Emergency cash instructions to spouse

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Topic Author
tonyclifton
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Joined: Sat Feb 08, 2020 5:25 pm

Emergency cash instructions to spouse

Post by tonyclifton » Sun Jun 28, 2020 9:41 am

Hello! I'm working on a "break glass in case of emergency" set of instructions for my spouse to use in the event of a financial emergency where I am not able to assist. This would be used as instructions and to give confidence in the event that "helpful" family members gave advice that was not-in-line with my thinking. I have read the wiki on emergency fund strategy but I think it is missing some considerations like putting HSA first, putting loans/penalized options last and of course selling the house. Spouse is very aware of family financial situation but would need guidance on what steps to take and in what order. If it matters for this exercise, the Tier 1 has 12 months of current expenses. Would you please provide feedback?

Thank you!

Emergency Fund

In an emergency, if cash is needed, withdraw funds in the following manner:

Cash needed immediately ($XX,XXX)
1. If emergency is health related, use debit card for Health Savings Account. ($X,XXX)
2. Go to branch and withdraw cash from XXX or XXX savings or checking accounts. ($XX,XXX)
3. Liquidate XXX brokerage account (XXXXX Money Market Fund). Go online or call to place the sell order for XXXX. Requires one business day to sell and receive money. After sale, transfer money from brokerage to checking. Write check from XXX checking account. ($XX,XXX)

More cash needed ($XX,XXX)
4. If emergency is short-term and family is still generating income, go to branch and transfer money from XXX HELOC to XXX checking. ($XX,XXX).
5. If emergency is longer-term or family is not generating income, sell stocks from Roth IRAs and withdraw contributions. Roth IRA contributions can be withdrawn without penalty. ($XX,XXX).

Sell the House ($XXX,XXX)
6. Contact realtor to put the house up for sale. Work with realtor to set the price needed to sell the house as fast as possible. Use proceeds from sale to pay off HELOC. Expect to generate $XXX,XXX from selling the house (Equity minus HELOC minus realtor fees).

Last Resort ($XXX,XXX)
7. Take 457b hardship withdrawal. Withdrawal will be taxed as it was contributed pre-tax. Contact XXX to initiate the withdrawal.
8. If emergency is short-term and family is still generating income and can pay back loan in 3 years, take a loan from 401k. Repayment will be required in 3 years. Contact XXX to initiate the loan.
9. Take an early distribution from 401k, Rollover IRA or Roth IRAs. Withdrawal will be taxed and be penalized. Contact XXX to initiate the withdrawal.

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whodidntante
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Re: Emergency cash instructions to spouse

Post by whodidntante » Sun Jun 28, 2020 9:55 am

I think what you're doing is a good idea. "Helpful" people can do a lot of damage. Giving great advice requires a lot of insight into circumstances and preferences, and to be completely divorced from personal benefits if the person acts on your advice.

I would take a max HELOC draw upon losing the majority of my income or if I felt the wolf at the door just to increase my liquidity and my options available. Then I would treat the proceeds as any other money I have. And payoff the loan if things get better. Worst case with this approach is you waste some money on interest at a low rate. But for paying that you increase the chances that you will have access to the money when you need it.

Does your brokerage account only have a MMF and no other securities? If so, why have it at all? If you keep it, why not add checkwriting so you don't have to manually sell and wait a day?

Personally, I would sell my house after burning down a 457b and 401k. My house is not a huge part of my assets, however. If you have so much house that it's a noose around your finances, I would consider selling it, even now.

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willthrill81
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Re: Emergency cash instructions to spouse

Post by willthrill81 » Sun Jun 28, 2020 9:57 am

That's a good idea.

I have a running document with financial instructions to my DW, who is interested in personal finance but doesn't get into the weeds much, in the event of my passing first. This includes who to notify for life insurance purposes, where our money is located, which accounts to access, an investment strategy (buy-and-hold with some international and a SCV tilt), a withdrawal strategy, a strong admonition to never put any assets under the control of a financial advisor salesperson, and a very strong admonition to get a pre-nup in the event that she remarries. We periodically read through the document together.

We also have wills and health care directives in place. This reminds me that we may need to have our wills updated slightly.
whodidntante wrote:
Sun Jun 28, 2020 9:55 am
Personally, I would sell my house after burning down a 457b and 401k. My house is not a huge part of my assets, however. If you have so much house that it's a noose around your finances, I would consider selling it, even now.
We would probably sell our house before significantly* raiding our retirement accounts. We could live with my parents nearby, rent, or live in a nice RV for a while (and we've successfully spent significant time with our daughter in an RV, so we know that we could do it).

*I do have a 457 plan that could be raided after separation from my employer without penalty (though regular taxes are obviously due), but that's currently only a tiny portion of our NW.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Watty
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Re: Emergency cash instructions to spouse

Post by Watty » Sun Jun 28, 2020 10:24 am

It seems way too complex.

If you are so concerned about having emergency money available then you should really have six months expenses available in a liquid account.

