Not long ago, we worked with a client who found themselves financially stranded. Their spouse, who had managed the finances, passed away, leaving the client with limited access to cash and no understanding of how the household finances operated. Fortunately, the surviving spouse had a relationship with us, and we were able to assist.
In most households, one spouse typically takes on the analytical role of managing the finances, while the other tends to be more emotionally driven and influences spending decisions. We’ve observed varying degrees of involvement from the spouse who does not manage the finances.
When we encounter couples with these dynamics, one of the first things we examine is how their accounts are titled. After a spouse passes away, the survivor may initially worry about where and how to pay bills like the electric bill. However, the more vital concern is whether they have access to money to pay those bills. Joint accounts ensure that assets aren’t frozen upon the death of the primary bill-payer. If utilities autopay from the account, they will continue to be paid as the joint account holder takes over the account. As for credit cards, having a spouse listed as an authorized user can help ensure that automatic payments continue until the spouse can establish a financial plan. However, avoid adding children or others to the account, because it could create unintended tax consequences. Additionally, be sure that accounts passing by beneficiary designation are updated so they go to the intended recipient. These accounts are paid directly to the beneficiary, bypassing lawyers and probate.
We highly recommend having a centralized location for all important documents and bills, whether it’s a filing cabinet, fireproof safe, or bank safe-deposit box. A password manager can store all the websites and credentials needed to access financial accounts online. A spouse only needs to know the master password to access everything. A records organizer or document locator book can also be helpful, listing everything from contact information for colleagues or service providers to debts, insurance policies, accounts, etc.
The key is to have these conversations now while there’s time. You don’t need to wait until a situation becomes critical or health declines. Take the time to teach your spouse how to access key records. Review the monthly finances, and quarterly or annual bills, such as those for storage units, property taxes, or insurance premiums.
You don’t need to know how to set up everything yourself. Your financial adviser can help organize everything and assist with the implementation of a transition plan so the surviving spouse isn’t cut off from funds during an already emotional time. It’s crucial for a spouse who is not involved in the finances to establish a relationship with your team of trusted professionals, including your financial adviser, estate planning attorney, accountant, and insurance agent. This way, both spouses can ensure their adviser has a comprehensive understanding of their needs and goals. When the time comes, the surviving spouse will have someone in their corner to offer guidance.
- If you have questions about how to share the workings of your financial life with your spouse, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the September 21, 2024 “Henssler Money Talks” episode.