Estate Planning for Widows and Widowers

Practical Planner (Wealth.com): One of the worst things that can happen once a death happens is a surprise to the surviving spouse. If they feel surprised, they feel like I should have known something and you didn't tell me because you had the knowledge, you participated in helping us set up this plan and you had that knowledge, but I'll didn't get it. That's like kind of that worst kind of breach of trust and the most likely reason they're going to kind of bounce.

All right, what is up? And welcome back, everyone, to another episode of the Practical Planner Podcast. I'm your host, Thomas Koppelman. And here with me is Ann Rhodes and then Lisa Weigel.

So if you haven't checked out the last episode, Lisa's been on this is her second time. And the topic we're talking about today was supposed to be last time. I totally butchered it. I gotta share the story.

⁓ so we all hopped on for the last episode, and I just, you know, they told me we were doing talking about widows, and all of a sudden I just had a whole conversation and we were talking about divorce. Somehow they went with it. We had a great episode off the fly with no preparation. ⁓ and that's on me.

But today we're actually going to do the topic that we were planning for. And I think, you know, for advisors, there's a lot of times in our life where, you know, people say, like, okay, what do you do on a yearly basis? How do you help people? And there are for sure years where things are kind of status quo, right?

Like we're helping, you know, maybe things are maintaining, we're keeping pushing things forward. But then there's other times where like our value is. immense, right? There's things that you really have to step up, things that maybe you didn't prepare for.

And I think losing a spouse has got to be one of the most impactful times for, you know, an advisor in a client's life. ⁓ you know, on my last podcast, I actually hosted it with Jacob Turner. And when he was a pro baseball player, he said his sole reason of hiring a financial advisor was because he didn't know what his wife would do if if he were to pass away, right? We know that most families there's a money spouse and a non-money spouse.

And if the non-money spouse passes away, obviously super sad. We have all those issues, but the other spouse might be able to kind of handle things moving forward on the financial side. But if the other one passes away, things are really tough. They don't really know what's going on.

They don't know where all the money is. They don't know how to manage it. And so, like this is, I think, one of the most important topics that we can talk about. ⁓ so I'm excited to talk about this one, even though it's a really sad topic and just go between the You know, obviously there's like the how do you prepare?

There's the estate planning, there's the financial planning. but you know, Ann, I'm I'm gonna kind of kick this off to you to start. You know, obviously the conversation happens before somebody's a widow, but I think we take this conversation like it's this happened, right? And, you know, maybe it's a new client, maybe it's an existing client, but where where do you start as the advisor with this when a widow comes in?

Yeah, I think of it as ⁓ Taking place over the course of three stages, that relationship that you develop with the non-like primary spouse in the relationship. ⁓ and here I think we're going to refer to these people as widows, but some of this is obviously transposable to like a widower. you know, most often I think financial advisors say like their primary relationship with is with the husband, and then the wife is sort of like more of a like tag-along member. Yes, she signed documents, but Are you truly meeting with her?

So I think the the first phase of the relationship definitely is while both spouses are still alive. And we'll talk a little bit about that because you need to set them up for success. ⁓ you know, death taxes are two of the only things that are sure about life. And so you would be doing yourself a disservice, but also the couple a disservice by not thinking about phase one.

as the preparation step for phase two. And phase two is really, you know, one of the spouse now is deceased. And there is, you know, an amount of frenetic activity is, you know, Thomas, you're probably hinting at for that second phase of the relationship, which is, you know, usually I want to say like three months to two years, if things are not controversial. Things are controversial with the family or, you know, between advisor and client, like that timeline is out the window.

But Two years is the a good rule of thumb where you really have an ex like an exceptional opportunity to step up for the person who's left. And then there's the third phase, which is maintenance and maintaining that relationship. And sort of, you know, to your point, Thomas, it kind of goes back into this like, you know, things are normal and you're doing your normal, you know, checklist items with these people. So, so I would say, you know, and here, you know, Lisa, I'd love to hear your thoughts, but how do you set up a couple for success, maybe with more of an estate planning lens, ⁓ in that first phase of the relationship?

Yeah, definitely. I think it's so critical to estate planning is always talking about different phases in life, right? You're not just taking a snapshot in that moment where our job as estate planners and financial planners as well is to be looking ahead and sort of map out all the potential branches of like, well, what if this happens and what if that happens? ⁓ and obviously a big part of that is like at some point someone will pass away in the cup in the married, you know, couple ⁓ relationship.

