Widow’s Estate Planning Nightmare

A man I know died leaving an elderly widow behind. The husband had paid all the bills, kept all the accounts, planned for retirement, and done everything related to the financial dealings of the couple. This couple had lived through the depression, and the husband didn’t trust banks. He had seen too many bank failures, so he was very careful to make sure no one bank held much of his money. He had dozens of accounts. When he died, his wife had no clue where all of the accounts were or how to manage her financial matters.

The church group they belonged to actually assigned a team of church members to try and 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 the accounts and had this poor lady’s financial affairs accounted for. The poor widow’s problems weren’t over, because the accounts were all held solely in her dead husband’s name. She had to probate all of the accounts before they could be transferred to her. This poor lady not only had the emotional disaster of losing a lifelong husband, she had a huge financial nightmare. There are a number of lessons to be learned from this case.

First of all, both spouses should be involved in the family finances. The husband isn’t doing his wife a favor to “just take care of everything.” The wife who plays dumb and “doesn’t want to know” may be very sorry some day, and I am sure her attitude has to be somewhat frustrating to the husband. In the reversed role, I have seen husbands that turn a blind eye and say the wife takes care of everything, and they are quite proud of their ignorance. It’s never too late to start to involve both spouses in the family’s financial dealings.

The husband probably wasn’t stupid not to trust banks. Banks are failing at a record pace today. Be careful not to go over the FDIC limits on what will be covered when the bank goes down. I have had several clients and associates get burned by having a “little too much money” in a single bank. It would be unpatriotic of me to question how long the Federal Government will prop up the FDIC, but I don’t believe the government is going to solve all of our problems forever. Just be careful.

Everyone should keep some sort of ledger detailing where their assets are and what the assets are. If you will at least keep all of your banking, brokerage, and insurance statements in the same file drawer, the kids or the surviving spouse can find the drawer and have a place to start after you die. In fact, it just isn’t only death that triggers the need for a transfer of financial control. You have a much greater chance of being unable to control your financial dealings next week than you do of being dead. You may have any number of a dozen things happen to you which will make it so you can’t control your own financial dealings.

Assets such as bank accounts, real property, brokerage accounts, safe deposit boxes, cars, timeshares, and many others shouldn’t be held in a single individual’s name. Joint tenancy ownership will work where a husband and wife are joint tenants, but people, other than spouses, should almost never own property together as joint tenants. There are many serious reasons why joint tenancy ownership is a really bad idea.

Ideally, such assets should be held by a living revocable trust. If you hold assets in the name of your living trust, then the assets won’t 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 the surviving spouse can’t manage the trust estate for some reason.

Just a little bit of planning can make the death of a family member a lot less of a financial disaster. The planning is worth every effort you make and every dime that you spend just to soften the frustration, expense, and time requirements expended in handling a deceased family member’s financial estate.