The Census Bureau reports the average age of widowhood in the United States is only 59 years old. With this being the case, many women should be prepared financially to live another 20-30 years after the death of their spouse. Tragically, we have seen clients who unexpectedly lose their husbands to tragedies such as a heart attack, inoperable cancer, or other unexpected events. While this is incredibly heart-wrenching on a personal level, fortunately, many of them had the financial resources to keep paying the bills. Being single in your fifties is hard, but not having enough money can be much worse. Talk to your partner now and make a comprehensive plan just in case the worst happens much sooner than expected.
Here are a few things to consider:
Personal Information & Organizer
One of the best ways a couple can prepare for a life event is by creating a binder containing all personal and financial information in one place. This organizer should include social security numbers, beneficiary information, passwords, and the contact information of your professional advisors. Write down any information regarding your personal residence or vacation/rental homes. In addition, you should include funeral and burial information, where to locate any important financial, insurance, estate, tax, and legal documents. Download our Organizing Vital Family Information checklist below as an easy resource to compile all this information in.
Term Life Insurance
One of the biggest mistakes couples make is not having enough life insurance or underinsuring their spouse. The best way to protect your standard of living is to buy as much term life insurance as possible. Term is the cheapest form of insurance and the easiest to get. Use the 4% withdrawal rule when deciding how much insurance you will need. For example, if your spouse makes $100,000 a year, buy at least $2,000,000 worth of term life insurance. This should provide $80,000 a year of income using a 4% total return withdrawal rate. Also, buy a 30-year term policy which is the longest time frame possible; this will lock in the annual premium for the next three decades. The earlier in life you buy the life insurance policy, the cheaper the premium. It is also easiest to get insurance before any health issues arise, and much better to buy in your 40s than in your 50s or 60s.
Will/Trusts
Everybody should have a will, which is a road map as to who receives your assets and when, upon your passing. If you have a will, it is also a good idea to set up a revocable living trust to avoid probate. The probate process typically takes a long time, is expensive, and makes your will public record. Irrevocable trusts happen after you die, which move your assets out of your estate and provide creditor protection. Trusts are particularly useful if you are in a second or third marriage and have a blended family. You can specify in a trust which assets you wish to leave to your children apart from your current spouse, who may not be their birth parent.
Team of Professional Advisors
If your spouse handles the family’s finances, then you need to get to know his or her team of advisors. These experts would most likely include an investment advisor, life and property insurance agent, personal banker, mortgage broker, and the executor of your will(s). Make an appointment to meet via Zoom or even better, in person. Establish a relationship so there is a rapport of trust and comfort. You will be glad you did so when you need it most.
If your spouse suddenly passes away, you do not get a second chance to buy life insurance or redo your financial picture, so it is best to be prepared well ahead of time. This means you should have all personal and financial information recorded in an easy-to-find location and enough life insurance to cover living expenses. Write a will and set up a trust. Get to know the team of experts you work with now to help guide you through what could be one of the most stressful times of your life. The rule of thumb is to avoid making any major decisions for at least a year to eighteen months because of the trauma from the grief associated with losing a spouse. The less you must worry about by being organized and in the loop now, the better, especially if your partner handled all of your finances in the first place.
Important Disclosure: This content is for informational purposes only. Opinions expressed herein are subject to change without notice. Beacon Pointe has exercised all reasonable professional care in preparing this information. Some information may have been obtained from third-party sources we believe to be reliable; however, Beacon Pointe has not independently verified, or attested to, the accuracy or authenticity of the information. Nothing contained herein should be construed or relied upon as investment, legal or tax advice. Only private legal counsel may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement the design discussed herein. An investor should consult with their financial professional before making any investment decisions.
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