Heres a fairly common picture:
During 50+ years of marriage, a husband (well call him George) handles all the banking and investments. George dies. Barbara, his surviving spouse, must now handle unfamiliar financial matters. This is especially difficult in the midst of the grief and other impacts of losing her spouse. Barbara needs to know her financial situation, but doesnt know where to start.
Our advice to Barbara
This is not a time to hurry with any big financial steps like selling your home. There are, however, important financial, tax and legal issues to look at, and you should move forward with the first steps as soon as you can (within a month or two).
But dont try to handle this alone. Youll benefit most from obtaining help from a team of accounting, legal and financial professionals. If you already have a good relationship with an experienced and capable accountant, attorney or financial planner, start there.
The first steps involve finding and sorting through the various bank, insurance and other financial accounts, analyzing your other assets and your debts, examining your ongoing income and tax status and organizing your financial situation. An experienced and capable accountant could help with this. Accountants often charge hourly rates resolve the billing arrangements up front.
Also work with an experienced and capable attorney to administer your husbands estate. Attorneys often charge hourly rates resolve the arrangements (and look for a fixed fee or a fee cap) up front.
The work with the accountant and attorney should sort out your current situation, and show you how simple or complex your existing income, asset and investment picture is.
Bring in a financial planner
Youll need to look at your future financial needs and investing and re-investing, all in
light of your situation and goals. Seek the help of an experienced and capable financial planner. Planners are paid in one or more of these ways:
- Commission (from sale of investment products, insurance and annuities).
- Assets under management (you pay a percentage of the value of the assets the planner manages for you).
- Fee-only (hourly for some work and percentage of assets managed for other).
- Fee-based (hourly for some work and commissions for other).
Knowing the ways in which your planner is paid will help you understand his or her financial motivation related to your account.
Planners designations can tell you something about their training and experience, and a few (requiring years of training and experience) are widely recognized for their merit. Those include certified financial planner, personal financial specialist, chartered life underwriter, chartered financial consultant, certified public accountant and chartered financial analyst.
In recent years, however, light-weight designations have proliferated. They require little training or experience and are often obtained to enhance marketing to seniors. A week at summer camp is more work than earning some of these credentials. The Financial Industry Regulatory Authority (FINRA) provides information on ways for investors to protect themselves, smart investing and market data.
- For FINRA information visit finra.org/Investors/index.htm
- For H.E.L.P.s free publications, Checklist: When a Person Dies, Estate Administration Overview and Ask First! call 310-533-1996 or visit help4srs.org
- For certified financial planner referrals call 888-237-6275 or visit cfp.net
- For fee-only planner referrals see the website of the National Association of Personal Financial Advisors at napfa.org
Finding a planner
Get names of professionals from other trusted advisers and from financially-sophisticated friends. Talk with several professionals face to-face in their offices. Take a financially-sophisticated friend with you. Youll want to make sure the planner you choose has real-life experience, in both up and down markets.
Have the planner complete H.E.L.P.s Ask First! stating their training, licensing, compensation arrangements and other key information. Check references, licenses and discipline records. Then select a capable, well-respected person you are comfortable working with, and put him or her to work.
Theres important work to do. Start the first steps within a month or two after your husbands death. Obtain help from a team of professionals. Whether the situation is simple or complex to handle, with their help you can set the best course for your financial future.