by Eve Kaplan, CFP(R)
Losing your spouse prematurely may be your worst nightmare. That’s when you discover who your real friends are, which relatives you can count on — and the unbelievable time and stress involved in sorting through complicated legal and financial issues that immediately land in your lap.
Some well-intentioned friends or family will tell you to avoid making any financial decisions for some time, such as working with new financial professionals or buying investment products. On the other hand, some financial and legal matters need to be attended to immediately. How do you know what needs to be addressed now – and what can wait?
Let’s take Anne, whose husband, Jim, passed away in December 2011 – just months before his retirement. Jim took care of all their financial affairs, so Anne immediately was lost when an avalanche of paperwork hit her. She couldn’t access Jim’s computer system and was confused by the various forms Jim’s employer sent her. Anne didn’t know Jim had a pension at work, didn’t know the size of her husband’s 401(k) plan and didn’t know he had group insurance at work.
Their broker pressured Anne to consider moving part of their joint account into an annuity, which Anne didn’t understand. Jim didn’t have a will so no estate attorney was involved until Anne’s friend finally convinced her to consult one about 8 months after Jim died. New Jersey requires estate planning paperwork be filed within 9 months of a spouse’s death….so Anne had mere weeks to engage an estate attorney to complete this filing.
Anne’s friend and the attorney both recommended Anne work with a financial planner — who straightened out Anne’s paperwork, created a budget and worked on helping fund Anne’s daughter’s college education. The financial planner also set up a prudent, diversified investment portfolio to help Anne fund the coming decades.
Based on Anne’s experience, here are some things to consider:
1. Losing a spouse puts you into a state of extreme shock and paralysiss. It’s difficult to make key financial decisions during the first month or more. Yet there are decisions you must make very shortly after your loss. Find paid professionals as soon as possible who can go to bat for you: an objective financial advisor (not the same as a “broker”), an estate attorney and a CPA or Enrolled Agent (EA).
2. If you don’t already have a financial planner/advisor, find a Fee-Only (meaning no products sold) advisor through www.napfa.org . You also consult www.cfp.net to find the “go to” advisor who pulls financial, legal and tax issues together. He or she can be in touch with your estate attorney and CPA to smooth the flow of information, make sure deadlines are met, make sure assets are titled properly and help avoid costly tax and investment errors.
3. If you don’t have an estate attorney, ask your advisor or people you respect to recommend a reputable attorney to help you deal with legal paperwork (e.g. filing NJ estate tax) and help draft new estate documents for you.
4. If you don’t have a CPA or EA to file your taxes, engage someone to direct you in this area. It’s possible your advisor or attorney can recommend the right person.
Here are some of the things a financial planner/advisor can do:
1. Review benefit options if your spouse had e.g. a defined benefit plan at work. Should you take a lump sum and pay tax in one go? Or take a stream of pension payments in retirement if you’re entitled to do so? A financial advisor can help you determine which option is better for you.
2. Gather and itemize your various investments accounts , assess your investments and align a new portfolio with your risk tolerance and needs to generate income – now and/or in the future.
3. Determine the cost of your various financial goals (e.g. college for your children, if you have them, your retirement living expenses, etc) and help you decide when you can afford to retire.
4. Make sure you have enough of the right kinds of insurance to protect your family if you die suddenly or become infirm.
5. Advise you regarding the right time to begin taking social security, if you haven’t yet begun receiving payments.
6. Help you organize immediate cash flow needs – to make sure you have sufficient sources of funds if your deceased spouse was earning an income.
There are many things professionals can do to ease you way. Nothing ever can replace the loss of a spouse but delegating financial matters to professionals allows you to focus on you and your family’s emotional needs at a trying time.
Copyright © 2012 by Eve Kaplan