February 2, 2022

When we are young, it is challenging to appreciate an aging process that results in loss of mental capacity and/or death of our loved ones. This happens to some of us more quickly than others. The emotional difficulty of dealing with an ailing or deceased spouse is obvious, yet through client interaction, I’ve seen how important it is to fill in the gaps and provide more practical, concrete steps that can be taken at various stages of incapacity and death.

This type of planning is vital for a married couple or a family, regardless of age and gender. Ideally, the planning starts when everyone is lucid. Consider a client who has lost a spouse. Even though she and her husband did some final year (end of life) planning, including updating their estate plan, the client is left with many accounts across several institutions to organize. This project will require an enormous investment of time and energy, even if the surviving spouse is reasonably well versed in the language and machinations of retirement planning.

I’m writing this article with the full acknowledgement that not everyone has access to a financial planner who can walk them through the many required steps of final year planning. For those who are navigating these steps on their own, checklists can help. For example:

To plan for possible incapacity or other future event:

• Set up power of attorney for finance and healthcare decisions. If a couple is not formally/legally married, it is especially important to formalize these instructions as hospitals will not automatically give non-spouses the same access as a spouse. 
• Compile a list of assets and liabilities, as well as contact information for each item. If the spouse who handles the financial affairs is suddenly incapacitated, the biggest favor they can do for their spouse is to leave them a roadmap of where everything is located. Business interests and properties can add a level of complexity that is difficult to navigate without some kind of roadmap. 
• Make a list of personal effects and who inherits what. My parents walked my sister and me through their house a few years ago, and we went through every piece of art and jewelry. It was a somber exercise, but it was interesting how my sister and I were very respectful and equitable towards each other. It’s our collective hope we don’t receive these items for many years, but we have comfort in knowing we won’t be bickering over our parents’ heirlooms. 
• Consider the need for life insurance in the case of young families. 
• Know where important documents are located. Consider using a fireproof lockbox, secure online portal, or both. These documents should include: 
  • Property deeds
  • Passports
  • Insurance policies
  • Estate documents
  • Must call list (e.g., estate planning attorney, accountant, financial planner, etc.)
  • Birth/marriage certificates
  • Power of attorney
  • Deeds to cemetery
  • If both spouses agree to this: passwords, most notably for the cell phone, as the device may provide easy access to apps and accounts. Consider duplicating these in a password-protected spreadsheet or using an online password manager. Please note access to the phone may require two-step authentication. 

If incapacity has already started, the spouse may have to exercise power of attorney (if it exists) and take over the family affairs:

• Set up bill pay for regular expenses such as credit card and utilities. The services of a trustworthy bookkeeper can also be invaluable.
• Obtain passwords, including social media accounts, if applicable.
• Obtain a credit card in just your name.
• Discuss funeral plans.

If the spouse is deceased:

• Contact Social Security and pension administrators if applicable.
• Request at least ten original copies of the death certificate.
• Make sure there is sufficient cash in an account that will not be frozen once institutions receive the death certificate and process the estate transition. We highlight cash flow as a high priority since a frozen account can come as a rude shock when the surviving spouse needs cash to cover expenses. A strong dose of patience goes a long way here as unfortunately each institution has its own set of rules and forms.  
• Retitle IRA accounts to your name (assuming you are the primary beneficiary—generally what we see in California) and be sure to name beneficiaries.
• Retitle taxable brokerage accounts if applicable.
• Be aware of step-ups in the cost basis for taxable accounts and properties. Obtain an appraisal for all real estate property. 
• If applicable, check to see if the required minimum distributions in retirement accounts were already taken for the year.
• Contact insurance, annuity companies, the tax preparer, and the estate planning attorney. 

If you’re not sure where to start, a tax return is a good source of information to familiarize yourself with the marital estate. For someone who needs help reading these documents (besides the tax preparer whose sole focus will be tax-related issues), an experienced independent financial planner can help by providing comprehensive and ongoing planning. 

The hope is this planning will be for naught, and you’ll live a long and happy life with your spouse. Still, planning ahead can make all the difference in simplifying the issues that arise during difficult transitions. With enough forethought, the family can focus on the emotional aspects without stressing over mundane details.