As a financial professional, you probably have clients with spouses who are not interested in learning about finances. This can create a very difficult situation if the in-control spouse dies first.
This article will provide a few guidelines for advising survivors who are less savvy financially, or just not interested in financial topics, in general. I will offer some strategies to consider while both spouses are still alive to help guide the financially uninterested spouse through the financial and grieving process following the other spouse's death. I will also cover some strategies for the surviving spouse to consider at that difficult time.
Before The Death Of The First Spouse
You can lay the foundation for a productive, working relationship with the surviving spouse by getting both spouses involved in discussing their financial strategy while both partners are still living. The first step is to discuss the problems that could result if the in-charge spouse dies first. These may include the need to make investment, spending and estate planning decisions. Let them know that your recommendations will take these issues into consideration.
Prior to a spousal death, it is important to establish proper ownership of assets so that they transfer easily and avoid probate. It’s also important to arrange for quick and easy access to assets by the surviving spouse. You can help them get organized so both understand where all the financial and estate planning documents are located. Use a checklist approach for simplicity.
Start by making sure the client has a proper strategy for titling assets and checking beneficiary designations. You'll want to verify that transfer designations are accurate (including both primary and secondary beneficiaries) and create a summary list for arrangements—group benefits, transfer on death (TOD) accounts, life insurance, etc. Also, make sure nonqualified assets are owned/titled appropriately to help eliminate probate (if that’s a client goal).
In the category of nonqualified assets, consider that joint tenants with right of survivorship (JTWROS) and tenants by entirety transfer ownership, usually directly to the survivor. Also, help your clients understand that tenancy in common and sole ownership pass through probate and are subject to the client’s will.
Individual retirement arrangements are another matter you should discuss with your clients while both are living. There are tax implications and other nuances to both traditional and Roth IRAs, and a number of strategies your clients may want to consider today, including naming a beneficiary of each of their IRAs while both spouses are alive. You should ask the couple if income deferral will matter to the surviving spouse. If so, have them consider their beneficiaries.
It's a good idea to make a routine practice of checking beneficiary designations on the client's life insurance, retirement assets, annuity contracts, payable-on-death accounts and transfer-on-death accounts to determine if any updates are needed. You'll need to make sure that all nonqualified assets are owned and titled appropriately, to help eliminate probate (if that is a client goal).
Health-related concerns are another area you will want to discuss with your clients. In the event that you have client couples with both spouses living, there are pre-death considerations to consider with an attorney that you should encourage your clients to discuss. These include Power of Attorneys (POAs) for both spouses; health care directives and establishing a will. They'll also want to review or consider trusts, and review ownership and beneficiaries of assets.
Finally, ask your clients about their long-term care plan, which may or may not be well thought-out or documented. Do they plan to self-fund care, depend on spousal care or care from a child, or rely on Medicare or Medicaid? Possible long-term care financing solutions include life insurance, an annuity or a long-term care insurance policy.