The Widow’s Estate Planning Nightmare

A man I know died leaving behind an elderly widow. The husband had paid all the bills, kept all the accounts, planned for retirement, and done everything related to the financial transactions of the couple. 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 held 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 them over a year to be satisfied that they had found all 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 of all, 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 be very regretful one day, and I’m sure her attitude has to be somewhat frustrating for the husband. On the reverse side, I have seen husbands turn a blind eye and say that the wife takes care of everything, and are quite proud of her ignorance. It’s never too late to start involving both spouses in the financial affairs of the family.

The husband probably wasn’t stupid for not trusting the banks. Banks are falling at a record pace 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 out by having “a little extra money” at a single 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 our problems forever. Just be careful.

Everyone should keep some kind of ledger that details where their assets are and what they 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 will make you unable to control your own financial transactions.

Assets such as bank accounts, real estate, brokerage accounts, safe deposit boxes, cars, timeshares, and many others should not be held in the name of one person. Joint ownership will work when the husband and wife are co-owners, but people other than spouses should almost never own property jointly as co-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 do not have 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 assets. Of course, during your lifetime, you are the sole trustee or you are a joint trustee with your spouse. Usually, the surviving spouse is named as the first successor trustee, and then someone else is 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 you make and every penny you spend just to ease the frustration, expense, and time requirements invested in managing the financial estate of a deceased family member.

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