And so you know, making sure that everybody understands, hey, this is what happens at the first death and this is what's going to happen at the second death. A lot of times, you know, the the primary focus when a couple sits down to their do their estate planning is sort of the second death scenario. ⁓ but there's so much that happens at that first death where, you know, depending on how their estate plan is structured and where they live, you know, you're you potentially are having, you know, a trust split into shares and how, you know, the how each of those shares are managed can be different.

So just making sure everybody is under understands what the mechanics are going to be. ⁓ and I think most importantly, you know, we always drive home, you know, you you should be calling your financial advisor, you should be calling your estate planning attorney, your CPA. You know, first thing because there's so many little things that have to happen in the beginning, elections and ⁓ you know, making sure you get a handle on the on the finances. And so just letting them know, like just call somebody.

You don't have to know it all. Just call your your trusted advisor ⁓ and get the ball rolling that way. Yeah. The the hardest part I think about phase one is where you have a profile for that couple where you know that there might be some, you know, ⁓ like a ⁓ A spouse who's maybe a little bit more dominant in terms of like how they think about the estate plan.

And you, as an advisor, financial advisor, but also the estate planner is in the same boat where you're like, this is not very even like what they want out of the estate plan. Like if she dies first versus he dies first, there might be vastly different, you know, plans. And usually, you know, most of your clients will just have mirror plans of each other, right? It's like, Okay, if they want a marital trust, it's like regardless of which spouse passes away, like there will be a marital trust.

But every so often you get those situations where like the it's not even. And maybe it's it's as simple even as like you have one richer spouse, and if he passes away first, he feels comfortable that he's leaving enough of his estate to be able to make large gifts. So like to their alma mater or to, you know, some. like the basketball program.

I've been watching a lot of basketball lately. But so you have, you know, those those like specific gifts coming out, whereas like if she passes away first, like everything just goes to him and there are no like big gifts or something like that. So like watch out for those things that are make things a little bit uneven. ⁓ but it's also like usually there will be a spouse who like might be younger.

And it's expected that the spouse might remarry or keep living for just a very long time beyond the other spouse. And that can create some sort of like tension as well in the estate plan. And I would just say, like, when that happens, don't just shy away from that conversation. I think it's super important for the like lesser, you know, like the the spouse with less of a voice or who's not.

nearly as, you know, involved to really understand what the plan is, because taking that time is what then builds the trust that you are looking out for them, right? And wanting to do what's best for the the whole couple ⁓ for when things, you know, ⁓ happen and one of the spouses has passed away. Super interesting. I feel like so in this phase, right, there's the like estate planning.

So there's the complexities, but there's also the the simplicity, right? Like the advisor's role here is like, It doesn't matter how young you are, you need to get your estate plan in place. Like I'm I'm walking through this with a client of mine who a friend of mine passed away last year at 29 years old with a wife, right? Not everything was done, not everything was organized.

And you know, you think that, hey, maybe estate planning in general is for high net worth people or the 60, you know, plus year olds. But in reality, like our job as the advisor is to push into it. Obviously. It's part of Wealth's mission.

It's part of why advisors use something like Wealth, it's an easier way to help implement and people help people actually get an estate plan done and kind of take away some of the barriers that have existed. I also think it's, you know, in this phase is helping people get organized. So, like, you know, one reason of hiring an advisor, like I said, is helping make sure that there's somebody to guide you through this. If if anything were to happen, God forbid it happens.

It's the advisor pushing to make sure, hey, They have life insurance or other things. So if one person isn't here that those needs are protected. But I also think it's making sure that other spouse knows where everything is. And so there's all of these, like you can find them online.

Mark Siccini has a pretty good one on it. That's like the like if I'm no longer here sheet that kind of has everything. And I think this is really important. And something advisors can help push people to or give them a template of like, okay, where are our retirement accounts?

Where is our life insurance with? Where is our Estate plan held, where is our investment accounts held? But then even things as like ⁓ hey, you know, here's who our lawn service is, here's who our cleaning, like, you know, all these people because maybe one person is overseeing that and you leave that person's no longer here, and you're like, ⁓ my gosh, our whole life is kind of unorganized now. You know, I don't know where anything and everything is.

And so I think that's like one way to really help get prepared that isn't very fun. And then I think there's also the side of like, you know, those websites that you can store personal information, right? Credit card numbers and social security numbers and logins to potentially crypto accounts or things that are hard to have. Like I know if you know, ⁓ if I were to pass away, my wife doesn't know where anything is.

