In a recent issue of Research Magazine, Ellen Uzelac listed all the mistakes she and her husband made in planning for each other's passing. She thought they had covered everything until he was no longer around to help her. In listing her tips, she refers to a recent book "Moving Forward on Your Own: A Financial Guidebook for Widows" by Kathleen Rehl.
1. Carve out time to discuss your financials and end-of-life wishes. Rehl suggests couples spend one hour a week, over a glass of wine or a cup of tea, to talk about such things as wills, beneficiary designations, why things are invested the way they are, legacy issues, and health care directives. She calls it “active loving.”
2. Create a repository for passwords and other need-to-know information. Whether you and your spouse record everything in a three-ring binder or on a thumb drive, just do it and keep it in a secure place. The document should include account numbers, information for key contacts, online passwords, security codes and PIN numbers along with the location of items such as birth and marriage certificates, divorce papers, vehicle titles, mortgage documents, life insurance policies, retirement plans and stock certificates. Prepare an inventory of what's stored in any safe deposit box and identify where the keys are kept. Update passwords, security codes and PINs on an ongoing basis.
3. Get to know your financial advisor. Industry research indicates 70% of widows fire their financial advisor — in large measure because they never bothered to develop a relationship.
As Kelly A. Shikany, a certified financial planner with Lakeside Wealth Management in Chesterton, Indiana, affiliated with First Allied Securities, notes: “I can't tell you how many times I have a meeting scheduled and the wife decides she's getting her nails done. There's an element of trust with the spouse: ‘Oh, he’ll fill me in and we’ll talk about it later.’ It's so important to get these women comfortable with money, comfortable coming to meetings. You don't need to add money to the grieving process. You don't want your first experience with an advisor to be: ‘I’m sorry for your loss. Let's talk about changing titles on the accounts.’ It's really a time to settle and find strength from family, friends and community before you need to push through this stuff. And you can do that with a trusted advisor.”
4. Make sure your accounts are titled properly. Jointly held accounts tend to be the gold standard. Merrill Lynch advisor Mary McDougall, based in St. Paul, Minnesota, favors JTWROS, or joint tenants with right of survivorship — a vehicle that allows the surviving spouse to inherit the contents of an account without triggering a gift tax. Brokerage and bank accounts should be held jointly so that they can't be frozen during probate. And McDougall says it's a good idea to have any household account — utility, telephone, TV — held in both names so that when a death does occur, the surviving spouse is on record as an existing customer.
5. Consolidate accounts. Multiple small-value accounts are hard to manage and sometimes even overlooked, according to Avani Ramnani, director of financial planning and wealth management at Francis Financial in New York City. People often start IRAs at different banks at different points in life or leave 401(k) accounts with past employers. It's best to park everything in one place. “Planning for financial clarity is always a good idea,” says Ramnani. “Doing so makes things efficient and easier to handle.”
6. Familiarize yourself with probate and how it works in your state. Probate can be easy or expensive and onerous, as it famously is in Florida and California. “Some states are such a nightmare that everyone plans to avoid it,” says Lisa Hutter, senior director of wealth planning for Wells Fargo Private Bank in Austin, Texas. “And even if you are in a probate-friendly state, when you have a will you still have to file the paperwork, transfer assets, change titles on everything.” And all those records are open to the public. Because assets are frozen during probate — a process that can linger for months or years — Hutter suggests that each spouse have enough cash on hand to pay expenses for 24 months.
To avoid probate, Hutter recommends placing assets in a revocable living trust. Such assets are not subject to probate. She adds that a two-page will can direct any assets not held in the trust to be held there at death, thereby bypassing probate altogether. (Note: Jurisdiction also matters when it comes to the nation's nine community property states. Make sure you are mindful of how that can impact end-of-life planning.)
7. Check beneficiary designations and how things are titled. It's a good practice to make sure beneficiary designations and titles align with your will, your trust, your wishes. “This is a really important door to open and examine. Lots of folks will go to a lawyer, update their documents and think they’re done. Unfortunately, that's not always the case,” says Kathy Muldoon, senior vice president of Dallas-based Carter Financial Management, an affiliate of Raymond James Financial Services. She suggests getting a “letter of instruction” from an attorney, essentially a guide to beneficiary language and titling. “This is really important, especially if there's any complexity at all: a second family, a family business, an angry family member,” she adds. “Pick your topic. If there's any quirk at all, and every family has one, it's not worth taking the risk.”
Even if you’re certain you know how things are titled or designated, check anyway. “We’ve seen ex-spouses named, charities clients don't like anymore, or kids who’ve died. Little was in line with today's wishes. So verify everything,” advises Mike Tylavsky, managing director of Tylavsky & Lombardo, a Wells Fargo Advisors’ group in Pensacola, Florida. “You’d be amazed. They think it's titled one way, but when you go to verify, it's different.”
8. After a death, give yourself structure and space. The financial fallout that follows the death of a spouse can be numbing. Muldoon, a financial planner for 15 years when her husband died suddenly, talks about the “overwhelmingness” of the financials — and that along with her kids, the household, going to work, and dealing with friends and family. “It's almost like you’ve got a knapsack on your back full of bricks and you can't lighten the load,” she says. What helped Muldoon, and others she has advised, was to set aside a half-day twice a week to initiate an activity involving the unwinding of financials. “It contains it. It puts a structure around it. And it gives you permission not to work on those things on the other days.”
9. Maintain one joint bank account. It's surprising how many checks payable to a deceased spouse filter in over time: a stock dividend, a rewards refund from a credit card, the proceeds of a class action suit, the balance of a bank account following probate. Wynne Whitman, an estate planning attorney with Schenck, Price, Smith & King in Florham Park, New Jersey, says: “By all means, keep a joint bank account open for one to two years. So when that refund from Time magazine comes, you’ll be able to deposit it.” Also, don't close your spouse's credit card until you understand what bill paying may be tied to it through auto-pay options.
10. Consider your Social Security choices. A widow has various options when it comes to Social Security claiming strategies because she can claim under her own work record or as a surviving spouse. “This is something you want to get right because Social Security is under no obligation to tell you how to maximize your benefit,” notes Jennifer Murray, a certified financial planner with Stonebridge Financial Advisors in Morristown, New Jersey.
Women can claim the widow's benefit as early as age 60 although there is an income cap attached to it. One popular strategy is to take the surviving spouse's benefit at 60 and then claim your own work record at 70. The good news here is that your own benefit continues to grow at 8% a year until age 70, when it tops out.
11. Understand your expenses. Many women are surprised at how much they spend. As Murray says: “I’ve never met a client who says ‘Oh my god, I can't believe I only spent that.’” She suggests using a one-page spreadsheet to track expenses — a process, she says, that can lead to a lot of self-discovery. Murray met with a young widow recently whose husband had prepared a spreadsheet for her in advance that included all of the need-to-know information. He had even researched her Social Security options. “She came into the office and said: ‘I’m starting with this. Can you help me understand it?’ Do as much as you can ahead of time,” Murray advises. “You’ll be so much better off.”