This is a short commentary on some issues that I have found in my work. If
you have run into other problems- and I'm sure you have- please let me know
and I may include them in a subsequent review.
One of the first comments from many articles in regards to surviving spouses
is that you should take some time for grieving before making decisions. That's
good in a perfect world, and while I do admit that the emotional drain of
someone dying may distort one's objectivity in viewing certain financial
situations, recognize that you may not have any choice in making the tough
decisions within just a few days to a few months after your loved one's death.
The one immediate decision that initially comes to mind is the life insurance
proceeds. Your agent- or your spouse's agent- will probably notify you of
the amount of the proceeds shortly after they have been contacted. But what
you are going to do with these proceeds is a MAJOR concern to you and your
family since they may be your sole income for the rest of your life. There
are various settlement options that will be undoubtedly offered by your insurance
company with all sorts of returns or yields with each. Here's my point. Go
to the HP12C page. You absolutely need someone with
competency to figure out which return is best for you given your budget and
your overall time constraints. One major item is that, with some of the
settlements, you will lose control of the funds altogether. The insurance
company may offer a guaranteed monthly payment for life, but you will be
unable to get any of the funds if needed. UNLESS THERE ARE OTHER ASSETS OR
LARGE AMOUNTS OF MONEY AVAILABLE, YOU NEED MORE ACCESS TO MONEY AFTER YOUR
SPOUSE DIES THAN BEFORE SIMPLY BECAUSE "STUFF HAPPENS". Tying all your liquid
funds in an account that you cannot get to in case of an emergency is usually
the wrong thing to do.
Within that regard, you can opt to invest the money. But with whom becomes
a big problem. When my brother in law died (at age 45, with no will), my
sister was inundated by her probate attorney and many others to invest with
this or that friend down at this or that brokerage or insurance firm. In
all honesty, these people may have been sincere in their referral, the brokers
may have also been sincere in trying to help, but without the credentials
listed elsewhere, she was probably going to get screwed. So to make it simple,
go back to the HP12C page. Never even bother to discuss money with someone
that does not have a financial calculator. You will be committing economic
suicide since these advisers do not possess a fundamental knowledge of money.
For the situation with my sister, the first thing I had her do was a budget.
Once that is completed (look for the extensive budget under the financial
planning section), you can determine what costs need to be cut, increased,
etc. Against that is the income stream that is or may be available. If there
are no children, social security will not be available until age 60 (blackout
period for widows and widowers). At that point, social security will pay
until the surviving spouses death. You need to determine the amount directly
from social security (800 772-1213). I have found that trying to estimate
these numbers can be fraught with errors.
If there are children, social security is a godsend. If a child is under
age 16, the surviving spouse is entitled to social security payments for
him/her until the child turns age 16. Then it stops FOR THE SURVIVING SPOUSE
until age 60. This is usually called the blackout period. But there is more.
The child (or children) ALSO receive social security benefits until they
are 18 or 19 if still in high school. Normally, these payments are provided
to the surviving spouse and are allocated to the income stream. (Don't expect
this commentary to be all encompassing for social security. This stuff is
quite involved. Since you will have to physically visit social security in
most areas, they should be able to provide assistance. Otherwise, call social
security and they should be able to fill in some informational gaps. I have
found them to be pretty good.)
I would feel uncomfortable- from experience- in getting much assistance from
the deceased's employer. As regards the major firm that my brother in law
was employed with- the human resource department provided incomplete statements
and incorrect advice. It seemed that the employees were relatively inexperienced
with issues of an employees death and were incapable of providing the needed
direction or help. I offer little suggestions here outside of hiring outside
help in mustering through the intricate forms and decisions that need to
be made. A CPA knowledgeable in retirement plans might be viable. Possibly
a financial planner, but make sure they have experience with all the facets
of dying. One type of problem with company employee plans is what to do with
any company stocks, pension plans, IRA's (can be really tough) and 401(k)
accounts. (As regards stocks, remember that many employees tend to buy too
much of their own company's stock and it may be far too volatile. For example
Digital's stock once reached $200 a share. But at my brother in law's death,
it was valued at $54- and subsequently dropped further to $16. Don't fall
in love with a stock. It cost her thousands and thousands of dollars not
to be properly diversified.) The funds may be allowed to stay and grow but
may need to be rolled to other accounts. And how you will roll them can make
a difference- new laws penalize you if done incorrectly. How will you accept
the IRA is another issue- and the list goes on. Also, remember, as the surviving
spouse, you will need to add new beneficiaries to the accounts.
Lastly, if your spouse owned or controlled a business, you will need to make
many decisions- and probably very quickly- since your customers and,
particularly, your creditors will want to know whether the business will
continue. And within the context of post mortem estate planning, will there
be enough money to pay estate tax or will assets- even the business- be forced
to liquidate? Perhaps estate taxes will need to be paid with company stock.
These issues will require independent and clear headed thought. Yes, you
might leave them to well meaning business associates and friends, sons, daughters
and so on, but I would suggest hiring someone independent to view the entire
situation. As stated, attempting to do estate planning after the fact,
particularly if inadequate amounts of liquidity are available, is just plain
tough. By the same token, you probably can't wait till the formal grieving
period is over before many of these decisions will need to be made.
These are the thoughts that initially come to mind. Basically, you will have
to probably make major decisions within a short time after your spouse dies.
The articles stating that you should wait a year are simply not real life.
But do not rely solely on well meaning friends, relatives or business associates
unless they have demonstrated proven skills with money. Be extra careful
with a business.
You may E mail for advice if you have recently lost a loved one and I'll
try to provide some guidance. This is a no cost professional service, NOT
a sales gimmick. I will hopefully help you avoid many of the difficulties
I have seen other people face since getting the wrong advice at this stage
in your life can be both financially and emotionally devastating.
Click to Buy it now!
Sample
Pages
GRIEVING LINK: Direct access to a
major "collection of resources of value to those experiencing loss and grief."
Highly recommended
WIDOWHOOD LINK:
Though written for Canada rules, this practical guide is still applicable
in many sections for U.S. citizens
WIDOWNET LINK: A support
page for all the issues of grief, bereavement, recovery, etc. effecting someone
recently widowed. Highly recommended
WIDOW(ER) LINK: Covers
a multitude of areas when a loved one dies- children, bereavement and much
more.
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