Login | December 26, 2024
Couples, Longevity and financial dislocation
JULIE JASON
The Discerning Investor
Published: December 5, 2024
Do couples know that wives will likely outlive their husbands? As reported in a National Bureau of Economic Research Paper (tinyurl.com/6yfx4ep3), widows are expected to outlive their husbands by more than a decade (12.5 years).
Knowing this, should couples talk about the future? Should they prepare for financial, tax and legal questions that need to be understood by the survivor?
In my practice, the future is a natural part of open discussions, usually including tax and legal considerations. But outside of my practice, I see couples who need to talk but don't. That's frustrating for me personally, since just being aware of things that can go wrong would help avoid mistakes.
This is not a gender issue, but it can turn out to be so. It has to do with who makes the financial decisions in the household. Who does the taxes? Who invests? Who has the relationships with the accountant, the estate planning lawyer, the financial professionals and, in the case of the high-net-worth, the family's money managers?
If the survivor is not the decision-maker, he or she will likely be lost in a sea of uncertainty when it comes to finances and taxes.
Accountant Jackie Spagnolo, managing director of Andersen Tax of Stamford, Connecticut, recounted a story about a client in her 50s whose husband died unexpectedly. Her husband had a strong connection with the couple's accountant, but once the husband passed away, the new widow felt alienated. She and the accountant didn't connect properly. The widow felt her voice wasn't being heard. She wasn't comfortable asking questions. In fact, she actually felt as if she was being kept in the dark.
That's a good example of a problem that can be avoided with some planning by both husband and wife. The answer is for both spouses to be comfortable with the family's financial, tax and legal advisers.
But what about someone who has no interest in getting to know advisers, or in investing or finances? This question came up in a joint presentation that I gave with Spagnolo last week to a small group of women. (If you would like to be invited to future presentations, let me know at readers@juliejason.com.)
For example, what about a conversation with the family's tax preparer? It may be difficult for someone with no experience to ask questions.
Spagnolo offers this advice: "Don't be intimidated to ask questions. Tax concepts can be complicated, so be sure you understand what your accountant is proposing during any planning or consulting calls. No question is too small."
If that sounds difficult, you can get help in advance of a dialogue with the tax preparer. I asked Spagnolo if someone could retain her to review a tax return that has already been filed, and yes, indeed, that is possible. By doing that, you can ask anything that comes to mind. Problem solved. Be sure to find someone with whom you can easily communicate.
Spagnolo added that planning for the future is equally important: "Ask your accountant for a summary of planning ideas that you can take home with you after a meeting to digest what was discussed and come up with follow-up questions you may have."
Spagnolo also recommends meeting with your accountant at least quarterly. "Communication is important. It helps establish goals, discuss objectives or even manage cash-flow expectations. It also builds the relationship between you and your accountant. Your accountant will be very much involved in your financial situation. Tax blends through to family relationships, and having more open communications can help your accountant fully understand your objectives and what's important to you," explained Spagnolo.
The same holds true for lawyers and financial advisers.
Over the years, I've seen families sidestep the big issues that future widows will face even when the couple is aware of a life-threatening illness. It's just a hard conversation to have. Who wants to face mortality -- or the potential loss of a spouse to divorce or incapacity? Just imagine how much more difficult it will be after the fact if not prepared.
Seasoned investment counsel (tinyurl.com/52nus8hz) and award-winning columnist and author, Julie Jason, JD, LLM, promotes financial literacy and investor protection. Read her latest book, "The Discerning Investor: Personal Portfolio Management in Retirement for Lawyers (and Their Clients)" (tinyurl.com/4u7h9pjs), published by the American Bar Association. Write to Julie at readers@juliejason.com. While all questions cannot be answered, each email is read and reviewed and can lead to discussion in a future column.
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