gets stolen, the thief will have his or her hands full trying to extract to anything of value.
- Keep your identity your own. Identity thieves have gotten ever more sophisticated, unfortunately, and it can be hard for the honest person to keep up. Make sure you and your sweetheart are vigilant about protecting your financial information. Do shred household papers before discarding them, use anti-spyware and anti-virus software on your computer, check your credit report regularly, and be very wary of giving out any financial information online. One small lapse could cost you thousands.
It's never fun to expect the worst, but when it comes to protecting your precious assets, you and your spouse will be glad you did.
Next: Build Up Your Retirement Booty.
Fool contributor Elizabeth Brokamp is a licensed professional counselor who regularly talks money with her honey, Robert Brokamp, editor of The Motley Fool'sRule Your Retirement newsletter. The Fool has a disclosure policy.