Taking care of the ‘what if’ moments

Bruce Brammall, The West Australian, 16 April, 2018

It’s certainly not the first time Mrs DebtMan has asked the question. So perhaps I should start getting a little concerned.

“What happens if you die suddenly?”

She asked this again just last week. It was our first night of a short run without the kids (who are with grandparents). And, granted, it’s not the sort of conversation held over the dinner table with the DebtKids present.

I assured her that in the event of my death, she and the kids would be okay. There’s enough insurance on me to cover them. Except if she’s plotting my death herself, in which case the insurance company would probably void the contract.

It’s important to make sure she understands that point.

But that answer only fuels further questions.

“What happens if you don’t die quickly?”

Simple, darling. Take your foot off my throat. Remove the knife from my stomach. Or call the paramedics and tell them what poison I’ve induced.

Not dying quickly is a little more complicated. But there are plans for that too.

Many natural “not-dying-quickly” scenarios, I again assure her, are covered by insurance. Trauma insurance is designed to pay you out on diagnosis of a life-threatening condition. Cancer, heart attack, stroke, or potentially any one of 30 of 40 illnesses, depending on your policy.

Not for a crushed larynx, dagger wounds, or poisonings by Russia-developed nerve agents.

You should have enough trauma cover to take care of whatever medical costs you might have and also to take away financial pressure for an extended period while you recover. It should cover the mortgage for an extended period and provide funds to cover the fact that you probably won’t be working.

Total and permanent disability insurance and income protection insurance are also designed to cover you in some scenarios here. TPD largely covers you for the likes of major accidents, while income protection is designed to kick in when you haven’t been able to work, due to accident or illness, for an extended period.

The most depressing scenario – the one I struggle to deal with – is what happens to parents who are unlikely to recover with young’uns.

You’ve been given the death sentence. You’ve been diagnosed. Insurance is now irrelevant, regarding your kids. (You’re either covered and receiving a payout, or it’s too late to take insurance out.)

I’ve watched this happen before. I’m watching it happen again now.

You get your house in order. And there is a bit to think about.

Firstly, a will. It’s probably not the time you want to be spending with lawyers drawing up how your spoils get divided when you die. But if you don’t do it soon … do you really want to leave everyone to fight over your remains?

Get powers of attorney in place. This one is about you, when you’re still alive. There may come a time when you’re no longer able to make decisions for yourself. An enduring power of attorney allows you to give defined powers to people you trust to do what you hope is right.

Of all the potential death scenarios, this is the one I find the hardest to deal with, or talk about with those who are in the middle of it.

The empathy of pain lies with both sides. The parent not seeing their children grow up. And the child knowing mum/dad won’t be there for them anymore.

It’s a devastating situation. Nothing can prepare you for that emotional element. Nothing.

Mrs DebtMan continues: “What happens if we both both die and the kids are left on their own?”

Insurance on both of us will cover the finances for them. But it will be up to our wills, again, to make sure that we’re looking after them as best you can.

A testamentary trust – a trust that kicks in to place at the moment of your death – will help to make sure your kids are looked after at the right time, in the right way, and as tax effectively as can be managed.

I’ve got most of the above covered.

But our wills, sweetheart, are out of date. It’s on the “to do” list. And something to be done before the end of the financial year. Not because there’s any benefit to doing it before then. As of now, I’m just feeling the need to put a time limit on it.

Bruce Brammall is the author of Mortgages Made Easy and is both a financial advisor and mortgage broker. E: bruce@brucebrammallfinancial.com.au.