By Marjorie L. Rand, CPA, CFP®, RICP®
I have found that it is not uncommon for one spouse to manage every aspect of the finances, from paying the bills to investing. Sometimes, the uninvolved spouse just has no interest in finances. Other times, life is so busy that the uninvolved spouse must focus on the other areas requiring attention. Unfortunately, however, there are unintended consequences by operating this way. I have worked with many widows who were not involved in their finances when their spouse was alive and sadly, they were left having to sort through a confusing financial mess while in a very fragile state of grief.
This article is undoubtedly the most important one for a married couple to read. While no one wants to think about death, it is essential for each spouse to be financially prepared for when that day comes.
I have helped many surviving spouses handle the settlement of their spouse’s estate and help them move forward on their own. I feel honored to be a support system my clients rely on to navigate such a difficult time. Therefore, I want to share with you a few practical steps you can take to make the financial transition easier:
1. Discuss Your Finances With Your Spouse
I’ve seen situations where widows were left in the dark and had to make major financial decisions while going through the grieving process. Surviving spouses should never be left in a position to make major financial decisions within a year after their spouse passes because they are in an emotionally vulnerable state that clouds their judgment. Therefore, think about the things he or she will need to know. Being on the same page financially avoids, potentially, very costly mistakes. So be sure to tell them about the decisions that you are making and why and bring them to some of the meetings with your financial professionals and attorneys.
It's also vital to talk with them about where things are (especially the log in credentials to financial websites), how to log into the accounts online, whether monthly statements come in the mail or must be downloaded from the financial institution’s website. Make it a point to actually show them how to log into accounts online so they know the nuances of the websites.
2. Organize Your Records
I’ve seen situations where all financial records were kept on a computer and no paper copies were kept of anything. The widow did not know the name of the brokerage accounts where any of the accounts were held and had no idea how to find the accounts on the computer. This creates a nightmare for the surviving spouse as it can take two years to rectify this type of situation. It is very important to keep a simple organized financial record that is easy to find and follow.
Begin by placing all legal documents and critical information in a locked fireproof safe. This should include your Social Security card, Last Will and Testament, Irrevocable Living Trust, military documents, marriage certificate, birth certificate, life insurance policies and any other critical information. Show your spouse where the keys are hidden.
Make a few lists that provide critical information all in one place for easy reference. Here are some suggestions:
- List of your log in credentials for all financial websites.
- List of all accounts with banks, brokerage firms including full account numbers and how the accounts are titled. For retirement accounts, list the names of the beneficiaries.
- List of all insurance policies with policy numbers, beneficiary names and contact information.
- List of credit cards and the names of the account owner and the names of authorized users.
- List of all bills that are paid monthly, quarterly and annually. Include recurring due dates, especially for property taxes and estimated income tax payments.
- List of all employer benefits, including those of prior employers and your current employer.
Place these lists in one folder in your fireproof safe.
Set up a paper filing system with prior monthly statements for all accounts to leave a paper trail. If you receive paper statements, open the envelopes and organize the statements neatly. Print out the prior years’ tax returns if they are in your computer. Having paper copies is critical for the estate administration process.
3. Review Your Credit Cards
What some people don’t realize is that upon death, a credit card owner’s credit card is usually terminated. The “account owner” is the one who is legally responsible for paying the balance on the card each month. An “authorized user” is someone added to the account by the account owner. The authorized user is given a card with their name on it to make purchases on the account but they are not legally responsible for the debt charged to the card.
Many couples have it set up to where one spouse is the “account owner” and the other is and “authorized user” however, in this case, if the account owner dies, the spouse will be left without any credit cards. Therefore, each spouse should have two credit cards, one with each major networks (Mastercard and Visa) where they are the actual account owner.
There are two reasons each spouse should be the account owner on two credit cards. First, when one spouse dies, the other will continue to have the use of their credit cards. And second, the credit cards will enable your spouse to increase their own credit score. Credit scores only consider the account owners, not the authorized users. Your spouse’s credit score is still important even if they are not applying for a loan because credit scores affect homeowners and auto insurance rates.
4. Review Your Estate Planning Documents
Make sure your Last Will and Testament and/or Revocable Living Trust accurately reflects your wishes. If not, have your attorney update them. Review the beneficiaries on your insurance policies, annuities and retirement accounts. One glaring example of a serious mistake involves failing to update the beneficiaries on a life insurance policy and having an ex-spouse receiving life insurance benefits instead of the current spouse.
5. Find a Fiduciary Comprehensive Financial Planner
If you have a financial advisor, think about whether your spouse is comfortable with them. If not, it is important to find an advisor who you can trust and who makes both you and your spouse feel comfortable.
Statistics tell us that over 70% of widows change financial advisors within a year of their spouse’s passing. The main reason for the change is the widow did not have a relationship with their spouse’s advisor. It’s difficult enough to find the right financial planner under normal circumstances, let alone finding someone a widow can trust while going through the grieving process.
If you don’t have a financial advisor because you have always handled the finances, one of the best things you can do for your loved one is to find a fiduciary financial planner who will look out for your spouse if you pass away. Develop the working relationship with the planner now and ensure your spouse attends meetings so they can build a relationship with the advisor.
Having a good financial advisor to look out for your spouse will bring you and your spouse comfort and peace of mind. It’s a good feeling to know your spouse feels comfortable calling your advisor and that the advisor will guide them through the challenges faced in the future. This is one of the best ways you can continue to provide for your spouse beyond your passing.
If you are in need of a comprehensive financial planner, I would be happy to speak with you so we can get to know each other a bit and to see if my services match what you are looking for. At Rand Financial Planning, I am not only able to help retired couples plan for their future, but with a strong background in taxation and estate administration, I can help surviving spouses make the transition to widowhood and guide them through the difficult times. Feel free to schedule a 20-minute introductory call or reach out to me at 908-895-2406 or email@example.com.
Marjorie Rand is founder and financial advisor at Rand Financial Planning, a comprehensive, fee-only, fiduciary financial planning firm. Marge specializes in helping her clients plan for a secure retirement and navigate life’s many transitions through customized, tax-efficient retirement planning. She is passionate about empowering her clients to make the best financial decisions for their life and being by their side no matter what life throws at them. Marjorie spent many years as a CPA, specializing in estates, before founding Rand Financial Planning so she could be a go-to source for all her clients’ financial needs and help them avoid costly mistakes. She has a bachelor’s degree in accounting from Rutgers University and a Master of Science in Taxation from Fairleigh Dickinson University, along with the Retirement Income Certified Professional® (RICP®) and CERTIFIED FINANCIAL PLANNER™ certifications. When she’s not working, Marge enjoys boating, horseback riding, traveling, and hiking with her husband and her dog, Rangeley. To learn more about Marjorie, connect with her on LinkedIn.