I’m currently preparing to become an empty nester and recently lost my father-in-law. As a result, I’m thinking about the future and reflecting upon my own mortality, even more so than usual.
Whether you’re dealing with the loss of a loved one, children moving on to college, or other landmark transitions in life, it’s important to take stock of your financial affairs and to make sure that you and your spouse are on the same financial page. If something should happen to you, your spouse will need a road map in order to navigate the future confidently and strategically.
A recent study by Ramsey Solutions found that couples in healthier, happier marriages are more likely to have important conversations about money. Interestingly, 87% of respondents who describe their marriage as “great” indicated that they work with their spouse to set long-term money goals, compared to only 41% of respondents who say their marriage is “okay” or “in crisis.” In addition, 94% of couples with “great” marriages discuss their financial goals together, compared to only 45% of those who say their marriage is “okay” or “in crisis.”
However, many couples experience a disconnect when it comes to managing money. According to data from a recent Fidelity study of more than 1,700 couples, approximately 40% of adults in the U.S. who live with their spouse or significant other are unable to correctly identify how much money their partner earns. Quite often, one spouse takes the lead on financial matters – from paying the bills to managing investment accounts – while the other spouse remains in the proverbial dark. Such a disparity can have serious consequences for surviving spouses.
The surviving spouse may lack a relationship with the professional advisory team or a deep understanding of the family assets, accounts, and guiding financial values. These difficulties may ultimately translate into unexpected financial challenges, from missed bill payments to mismanaged assets.
How can you make sure you and your spouse are on the same financial page? Communication is critical and serves as the foundation for all survivorship planning. At least once a year, couples should have an in-depth conversation about how their financial affairs are handled. The discussion should include practical information such as a detailed balance sheet (indicating which accounts are held where), data on cash flow (including income sources and expenses), and knowledge of your family’s professional advisory team (CPA, attorney, investment advisor, etc.). Remember that your advisor can coordinate with your broader team of financial professionals, playing a valuable role to ensure the smooth transition of financial responsibilities.
Consider updating your estate planning documents together, discussing important issues with your attorney as well as your advisor. Give special consideration to whom you would like to serve as your executor, trustee, and power of attorney. Have meaningful discussions with your spouse about your joint legacy and how you would like to transfer wealth in the future to family members, charitable organizations, and causes that are important to each of you.
In addition, leaving a breadcrumb trail is one of the smartest things you can do to prepare for the loss of a spouse. This is a key strategy to ensure continuity, particularly when one spouse has been primarily responsible for paying bills and handling investments.
To that end, we’ve recently added additional functionality to The Fiduciary Group’s online portal, so that clients can save key documents and organize their financial assets in one place. Take the time to add estate planning, medical directive, powers of attorney, and tax documents to the online vault as well as private assets, real estate, insurance, and outside brokerage accounts. Our portal offers a convenient way to take inventory of all of your assets in real time and offers a way for both partners to access the information at any time.
If something happens to the primary financial manager, the surviving spouse shouldn’t be left trying to put the pieces together. By having documents organized in one online portal, they will be easily accessible for the surviving spouse during this difficult time.
You’ll also want to make sure that your spouse has online access to all banking and financial accounts. Consider a “trial run” for your spouse to take over bill paying and pocketbook issues temporarily to ensure continuity.
Lastly, consider whether assets are titled appropriately to align with your financial plan. You may need to make strategic adjustments or to set up a living trust. We suggest scheduling a joint financial planning session with your advisor, who can help make sure that you and your spouse are both educated about your financial plan. Your advisor can also help you take inventory and offer a holistic view of your assets, explaining what would happen to your assets in the event of the death of a spouse.
It is common for couples to procrastinate on matters relating to estate planning and financial wellness. We’re happy to facilitate conversations, as we’ve seen first-hand the tangible benefits gained by clients who take the time to work through the process together.
We understand that each client’s situation is unique and are here to discuss your personal financial situation with you and your spouse.