After-Death Experiences

Not surprisingly, widows as a group exhibit the range of dysfunction from super hoarder to super frugal, independent of the actual assets at their disposal. For some, even having a $10 or $15 million net worth doesn’t get them beyond the fear that they might end up homeless living on the street, notes Geiger. They’re also scared someone will take advantage of them and walk off with their money.

At the other end of the spectrum, she’s met widows who’ve blown through $2 million in two years–a pace that will leave them with very little after five or six years.

Geiger finds many new widows are unable to focus on the decisions facing them. She’ll tell such overwhelmed clients that she’ll come to their homes and sit down with them and go through all the paperwork just to help them get organized–particularly if they’ve never handled the family finances. She tells them just to sit nearby, keep her company, and answer some questions.

“And if they let me help them, I don’t even charge them for the time,” says Geiger. “I’m happy to do it because I know what shoes they’re in and they’re probably going to be my client for 20 years. Over the next 20 years, I’ll earn the money back that I deserve for taking this extra time, but I want to help them get past this hump.”

Challenge of Illiquidity

Although their balance sheet may show significant assets, the lack of liquidity can be the first financial surprise. For example, if a couple owned parts of a few businesses and maybe some investment real estate such as a shopping center or some undeveloped land, those holdings don’t guarantee adequate cash flow to maintain the couple’s previous lifestyle. In a typical marriage where the husband’s substantial annual income maintained the family’s three homes and multiple luxury cars, the sudden lack of that income radically changes the cash-flow picture for the surviving spouse and children.

“Trying to come up with a way of structuring cash flow can be tough because a lot of widows don’t want to sell anything that they owned jointly that reminds them of their husbands,” notes Modly. “Since I practice in farm country, we’ve seen a lot of very illiquid estates.”

During strong real estate markets, an owner could sell a land parcel to pay taxes or improve cash flow. In many parts of the country today, however, selling property or a home is a challenge.

Even with affluent families, advisors aren’t seeing many cases where the amounts of life insurance are inadequate to replace the lost income after the death of the main breadwinner, as a recent case of Modly’s indicates. The husband had owned a profitable, closely held business, but he had been careless about maintaining stock certificates. As it turned out, the stock was in his name and some of it had been pledged. Modly’s firm had to spend considerable time just discovering who owned what.

The widow also became the owner of a substantial amount of property, including a 10,000-square-foot home the couple had just finished building. She’s reluctant to sell the house, yet she has insufficient proceeds from life insurance and other sources of cash to maintain her previous lifestyle. On her own, she earns less than $50,000 annually.

“It’s amazing that you can have that much net worth and still be broke–just because it’s not liquid,” Modly says.