ESTATE PLANNING FOR THE UNINITIATED

Posted on: May 20th, 2019

When one spouse stays hands-off on the finances, it’s easy to get caught off-guard by a death or illness.

Here’s how to get up to speed.

By Anne Tergesen

Gary Altman, an estate-planning attorney in Rockville, Md., recently had a client turn to her brother-in-law to cover bills after her husband died.

The client had plenty of money, but she couldn’t readily access it because some of the accounts were in her husband’s name alone and financial institutions often freeze single-owner accounts when a person dies.

“Her spouse died with assets in his own name, and their joint accounts were not large enough” to cover daily expenses, Mr. Altman said.

Mr. Altman’s client eventually got court authorization to manage her husband’s accounts, but hers was an avoidable problem.

Financial professionals and attorneys who work with widows and widowers say it’s common for surviving spouses who took a back seat on money matters to find themselves with an incomplete picture of their net worth or where the accounts are held.

It’s a challenge that comes at a terrible time, when the spouse who inherits responsibility for the money is overwhelmed and may not fully understand the details.

Yet “you cannot put your head in the sand because you are grieving,” said Rebecca Milliman, senior wealth strategist at CIBC U.S. Private Wealth Management. “A lot needs to get done.”

There are steps couples can take to prevent — or resolve — any issues.

If you don’t have advisers already, you probably need to hire a financial planner, an attorney who specializes in estate settlement, and an accountant to file income tax returns for the estate and handle any state or federal estate tax returns that are due.

A large percentage of widows — as many as 70%, according to some surveys — end up firing advisers they inherit.

“You need to find someone you can feel comfortable with,” said Ellen Kamp, co-founder of W Connection, a group for widows. Ms. Kamp, who switched financial advisers after her husband died, recommends asking friends, relatives, and colleagues for referrals to a fiduciary, who is legally obligated to put your interests first, and interviewing at least two or three candidates before making a final choice.

At a time when a surviving spouse feels overwhelmed, it is generally counterproductive to make major decisions, said Susan Bradley, founder of Sudden Money Institute, which trains advisers working with clients in transition.

Grief can reduce “cognitive capacity,” she added.

Ms. Bradley recommends putting nonessential decisions on hold for at least a year. For example, deposit life-insurance proceeds in the bank rather than investing it.

“It’s important to find a way to slow down the decision-making process but not completely stop it and to focus on what is essential so the surviving spouse doesn’t have their brain scattered in the clutter of everything.”

Ms. Bradley recommends prioritizing urgent matters, such as getting access to cash and filing taxes, before moving on to other important tasks, such as retitling a car or devising a budget.

Decisions that are difficult or expensive to reverse, such as moving or giving money away, should wait until the surviving spouse is no longer in shock and understands his or her financial needs.

“I have seen people give money to the kids and then realize they need it,” Ms. Bradley said. “Once you have enough cash to pay the bills, there’s usually no hurry” to make other decisions.

MARRIED COUPLES SHOULD . . .

– Hire an estate attorney to draft or update wills and other estate-planning documents.

– Hire a financial adviser both spouses like.

– Make sure each spouse’s will gives the executor permission to manage digital assets.

– Use an online service such as Intuit Inc.’s Mint or Personal Capital Corp.’s software to track all of their accounts and assets — and be sure both spouses have the password.

 – Use an electronic password aggregator to keep track of log-in information for online accounts, including photo sites, and keep the password with their wills.

– Set up bank and other financial accounts a surviving spouse will need immediate access to in both spouses’ names or as “transferable on death” from one spouse to the other. (Some types of accounts in one spouse’s name alone typically go through probate and may not be immediately accessible.) Consult with an estate attorney before retitling accounts if you think you may owe federal or state estate tax.

– When the first spouse dies, his or her estate is required to use assets held in the deceased spouse’s name alone to settle his or her individual debt. Assets that are jointly held or are held in the survivor’s name alone are protected, unless the survivor co-signed or guaranteed the debts.

A SURVIVING SPOUSE SHOULD . . .

– Order at least 15 copies of the death certificate to use to retitle financial accounts and settle the estate.

– Contact the estate attorney, accountant and financial adviser.

– Gather household bills and bank, brokerage, insurance, and credit-card statements.

– Retrieve electronic statements from the deceased spouse’s email account or petition the email provider for access.

– Start the probate process by having the executor submit the death certificate and any will that exists to the court.

– File with Social Security for a $255 death benefit.

– Consult someone who knows the rules for claiming monthly Social Security survivor benefits, based on the amount your spouse would have received. A survivor can claim as early as age 60 (or 50 if disabled).

– Retitle household bills in your name.

– Change the beneficiaries on your retirement or other accounts or insurance policies if necessary.

– Update your will.

– Create a new financial plan once you understand what you own and owe and are able to make long-term decisions.

– Call the deceased spouse’s employer, if he or she was working, to ask about a 401(k), traditional pension, stock options, and life insurance and the cost to continue health coverage under the company plan.

— Check the most recently filed tax return for the names of the financial firms that house the household’s accounts. Financial firms provide 1099s when bank, retirement and taxable accounts generate income, capital gains, dividends or interest.

— Present the death certificate and proof of identity to get their share of a spouse’s IRAs, 401(k)s, and life insurance. (Be aware of the rules surrounding penalties before transferring money from a spouse’s 401(k) or IRA to your own.)

— Look for statements in the mail for accounts that don’t show up on the tax returns, including pensions, IRAs, annuities, and 401(k)s no one is contributing to or taking withdrawals from. Because companies can lose track of former employees, call your spouse’s previous employers, too.

— Ask for free help if you believe your spouse was entitled to a pension from a company you cannot locate. Sources include the Labor Department and the Pension Benefit Guaranty Corp.

— Search for missing life insurance and annuity contracts in the “Life Insurance Policy Locator Service” sponsored by the National Association of Insurance Commissioners or in your state’s unclaimed property fund.

Source: WSJ and Kathleen Rehl, author of “Moving Forward On Your Own: A Financial Guidebook For Widows.” Used by permission.

 

 

 

 

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