Estate planning to prepare for the death of a spouse
Whether couples are newly married or advanced in age, it is important that they try to engage in end-of-life planning, including keeping their wills current, creating powers of attorney and establishing advance directives for health care. However, many people, upon becoming widows or widowers, discover that while they may have done some things correctly, they may have made some mistakes.
For instance, one major error is to place the brokerage and/or savings account in only one spouse’s name, and designating the other spouse as beneficiary. Upon the death of the spouse in whose name the account was opened, the other spouse will have limited access to the funds while the property of the deceased goes through probate.
In addition, in cases where the deceased spouse did all of the bill paying, problems may arise if that spouse did not share the passwords and security codes for those accounts. According to Kathleen Rehl, author of “Moving Forward on Your Own: A Financial Guidebook for Widows,” 70 percent of married women will become widows, and 80 percent of women will die while they are single. Rehl conducted a survey in which she asked participants what they wished they had known or done when they were still married. Here are some of their responses:
- They wished their husbands had had them practice managing the Quicken account for a month;
- Some expressed a desire to have met their husband’s financial adviser while the husband was still living;
- Others cited a wish to discuss the investments and the reasons for investing them in a certain way;
- Some wished their husbands had revealed the passwords to them;
- Others expressed a desire that a minimum of one checking account was in both of their names. Each household expense was connected to the husband’s bank account and credit card and, as a result, it took several months to resolve everything
It is important to set aside time to talk about your finances and end-of-life wishes. Couples could benefit from spending time to discuss matters such as wills, beneficiary designations, the reasons for their investments and health care directives. In addition, it is advisable to designate a place where you can store passwords and other essential information. The document containing such material should include account numbers, important contact information, online passwords, PIN numbers and security codes, and a list of places where crucial papers are stored. Such papers include birth and death certificates, divorce papers, titles to vehicles, mortgage documents, retirement plans, life insurance policies and stock certificates. Compile a list of significant documents that are kept in a safe deposit box, and record the location of the keys. Make sure that passwords, security codes and PINs are kept current on a regular basis.
Moreover, if you have a financial adviser, it would be wise to develop a relationship with that person. According to industry research, 70 percent of widows who have financial advisers fire them, mainly because they never formed a relationship with them. In many cases, the wife simply entrusts the spouse with all financial matters.
Make certain that your accounts are properly titled. If you do not have a living trust, then jointly held accounts are highly recommended. Accounts held in a joint living trust or as joint tenants with rights of survivorship permit the surviving spouse to inherit what is contained in an account without giving rise to a gift tax. In order to prevent accounts from being frozen during probate, spouses should hold brokerage and bank accounts jointly or in the name of their living trust. It is also best to hold all household accounts, such as telephone, utilities, and cable, in both names so that in the event of a spouse’s death, the surviving spouse will be considered the current customer.
Health care proxy and powers of attorney
Both spouses should execute a health care proxy, which allows you to select an individual to make medical decisions on your behalf if you are unable to do so. Each spouse should also have a durable power of attorney, which enables someone to manage your financial or legal affairs while you are alive if you cannot handle them yourself.
If you become widowed, you may become eligible for Social Security widow(er) payments. You can also receive such payments if you are divorced at the time of your prior spouse’s death, as long as you were married for 10 years.
If you would like to achieve the peace of mind that accompanies the knowledge that all of your financial affairs and estate planning documents are in order, consult the estate planning attorneys at Wade Law Offices.