Part Three of a three-part series
Perhaps the only thing more emotionally devastating than the loss of a spouse is the trauma of having to pick up the pieces of your life and move forward, especially for women who have never had to handle such day-to-day issues as managing their finances.
“With the older generation, it’s often the first time these women have had to deal with finances,” says Cathleen Burns, managing principal of Wachovia Securities Financial Network’s St. Augustine Investment Management in Florida. “On top of their grief, they now have to deal with a whole new set of responsibilities.”
In fact, Burns finds so many older widows sitting in her office who are completely unprepared for the task ahead that she keeps a checklist ready. The checklist gives the women something concrete to focus on, and helps Burns make sure that nothing falls through the cracks.
One of the earliest and biggest issues to be addressed is cash flow. Depending on how the husband’s estate was set up, there could be a significant lag time before the widow can take control of the assets. Meanwhile, death benefits need to be identified and applied for as quickly as possible, and that requires a copy of the death certificate.
“I had one situation where there was a typo in the social security number on the death certificate,” Burns says. “It took two months to correct one digit, and in the meantime we couldn’t do anything without that piece of paper. We couldn’t pay out insurance. We couldn’t transfer accounts. We couldn’t change the pension fund.”
Once the cash-flow issue has been addressed, Burns starts looking into every aspect of the client’s financial life. Following the checklist, Burns evaluates the securities the client is inheriting, generating a current account of what everything is worth and updating the cost basis according to the step-up value at death. For non-financial assets, she hires appraisers to determine fair market value. Then she starts retitling all of the accounts, including reregistering the securities and updating all the beneficiary designations. If assets are held in trusts, Burns works with the trustees and meets with the client’s attorney to update all the legal documents.
“You have to name new healthcare surrogates, revise the estate plan, and update the charitable gifting plan if they have one,” she says. “Sometimes it’s as simple as retitling assets, but with large plans that involve trust it can take months and months of work.”
Only after all these details are in order can Burns sit down with the client to design a financial plan that determines how much income they are going to need for the rest of their lives and how to draw that income based on their current assets and projected income.
“How much handholding I do through this process depends on the client,” Burns says. “Some women don’t even want to talk about money. They send a family member to talk to me.”
The ultimate goal, however, is to get the woman involved. Burns wants her clients to understand their finances so that they can feel more comfortable managing their lives.