So like I need a sheet like that because she would have no idea where investments are, where my HSA is, or you know, all those miscellaneous things are. Yeah, it's it's so true. And I think the biggest thing. ⁓ you know, we see all the time in private practice.

I can't tell you the number of clients that it would as Ann said, there's like a more dominant spouse a lot of time in the conversation, and then the the one that's, you know, the the dominant spouse is like, ⁓ they're not interested, you know, this they're they're not gonna come to these meetings. ⁓ and it just, you know, they have no clue where anything is at that when the that more dominant spouse passes away. and it's overwhelming. It's a crazy amount of work for someone to have to step in and like just figure out where everything is.

So I think those tools are incredibly helpful. And I think that's really where the financial advisor can be such a critical bridge to that person if they've already set up a relationship. And so it it's hard, I think, sometimes to like insert yourself and say like, hey, I really want to talk to you, not super dominant spouse, ⁓ about, you know, strategy or why we're doing these investments the way that we are, because they're gonna remember that. on the back end too and say, hey, that person really did reach out to me, even if it wasn't important to them during their life and they were like, okay, fine, whatever, I'll sit for this meeting.

They, I think, you know, a lot of times they'll remember, like, ⁓ they did care about me as well and wanted to make sure, you know, I was informed to some degree and have that outlet, you know, to reach out to here's my practical tip for this episode to set yourself up to get the phone call when phase two comes to pass. You have to ask yourself today with the clients who are live or the you know both spouses are live. Do you know if both spouses would want to pick up the phone and call you today if something were to happen?

Do you know like where each of the spouses kind of gets their advice, who is in their trusted circle when they make decisions about finances, life or death, et cetera? Because one of the things that I think is un underappreciated about like widows and women and the way that women make decisions, and this is something that apparently like has been written about a lot, is that the way that they get information can be very different from the male spouse, like the the husband. So women tend to have different circles of trust.

You know, they might rely much more on their friends to give them, you know, ⁓ information and recommendations than like your traditional, like, hey, I gotta if I want financial advice, I go to a financial advisor, you know, or you know, I'll figure it out on my own using AI or something like that. So knowing kind of like if this were to happen, like one of your your clients were to pass away, like who gets that first phone call, you want to be one of those first people. And so how do you set yourself up to be that resource so that they don't think, ⁓ I'm gonna go, you know, knee-jerk reaction to like, you know, my best friend or, you know, Chat GPT or whatever.

You wanna be in that conversation. Yeah. I think a lot of advisors, you know, one, they they just want to appease their clients, right? Like you wanna tell them the good things, you wanna, you know, you end up becoming like a service rep for them where they can kind of just like boss you around and in you do what they say.

And I think that is a way to set you up that you're not the person they reach out to. One thing that I've done is, you know, like Lisa was saying is I get a lot of clients, or you know, somebody signs on and they're like, Hey, my spouse doesn't care about money. They don't want to be a part of it. And I say, that's fine, but they have to be on our first call.

I can't build your the, you know, I can't help you align your finances, build everything out and plan without knowing what your family wants. And you know, what I've found is that most people, they just they go through life, they're busy, they don't sit down, they don't, they don't. you know, turn their goals into something concrete in the short term, midterm, long term. They don't talk together necessarily about like what worries them about money and all that.

And by having a first call, not be let me talk about your investments, but it said, let me get to know you so I can tailor my advice to what you're going through and what you're trying to accomplish, has gotten a lot of spouses to buy in that they actually come to all the calls now. And we always lead our agenda with like what are the topics they sent in that are important to them. So instead of diving into a market commentary, right? We dive into like Here's how you're feeling right now.

Here's what you're trying to get done this year. You know, you're thinking about a house project versus investing. And so they start to think of like, you know, my financial advisor helps make the decisions with us. They don't just talk at us about where their money should go.

And I think that's the shift in the industry, right? Away from we just manage investments to, you know, kind of we're like this household level CFO. And if your advisor views or if your client views you in that lens, they're gonna call you. If they they view you as a money manager, they're not.

Calling you in that moment. There's going to be somebody else they call. And then in reality, they're probably also going to switch advisors because you're not the person that they go to. And, you know, this kind of transitions into this third phase.

But no matter how organized you are, this third phase is a nightmare, right? Like you can be organized, but until you have the death certificate, right? You can't really do anything. And then you look and you realize some beneficiary designations were wrong.

And then that's kind of a nightmare. And so, you know, like the advisor. has to be able to handhold, has to walk them through. But I also think you have that first conversation after is like a yes, let's empathize with you.

