This three part series will deal with death, dementia and divorce and the devastating impact these three “Ds” can have on a marriage.
While death often is mostly associated with older folks, it can strike at any age. Our experience shows that most spouses do not prepare for the financial and personal issues that ensue, even when there is still time to do so.
Have you done any preplanning with a funeral home? Have you written an obituary and chosen a picture? How will the long distance family and friends be notified? Have you expressed a desire for charitable donations? What Social Security benefits will be available to the surviving spouse? Have you provided the passwords for your digital life, especially those for accounts involving money? What are the income tax implications following death? Is there a budget and do both spouses know which bills need to be paid and when?
At the most basic level it is important to have the correct documents in place such as a will, living trust, powers-of-attorney for financial and health care and a living will. It continues to amaze us the number of people who do not get around to this basic task. Some may do it but fail to update the documents on a regular basis. How long has it been for you? More than five years? Go see your attorney now. The first steps following a death are to visit with the attorney, the accountant and the financial advisor. Do both spouses know who they are? Have both met with them previously?
When is the last time you checked all of the beneficiary designations on your life insurance, annuities, retirement plans? Nothing is more frustrating than to find that an ex-spouse is still named on a forgotten group life insurance policy issued through an employer. Worse is to find out no one is named or it is the estate. In both instances the proceeds will needlessly have to go through probate. Get copies of each beneficiary form. The surviving spouse will have to obtain claim forms for each of these. However, to whom do they reach out if you don’t have a list gathered in advance?
Speaking of probate, anything that is solely in the decedent’s name will have to go through this process. A bank or investment account with only one name is frozen and the surviving spouse will not immediately have access. If it isn’t necessary to have the property in only one person’s name consider making the registration joint, with rights of survivorship or tenants by the entirety. Both of which avoid the probate process. After death, each account will then need to be changed into the name of the surviving spouse. If the decedent has property in multiple states then probate will likely be needed in each state. This can be very costly.
Do you have enough life insurance to pay off the debts (mortgage, cars, student loans, credit cards, estate taxes), provide for replacement of income and perhaps cover the cost of education for the children? A general rule is that five times a spouse’s income is the minimum needed. A stay at home parent may not have any income but that doesn’t mean there isn’t a need for life insurance. If the need isn’t permanent (estate taxes), then consider term insurance which is relatively inexpensive at any age.
We advise surviving spouses to avoid making any major financial decisions for at least six months, perhaps as long a year. This is an emotional period. Take it one day at a time.
One of the best ways to prepare for death from a financial standpoint is with a written financial plan. In one place you will have a net worth statement, cash flow analysis, budget, tax information, retirement plan information, life insurance, education planning, schedule of investments, estate plan and much more. The conversations that you and your spouse will have on this subject during life, while not easy, will help relieve some of the emotional and financial stress which comes at this difficult time.
Ray Ferrara is Chair and CEO of ProVise Management Group, LLC and Paul Auslander is the Director of Financial Planning. Founded in 1986, ProVise is nationally recognized as a leading financial planning and investment management firm with assets of approximately $1.4 billion as of June 30, 2019.
