Death and Taxes

The old saying about death and taxes being the only things that are certain is only partly true. Taxes change. Death is certain. The end of our lives is something that we face only reluctantly, if at all. When someone close to us dies, the effect is al­ways sadness. When a spouse or parent dies, the effect is traumatic.

Because death is an unpleasant subject, most people prefer to spend their time thinking of more pleasant subjects.  They believe that they have done their planning if they meet with an attorney to have a will or trust document prepared.  Once this is done the feeling is that the planning process is complete.  Unfortunately that’s rarely true.  This traditional view of estate planning gives your heirs the view from thirty thousand feet but often fails to provide the guidance that surviving spouses or children really need.  Here is an example from real life.

Sue Smith (not her real name) became a widow after her husband, Sam’s, brief illness. Sam had a small account with me but the bulk of his portfolio was distributed among a number of different investment firms and mutual fund custodians.  Only Sam had a complete picture of the family’s finances and he rebuffed suggestions to consolidate his assets and do planning beyond reviewing his will on a regular basis.  Sam retired after a career as an executive at a large corporation.  He had been a take-charge guy all his life, both at work and at home. He had been the sole income earner, made the investment decisions and paid the bills, while Sue was in charge of the home and children. They were a very typical couple.  Both were healthy, until Sam had a sudden stroke that left him incapacitated and led to his death a few weeks later.  Sue was suddenly alone.

In a matter of hours Sue had to make a number of decisions. Some required immediate action, such as the selection of a funeral home and the arrangement of the funeral service.  Shortly after the funeral Sue realized she needed help and asked me to be her “financial advisor” and I agreed.  We met at her home to gather basic information.  I began by asking her basic questions.  What was her income now that she was single? What level of income would she need to maintain her lifestyle?  Did she have any debts?  What were her regular bills and how were they paid?  What were her financial assets and where were they?  Did her husband have a life insurance policy or annuity?

The answer to all of these questions was “I don’t know.”

The psychological result of being left alone and unsure of herself was severe.  Sue was overwhelmed. This was a crushing burden to fall on someone who had never been required to take care of financial issues. It was as if a child had been dropped in the middle of dark woods with wild animals prowling around. The result was not only deep sadness but also fear and paranoia. Since her husband had always taken care of the fam­ily finances, she felt unprepared to handle major decisions and was terrified of being victimized. And because Sam had not left an in­struction manual for her, Sue went through a long period of grief combined with anger and confusion.

Since Sue did not have a the information that we needed, we had to go through Sam’s files, make phone calls and watch the mail and as bills and statements came in to get an true picture of her assets, income and expenses.  It took several months before we had a good handle on her finances.

Fortunately, Sam left Sue with a sizeable estate and I was able to provide all the income she needed as well as leaving a sizeable inheritance for her heirs.  However, Sue never over­came the issues that surfaced after her husband’s death, and it made her life as a “suddenly single” person very unhappy.  Sam never provided her with the guidance she needed once he was gone and it affected her in a very profound way.

As a result of my experience with Sue and a number of other widows who came to me for help, I prepared a manual that became a book, Before I Go, which I provide to all of my clients.   It provides the answers to the questions that are not addressed by the usual estate planning documents but are the questions that those who are left behind need to know.  The view from thirty thousand feet is not enough when it comes to managing the family finances and too often the details are ignored unless couples are made aware of the need for detailed planning that goes beyond preparing the will or trust.

 

 

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