Do You Need to Appoint a New Family CFO?

Every couple has its own way of dividing up household duties. When it comes to money matters, the responsible spouse may effectively become the family's chief financial officer (CFO), which can work well for years or even decades—until that person is no longer able or willing to carry out his or her duties.

Without adequate planning, the death or incapacity of the de facto CFO can leave family members to grapple with a host of unknowns, including what bills need to be paid and where short- and long-term funds are kept—to say nothing of estate-planning and portfolio-management particulars. "On top of that, they're going through all this while dealing with the death or declining health of a loved one," says Joe Reyes, a Schwab senior financial planner.

The best way to handle any crisis is to plan for it in advance, Joe says. In a corporate setting, for example, an understudy would often be named, trained, and ready to take the reins at a moment's notice—and a family with assets to protect should be no different.

Key to this transition is foresight. In a worst-case scenario, for example, how would a death affect potential sources of income, such as pensions and Social Security? Would the surviving spouse need to reduce spending or sell assets to maintain a balanced budget? What steps would need to be taken to settle the family estate?

Also critical is transparency. Kim Frank, a Schwab wealth strategist, recommends that families establish and maintain a comprehensive list of assets and expenses for the executor or trustee of the estate, who is most commonly the surviving spouse. "That way, both spouses can go into the document at any time to see their resources and liabilities," Kim says, "which makes picking up the pieces in the event of loss a whole lot easier."

Paying the bills is often the most immediate concern following a spouse's death or incapacity. Automated recurring bill payments make this chore more convenient. The downside is that paperless billing by definition leaves no paper trail for others to follow. Keeping a list of such bills helps. However, a death certificate (in the case of loss) or a durable financial power of attorney (in the case of incapacity) may be required for a direct beneficiary to gain full control of any online accounts to which he or she doesn't already have access. Letters of testamentary may also be required if the deceased's assets are not held in a trust or if an executor, a spouse, or a trustee has no direct beneficiary relationship to the deceased.

Another important resource is a roster of all the people who help manage financial matters, including accountants, estate attorneys, and financial advisors familiar with a family's long-term goals. Ideally, though, these key players should be more than just names on a piece of paper. "Even if you're not the hands-on spouse, being present in meetings and listening to what's being said can be extremely beneficial," Kim says.

Financial consultants can provide critical guidance even when there's been little or no estate planning. That said, "such situations can involve probate and other complications that might easily have been avoided had there been better preparation," Joe says.

Of course, many people would rather not contemplate the potential passing of a loved one, never mind their own mortality. But looking past emotions and making plans now can help ensure that important decisions aren't left to chance. "It's really about working with an attorney to make sure your wishes are clearly articulated and codified," Kim says.

If such conversations sound intimidating to you, you aren't alone. "I actually had to fool my family into looking at our financial plan," Joe says. "I gathered everybody around the TV and said, 'Hey, I've got something to show you!' Then I took out my phone and projected it right on the TV. I said, 'Don't move—we're all going to look at this.'"

That evening's entertainment may not have been binge-worthy, but it was definitely must-see TV. "My family now gets the gist of it—and they know whom to call for help," Joe says. "And I consider that a giant success."

The records essential to ensuring a smooth transition to a new family CFO:

• Accounts: Maintain a list of all bank, insurance, investment, and other accounts, including digital services such as PayPal and Venmo.
• Cash flow: List all potential sources of income—including insurance, pensions, retirement accounts, and Social Security. Alongside them list all financial obligations, including car and mortgage payments, subscriptions, and utilities.
• Contacts: List the names and contact information of all professionals who help oversee family assets, including accountants, attorneys, financial planners, insurance agents, and portfolio managers.
• Legal documents: Keep hard copies of health-care directives, trusts, wills, and the like in a secure place.