There's there's that whole side. But then it becomes the how do I level set expectations for you of what this next, you know, three, six and twelve months look like because obviously we all know like if if you have the wrong expectations, it's gonna feel way worse. So like just kind of giving them the here's what we see happen. Here's the timeline you're gonna expect, here's how you it's gonna be on life insurance settling and all of that.

Like I feel like advisors can just have a really important role just by hand holding and level setting of what that year looks like. Yeah. One of the worst things that can happen once a death happens is ⁓ a surprise to the surviving spouse. If they feel surprised, they feel like I should have known something and you didn't tell me because you had the knowledge, you participated and helping us set up this plan and you had that knowledge, but I'll didn't get it.

That's like kind of that worst. kind of breach of trust and the most likely reason they're going to kind of bounce. One of the ways in which I think I've heard it can be a very tough conversation is where the surviving spouse realizes they're living with a marital trust, which is a super common now way of structuring ⁓ you know, the inheritance for that spouse. And they think it has something to do.

And if you read on the internet, and it has everything to do with pledges and control and da-da-da-da-da. There's a lot of like, you know, the like negativity of the feeling around why somebody sets up a trust. And I think it can be really hard as an advisor to have that conversation on the back end with the spouse who has to live with one and didn't realize why this was set up. And so I think that that's why in phase one, you know, having that conversation.

So everybody is clear that this isn't ne necessarily because of a retroactive or, you know, some sort of negative like emotion. It's really to protect the whole family and why are we doing this? I think that's really, really important. I think people lose sight.

And I've had those conversations as an estate planner that are so awkward. But it's like we did put in place a marital trust. Let's let's wind it back. Like, why did we do this?

And if you can wind it back to a conversation they participated in, it is so much easier than saying, ⁓ we just listened to your spouse who's passed away because like they participated and you didn't in the conversation. And so, you know, now you're stuck with this. ⁓ Lisa, I don't know if you have other examples of Yeah, I totally. And I think, I mean, this is where like having the ability to like provide flow charts, because obviously, you know, no one's digesting the entirety of the of their revocable trust or or even you know all of their era of trust.

They're doing it and then they're saying, like, great, I did it, I don't want to think about that again, you know, until like I have more kids or somebody dies. Like they're just never gonna pick that back up ⁓ and revisit it. So I think, you know, when Planners or advisors can provide a flow chart that shows that. And I think that's where, you know, that mechanics of the family trust versus marital trust.

When I was in private practice, we'd always highlight, like, hey, you're gonna have these two different buckets. They're both for your benefit. You can technically draw from either one, but one is more beneficial because it's gonna, you know, whittle down the amount that's exposed to taxes versus the other one that's protected. So let's leave that one alone if you can, you know, and and also visualizing like you still have your own stuff over here.

⁓ you know, that just having those kind of visuals that maybe you just remind them of every couple of years where they're like, ⁓ yeah, yeah, yeah, I yeah, now I remember we talked about this, you know, it's helpful for tax purposes or whatever. that can be really helpful because yeah, no one's picking that trust back up unless they have insomnia and need to get to sleep or something. For the high net worth clients, we definitely use taxes as a straw man. Yeah.

Totally. So I think maybe from an advisor's lens, like what is the the first year look like? Like what are the touch points? What are the things to get right?

And maybe like what are some of the planning opportunities, you know, with still being married filing joint and things like that? Yeah, there's a lot to do ⁓ in the beginning. And then I always feel like it's a little bit of like hurry up and wait in in a state administration. There's, you know, getting the death certificates, ⁓ you know, making sure that you're making the the necessary tax elections.

I always say, you know, call the advisor, call the estate planning attorney. I think the best ones that you can work with are going to work cohesively as a team. And, you know, people always say, like, how am I going to remember to do all this stuff? You don't have to.

Like that's what professionals are for. They step in, they give you like a little agenda and they say, these are the things we're going to start checking off as we move through this process. If we have to file for Pro Eight, we will do that, you know, et cetera. ⁓ and so it can feel very overwhelming, but that's the reason that you have, you know, professional advisors.

⁓ but yeah, so I would say, you know, getting the death certificates, ⁓ You're you know, the CPA or the estate planning attorney is gonna look at the tax situation. There's gonna be a final tax return that's gotta get filed. And then it kind of depends on what the estate plan says happens at that stage. ⁓ you know, if there's a probate estate that's needed, there's some court, you know, court procedures that could be involved there.

