A man I know died leaving behind an elderly widow. The husband had paid all the bills, kept all the accounts, planned the retirement, and done everything related to the couple’s financial transactions. This couple had survived the depression and the husband did not trust banks. He had seen too many bank failures, so he was very careful to make sure that no bank kept much of his money. He had dozens of accounts. When he died, his wife had no idea where all the accounts were or how to handle his financial affairs.
The church group they belonged to actually assigned a team of church members to try to track down all of the widow’s money and help her manage it. It took over a year for them to be satisfied that they had found all of her accounts and accounted for this poor lady’s financial affairs. The poor widow’s problems were not over, because all the accounts were in the name of her late husband. From her He had to legalize all of her accounts before they could be transferred to her. This poor lady not only had the emotional disaster of losing her lifelong husband, but she also had a huge financial nightmare. There are a number of lessons to be learned from this case.
First, both spouses must participate in the family finances. The husband is not doing his wife a favor by “just taking care of everything.” The wife who plays dumb and “doesn’t want to know” may have a lot of regret one day, and I’m sure her attitude must be somewhat frustrating for the husband. In the reverse role, I have seen husbands turn a blind eye and say that the wife takes care of everything, and they are quite proud of her ignorance. It’s never too late to start involving both spouses in family financial affairs.
The husband was probably not stupid for not trusting banks. Banks are falling at a record rate today. Be careful not to exceed the FDIC limits on what will be covered when the bank fails. I’ve had several clients and partners get burned for having “a little extra money” at one bank. It would be unpatriotic of me to question how long the federal government will support the FDIC, but I don’t think the government is going to solve all of our problems forever. Just be careful.
Everyone should keep some sort of ledger that details where and what their assets are. If you at least keep all your bank, brokerage, and insurance statements in the same file drawer, the children or surviving spouse can find the drawer and have a place to start after you die. In fact, it is not just death that triggers the need for a transfer of financial control. You have a much better chance of not being able to control your financial transactions next week than of being dead. A dozen things may happen to you that make you unable to control your own financial transactions.
Assets like bank accounts, real estate, brokerage accounts, safe deposit boxes, cars, timeshares, and many others should not be in the name of just one person. Joint ownership will work when the husband and wife are joint owners, but persons other than spouses should almost never own property jointly as joint owners. There are many serious reasons why joint ownership is a very bad idea.
Ideally, such assets should be held by a revocable living trust. If you have assets in the name of your living trust, then the assets will not need to be probated when you die. That saves a ton of frustration, time, and money for your heirs. The trustee always has control of the property. Of course, during your lifetime, you are either the sole trustee or you are a joint trustee with your spouse. Typically, the surviving spouse is named as the first successor trustee, and someone else is then named to take over if there is no surviving spouse or if the surviving spouse is unable to manage the trust estate for some reason.
Just a little planning can make the death of a family member that much less of a financial disaster. Planning is worth every effort and penny spent just to ease the frustration, expense and time requirements involved in managing a deceased family member’s financial estate.