Helping your spouse understand the financial life they may one day need to manage without you
In many marriages, one person naturally takes responsibility for more of the household finances. Maybe one spouse pays the bills, manages investments, works with the financial advisor, handles insurance and taxes, or simply knows where everything is.
That arrangement may work perfectly well for decades.
Until that person isn’t there.
In that moment, when everything changes, one spouse may be left to manage a whole new world of responsibility. This can be an enormous burden when mixed with grief and a lack of experience. While many couples take the steps that they believe will provide security, preparing your spouse financially isn’t only about leaving them money. Having an estate plan is vitally important, but it is not the only thing they need. Helping your spouse to prepare is about making sure they understand how to navigate the financial life they will inherit.
1. Start talking about your finances now.
When couples fall into familiar roles, it is easy to assume that each knows what the other does, but that isn’t always the case. A conversation with your spouse about the basics may shed light on things that he or she does not know. Start by asking your spouse some specific questions and learning where there may be gaps in their awareness.
- Do you have a general understanding of what we own?
- Do you know what debts we currently have?
- Do you know where our income comes from?
- How much does it cost to run our household each month?
- Who manages our investments?
- What insurance policies do we have, and what coverage do they provide?
- What significant expenses or financial commitments should we anticipate in the future?
2. Help your spouse understand the household cash flow.
One of the hardest things to deal with in the days after a spouse passes away is the fact that daily life continues. As much as our world has changed, bills will continue to arrive, and the household budget will need to be managed.
- Does your spouse know what monthly bills you have, such as your mortgage, property taxes, utilities, insurance premiums, credit cards, car payments, and cell phone?
- Are your bills on autopay?
- Does your spouse know how to access the accounts needed to manage the household?
- What bank accounts are these paid from?
- Are there automatic deposits going into those bank accounts?
Inevitably, some of these bills will likely change upon one spouse’s death, but some sources of income may change as well. Discussing this in advance can help explain what to expect.
3. Make sure your spouse understands your overall financial picture.
Your spouse does not need to memorize account balances or become an investment expert, but they should have a general understanding of your bank and investment accounts, retirement assets, real estate, business interests and other significant property, as well as mortgages, loans, credit cards or other debts. They should also understand which assets are owned jointly, and which are held individually.
4. Review what changes financially after your death.
It can be difficult enough for your spouse to newly take on the household budget as it stands, but they need to prepare for what will also change.
Will your spouse be left with less income to pay the bills and live on? There could be adjustments to Social Security or pension benefits, or possibly a loss of a salary. Are there insurance proceeds or retirement assets available to help support your spouse?
How will your spouse’s needs change? Will they remain in the house you shared? Or does a downsizing move or relocation closer to family offer more support? What are their anticipated health care or long-term care needs?
Your financial advisor can help you look at what the surviving spouse’s income, expenses and resources might look like and identify adjustments that may be appropriate while both spouses can participate in the decisions.
5. Review your estate plan and beneficiary designations.
You may have sat down with an estate planning attorney and created a comprehensive set of documents. When was that? Have there been significant life events since your estate plan was created or last updated?
Did you retire? Open new investment accounts? Buy or sell property? Have grandchildren? Make changes to your insurance coverage? Experience a significant increase in assets?
When was the last time you reviewed your beneficiary designations for retirement accounts or life insurance policies? Now is the time to ensure that they are current and consistent with your overall estate plan.
When we create estate planning documents, they reflect our lives in that moment. As you prepare your spouse for the next stages, you need to make sure that these documents still accomplish what you want. An up-to-date estate plan can provide important financial protection for your surviving spouse and help ensure your assets are distributed according to your wishes. These documents can establish how property should pass, who will be responsible for carrying out your instructions, and how your spouse and other beneficiaries will be provided for.
Your financial advisor can review how the estate plan and beneficiary designations fit into your overall financial strategy, identify areas that may warrant attention, and coordinate with your estate planning attorney when legal changes are appropriate.
6. Introduce your spouse to the people they will need.
Your financial advisor can serve as an ongoing source of support for your spouse. However, if they have not had their own relationship with your financial advisor, even in a time of vulnerability, your spouse may hesitate to ask for help. It can be helpful to make introductions now so that there is time for your husband or wife to develop their own relationship and become comfortable discussing financial matters with the advisor. Then in the days, weeks, and months ahead, your spouse will already have a trusted advisor they feel comfortable turning to for help.
You can also make sure they are comfortable speaking with your CPA, attorney, insurance professional, bank representative and anyone else who they may need to reach out to for assistance.
7. Give your spouse a roadmap for the first days and weeks.
These may be some of the most difficult days for your spouse to get through. As they are grieving, it can be even more difficult to handle the financial side of things, but some guidance can help them to determine what needs to be addressed immediately and what can wait. A list of written instructions can cover things like:
- Who should they contact first about the finances?
- Where will they find the financial information they will need?
- What bills and expenses require immediate attention?
- What income or benefits might change?
- Are there insurance claims or survivor benefits that need to be initiated?
This guide should also reassure them that they do not have to answer every question about their financial future in the first week. In time they may decide that they want to sell the house or pass down possessions to family members, but in the early stages of grieving, they may not need to make every major financial decision immediately.
What are you really giving your spouse?
Preparing your spouse financially for your death is about so much more than leaving them with an estate plan and lists of account information. It is about holding their hand through this transition and guiding them into the next chapter. If you were always the one to handle the finances, you can share that knowledge, helping your spouse understand the financial life they will be responsible for, and connecting them with people they can turn to for help. You cannot remove the grief your spouse will experience, but you can remove some of the uncertainty. If you would like to learn more about how we can help you, please contact us.