⁓ filing the estate tax return. If there's state estate tax taxability that's gonna be need be filed, if there's federal, then of course ⁓ an estate tax will have to be filed, and those take a long time to clear. I think when I left private practice at the end of last year, it was probably ⁓ I think we were on like two years was our average turnaround time. Again, it's just a lot of like waiting around for that final closing letter from the IRS.

⁓ social security, ⁓ making sure social security knows that the person has died. Usually like the funeral home or ⁓ nursing home or things like that will notify, but just making sure that benefits are, you know, stopped or or changed as they need to happen. ⁓ and the other big one I would say is the identity protection piece of like making sure, like, okay, we're gonna notify like Equifax or TransUnion, those type of agencies, so that there's no potential fraud. Usually there are a lot of talk lists, and actually wealth.

com has its own. So you can come and ask us for ours. ⁓ but I would say, you know, what it boils down to is just the more you can take off the plate and also just plan into that year or two year timeline. So that everyone's clear on the really firm deadlines for things that can only serve you well.

⁓ as a planner, that should be like right there in terms of like what you can do for that client is talking to their estate planner or, you know, the family, the executor, the trustee, and like making sure everybody's on the same timeline. I think there's this impetus when a death happens of like letting the person grieve. And that can take many forms. You know, there's a lot that's written about that.

But the IRS doesn't wait for you to grieve, unfortunately. And so there are things like, for example, you have to actually pay estimated taxes if you don't know what the actual return will say. You know, there are like firm deadlines on things. So it's like a nine-month ticking clock.

Like nine months might be nothing compared to how this person is grieving. But somebody's got to kind of like take that on the burden of like, you know, let's make sure that we're meeting our deadlines and filing all the paperwork. And that is something that as an advisor, if you step into that void and like want to help that person kind of push things through, I think that can only serve the family well. And they'll remember that.

it's annoying because who wants to do the paperwork? But I think that's exactly the the feeling that the widow will have, you know, the the family members who are grieving. And so if you can take that on for them, you know, I think that can only serve you well. Yeah.

I think some of the other planning things are right. So like we have Certain number of time of being married filing joint. So now we're moving to a single tax bracket after that. Are we thinking about Roth conversions?

You know, do we have a half step up in basis? Do we potentially have a full step up and basis? Is this create a period of time where we reevaluate, like, is that spouse have the same risk tolerance of what their portfolio potentially was? ⁓ you know, maybe they're more risk averse and you're using the step up and basis to sell and potentially pay off a mortgage or do different things like that.

But I do think it creates some opportunities to To re-engage and have some conversations, because I haven't really been through it too much. You know, the one person I'm helping through is still pretty young. They're not using their investments to live off of their life. But I'm sure that might change how they feel.

And I'm sure as an advisor, like, did was somebody sick and did they have years to plan for this versus it came out of nowhere is really gonna change potentially how they think about money and their life moving forward as well. Maybe. They care way more about experiences now because they didn't think, you know, life was as fragile as it was. You know, maybe they think about risks differently.

I think there's just a lot of opportunities to kind of re-engage, get to know them and see like, hey, is what we've been doing still right for you after you went through something potentially super traumatic that might change how you view a lot of your life. I think that's completely right, Thomas. Everything that you knew about the couple needs to be revisited. I think when you move into that last phase.

Which is kind of like, you know, now the immediacy of the estate administration, the trust administration is done, everyone's living with, you know, the subtrusts that were created or whatever else, you know, they're these like legacy investments. It's about re engaging that spouse from the ground up and saying, Let's revisit everything. Like, I mean, how many spouses do we know or widows do we know have moved? You know, once their spouse has spoken to kids or something too, probably.

Change beneficiaries, you know, maybe they get more involved in like with a charitable, you know, potential charitable beneficiary. I mean, there are all these, you know, ⁓ like life-altering objectives that might change. And so you need to kind of like re-engage that spouse and come back to what you said earlier, Thomas, about like how do you set up a new relationship with a couple? Now it's resetting up a new relationship with that spouse.

You know, how are you feeling? Like, what are your objectives? Like, start. Scratch.

Yep. Anything else for this episode you think that we haven't hit on? We just love questions from the audience, I think. You know, if you have feedback on ⁓ wanting to dive deeper into the details of an actual trust administration, that's fine.

We we would be happy to do that. Just let us know. Love it, love it. All right, Lisa, thanks for joining us again.

Ian, always good to see you. ⁓ everybody, please ⁓ don't forget to read this podcast five stars, share with another advisor who could learn from it. And ⁓ we'll see you back here in a couple weeks.