Women who have recently lost a spouse may confront many changes in their daily lives and need financial support and advice.
Financial planning at this stage involves both a person's emotional and financial states. Many widows are pushed by well-meaning friends and relatives to make decisions that can turn out to be unwise, so financial advisers need to understand how to counsel them.
First, know that recent widows might be experiencing an emotional overload. Your goal for the first year should be helping your client to get her bearings and stabilize the situation.
IMMEDIATE CONCERNS
Cash flow needs. Find out what comes in and what goes out on a regular basis. Is there insurance through work or personal policies? Do you need to liquidate some assets to pay bills?
Liquidity. Be sure that there is enough money for living expenses to see her through this time, perhaps enough to live on for one year. Keep this money separate from investment accounts, which may fluctuate.
Estate needs. Find an attorney with whom you both are comfortable who will help with settling an estate, probate and other things that can't wait, as well as an accountant who will file the final tax return for the deceased spouse.
Statements and records. Review all assets and liabilities, locate all accounts and speak to all professionals who help with financial matters. Know where everything is.
Benefits. See about collecting benefits from Social Security or from the husband's company.
Health insurance. If medical insurance came from the husband's firm, call that company's human-resources department to see about getting COBRA coverage for the widow and any dependent children.
LONG-TERM ACTIONS
Develop a new spending plan. Over the long term, your client should decide on the lifestyle she wants, and you can help determine how to achieve it. Ask about her new lifestyle. How will it differ from the past? Work out financial needs with monthly expense and income sheets or with a program such as Quickbooks. Mostly, she should become familiar with her cost of living and stay within her means.
Select reliable people to help. Encourage your client to bring a trusted relative or friend to meetings to provide a second set of ears.
Create a road map for the future. This is the key to the kingdom of independence, and one with which professional advisers can help. Developing a road map based on life goals will relieve your client considerable uncertainty and anxiety.
Confirm that she will be fine financially. This is a time for reassurance and taking it slow. Consider a retirement plan that shows she will be OK into her 90s or, if not, what has to change to ensure that she can live comfortably, such as selling her home, going to work or cutting back on certain expenses.
ACCOUNTS SHE CAN 'OWN'
If accounts are in the husband's name, you will need a certificate of death for each institution.
For individual retirement accounts, once there is notification of a spouse's death, the accounts are frozen.
For joint accounts, you need to provide the same documentation to get the late spouse's name removed from the account. If your client inherits assets from her husband, speak to the estate attorney about how best to accomplish their transfer.
The portfolio that suited the couple may well be different from the one that's best for a woman on her own. Think about investment objectives, risk tolerance, time horizon, the correct withdrawal rate, keeping securities that will help achieve investment goals, and re-balancing the portfolio.
As an adviser, you need to be aware of the mistakes that widows make directly following their loss, such as trying to assume the role of both parents when there are young children; making major changes in her job, life-style or family make-up too quickly; treating each meeting with a professional as an isolated event; assuming that she can't manage or supervise the management of her investments; and leaving the portfolio the way her husband had it.
Your role is to educate her about the basics, communicate clearly and help prepare her for the rest of her life. This is your chance to add value.
A wise adviser will help his widowed client prepare a plan and take one step at a time to keep her from feeling overwhelmed.
Karen C. Altfest is executive vice president of Altfest Personal Wealth Management.
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