How to Financially Prepare Your Spouse for Your Death
By Aimee Calderon, CFP®
Out of an abundance of love, many people when facing their own death want to help prepare their spouse for the transition. While this is a difficult time and involves many different aspects of life, finances are undoubtedly one of the top concerns.
Estate Planning
Making sure you leave your spouse with updated estate plans is one way you can help them after you have passed.
In California, a living trust detailing beneficiaries and successor trustees will avoid probate and help the process of transferring assets go smoothly. After having a trust written, it is vitally important to have your non-retirement assets titled in the name of the trust.
If you have a trust but it was written more than a few years ago, it is a good idea to have it reviewed by an estate planning attorney. With the recent change in the tax law, you may able to simplify the document.
A will is also an essential part of estate planning. If you have minor children, your will is where you express your intent for future guardians. You can also designate that you wish for all non-trust assets to be put into the trust at your death.
Health care directives and powers of attorney are also usually part of an estate plan package. These documents can greatly ease the burden on your spouse when making health care decisions at the end of your life.
Retirement accounts cannot be held in the name of a trust. Instead, beneficiary designations on the retirement accounts direct their disbursement after your death. Make sure that your beneficiary designations are up to date on all of your retirement accounts. At our practice in Orange County, California, we have heard many stories of ex-spouses inheriting money because the beneficiaries were never updated.
Organize Your Finances
It is common with married couples to have one spouse more interested in finances than the other. Often, a surviving spouse is left in the dark as to how much money there is and where it is held.
Create a net worth statement to list both assets and liabilities. For assets, list account titles, account numbers, custodians, and current values of all accounts you own. The same can be done for liabilities. If you own life insurance, make sure to list that as well. Income sources and amounts (such as pensions and Social Security) can also be detailed on a net worth statement. Once you have created the document, make sure to share it with your spouse so they can access the information when needed.
Consolidating accounts before your death can help ease the burden on your spouse after you pass away. Do you have multiple retirement plans or IRA accounts that can be consolidated into one account? Maybe you have accumulated multiple checking or savings accounts that can be combined.
In this day and age, we have passwords for everything. From your computer to your bank account, from social media sites to credit cards, you probably have numerous passwords. It is important to create a list of those passwords, keep it up to date, and give it to your spouse. It will be one less headache for your spouse when you are gone.
Getting Professional Help
Even if you have a handle on your finances, starting a relationship with a team of professionals can help your spouse know who to turn to for help when the time comes.
A financial planner can help with the tasks previously mentioned such as creating a net worth statement and consolidating accounts. They can also write a financial plan with input from you and your spouse so there are clearly defined goals and expectations for your investments. An advisor can be very helpful when the time comes to retitle accounts and distribute estates to beneficiaries.
If you don’t already have a relationship with an accountant, now may be the time to establish one. After your death, there will be many tax-related tasks that need to be accomplished such as resetting of cost basis, filing final returns, and filing estate tax returns. A trusted accountant can work with your financial advisor and provide support to your spouse.
As mentioned, an estate planning attorney knows current tax laws and can help you set up a trust and will. An attorney can also help your surviving spouse transfer title on assets such as your home or rental properties. An estate planning attorney will work closely with your financial advisor in following your wishes spelled out in your trust.
Facing your death will certainly be one of the most difficult and confusing times in your and your spouse’s lives. However, setting up professional relationships and documents to help your spouse with finances can bring some peace of mind.
Schedule a 15-minute discovery call with a fee-only financial advisor to discuss your personal situation.