The step about " Liquidate XXX brokerage account" could generate a lot of capital gains taxes so they would need to evaluate that.

The step about " Contact realtor to put the house up for sale. Work with realtor to set the price needed to sell the house as fast as possible." is also questionable that could be selling the house at a distressed price in a hurry when getting to the point where a six figure amount would not happen overnight. With a six month emergency fund you would not need to do a quick sale. Your wife would also need to then figure out where to live.

The most common emergencies I can think of are;
1) Job loss, but you would be around to handle the money.
2) Disability, hopefully you would have disability insurance, if not there would be SSDI. If you are not in a comma in a hospital you could also tell her what to do about the money.
3) Death, and you might have some life insurance even if it is just some work provided life insurance.

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ResearchMed
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Re: Emergency cash instructions to spouse

Post by ResearchMed » Sun Jun 28, 2020 11:36 pm

My first thought about the "immediate emergency" part is..
... don't you have some charge cards with conveniently high limits for such emergencies?
If they are paid off promptly, there wouldn't be any costs to using those, and then spouse would have *immediate* use of the cards, and some leeway to arrange to pay the arriving monthly bills, depending upon when in the cycle the charges are made.

We keep charge cards available for such things, or even if stranded overseas and needing a high-cost flight home, etc.

And you plan also seems complicated... especially for a spouse who needs direction and is likely to be already quite stressed.

But it's a great idea to have a list for spouse to follow!

RM
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runner540
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Re: Emergency cash instructions to spouse

Post by runner540 » Mon Jun 29, 2020 12:31 am

I made one of these docs for my spouse. This does seem a bit complicated. Hopefully the Bank savings Account is big enough for a couple months of breathing time before having to execute other maneuvers. Does spouse have access to these accounts? Do a practice run of your spouse logging Into all accounts and making sure their name is on everything they need to access.

Does spouse have contact info for your direct manager/team, and HR dpt? If you are incapacitated, someone needs to call them and activate leave, etc.
How do all bills get paid? For example, what is on autopay and what is not?

Topic Author
tonyclifton
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Re: Emergency cash instructions to spouse

Post by tonyclifton » Mon Jun 29, 2020 7:30 am

Thank you to everyone for the feedback. Your input made me realize the first draft was too complicated. What I wanted to do put together a plan to give time to allow for thoughtful decisions to be made and avoid making bad decisions while under pressure/stress. The first draft was overly prescriptive.

I revised the instructions which, when adding the HELOC, covers 2 years of expenses.

------
Cash needed immediately ($XX,XXX)
1. If emergency is health related, use debit card for XXX Health Savings Account. ($X,XXX)
2. Write check or go to branch and withdraw cash from XXX or XXX savings or checking accounts. ($XX,XXX)
3. Liquidate XXX brokerage account (XXX Money Market Fund). Go online or call to place the sell order for XXX. Requires one business day to sell and receive money. After sale, transfer money from brokerage to checking. Write check from XXX checking account. ($XX,XXX)
4. If emergency is short-term and family is still generating income, go to branch and transfer money from XXX HELOC to XXX checking. ($XX,XXX).
------

Here are other answers to questions people asked:
1. We started working on a "5 Wishes" document for an advanced medical directive. Need to finish this...
2. The taxable account only has a money market fund and this time. SWVXX - Schwab Value Advantage Money Fund. The return is not great (.14%) but is comparable to short-term CDs for a lot more flexibility. We are saving for a bathroom remodel.
3. A credit card could cover an emergency purchase. Not considering this option for this purpose.
4. Our mortgage isn't a big drag but assuming I wasn't around, and there was a need for money, it would be an opportunity to downsize and could move in with family if needed. For us, it is a better option to sell the house before raiding retirement accounts. I would make this same choice even if I was still around and the one able to make it :)
5. I have another set of documents with account info, a printout of balances and a keepass file with the username/login info.
Last edited by tonyclifton on Mon Jun 29, 2020 8:07 am, edited 1 time in total.

Fulltimer
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Re: Emergency cash instructions to spouse

Post by Fulltimer » Mon Jun 29, 2020 7:40 am

For #2, why wouldn’t your spouse simply write a check to whoever needed a payment instead of going to the branch and withdrawing cash? Having actual cash seems a complication. You have to physically go get it during business hours, keep it safe, then physically get it to someone else.

Topic Author
tonyclifton
Posts: 12
Joined: Sat Feb 08, 2020 5:25 pm

Re: Emergency cash instructions to spouse

Post by tonyclifton » Mon Jun 29, 2020 8:03 am

Fulltimer wrote:
Mon Jun 29, 2020 7:40 am
For #2, why wouldn’t your spouse simply write a check to whoever needed a payment instead of going to the branch and withdrawing cash? Having actual cash seems a complication. You have to physically go get it during business hours, keep it safe, then physically get it to someone else.
Ahhh...You are correct. Actual cash is hardly ever needed. I'll change to be more clear. Thank you!

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