You may be doing a good job of handling the family finances, paying bills and investing, but what happens if you pass away? Would your spouse understand the financial choices you were making as a couple? Would he/she turn to the right person for financial advice? I have seen many surviving spouses who feel utterly lost and panicked about money matters. That’s why it is important to handle the finances together. Here’s how…
Communicate your concern to your spouse — but avoid blaming. Your spouse may have deferred responsibility for the finances, but you were equally complicit by taking charge all those years. Tell your spouse that you would like to work as a team going forward. Stress that your spouse doesn’t need to become an investing wizard or an insurance expert, but that it is important to know enough to keep everything functioning even if you are not there.Put your spouse in charge of organizing the finances. It’s a simple, nontechnical way to get your spouse involved. Have your spouse compile a list, including phone numbers, addresses, Web sites and passwords, of all your accounts at banks and brokerage firms and other financial institutions. Also have your spouse list insurance policies… financial professionals you use… and the individual to contact at your job about employee benefits and retirement plans.Have your spouse make copies and maintain records of wills, trusts and deeds to the house in both a bank safe-deposit box and a fireproof box in your home.
Divide up financial chores. Ask your spouse to relieve you of some of the weekly and monthly paperwork. Do the tasks together at first, then let your spouse take over some. Begin with the most basic tasks that would need to be done if you died. These include…Paying the bills. Your spouse should have a good idea of your personal cash flow?what’s going in and out of accounts each month.
Maintaining an emergency cash reserve. Your spouse should make sure that there’s enough for at least three months’ worth of expenses and know what to do in order to replenish the fund if some of the money is used.
Make sure your spouse trusts your financial advisers. Involve your spouse in meetings with your estate attorney, accountant, financial planner, etc. It’s important that your spouse establish enough of a relationship with your advisers to be comfortable working with them in your absence.Many of my clients expect their grown children to help the surviving spouse with the finances. Children often lack the time and expertise to do an effective job. Also, after you’re gone, your kids may have their hands full dealing with all the other changes in your spouse’s life beyond finances.
Jot down explanatory notes on your financial plans and documents. Clearly explain your intentions behind particular decisions and how they were meant to benefit you and your dependents.Examples: “I bought this deferred annuity because…” “I stopped adding money to this retirement fund and started contributing to that one because…”
Reason: A major problem for widows and widowers is figuring out why their spouses made certain investments or bought particular policies. A simple explanation gives your spouse and advisers a foundation to work from.
Recommend that your spouse wait a year before making any major financial decisions. It takes at least one 12-month cycle for a surviving spouse to fully understand the finances and the consequences of financial decisions on long-term planning.Example: A widow in her early 60s used the proceeds of her husband’s life insurance policy for an extensive kitchen remodeling project that she had put off while he was alive. She reasoned that it would help assuage her sorrow. Halfway through the project, however, she got hit with the annual property tax bill for her home. She hadn’t factored that into her budget.
