Financial security after a partner dies
Ladies, have you planned for your future financial security?
It is a statistical fact that women overall live longer than men. Longevity is in the genes in many Bermudian families where we find female individuals surpassing the 90-year and 100-year milestones.
Yet, even in this day of supposed equality far too many ladies, for many reasons, are not financially prepared to survive after losing their man or their partner.
The Society of Actuaries 2014 white paper, Facts About Women, Old Age and Retirement by Anna M Rappaport, states “most women outlive their husbands, often by 15 years or more, with an often concomitant decline in economic status in widowhood. Follow this link to read the paper: https://tinyurl.com/y5oa3xep
Here is a review a few real-life stories of ladies financially broadsided, from my practice archives in Bermuda and the US. Confidentiality protected, of course.
A little warning. These narratives may be uncomfortable reading for some, and for that my apologies.
However, facts are facts. Women still lag in earnings, have smaller, or non-existent pensions, lower salaries, only part-time work, caregiver interruptions, divorce, and other unplanned life events.
Example 1: She is 55 and is quitting her solid-earnings job to care for her spouse who has terminal cancer. It is a second marriage for them both.
When asked if she will cope financially afterward, she said she did not know. She added: “The company I left is reorganising. He feels committed to leaving his pension, life insurance to his children and his home to his mother.”
I asked if he would be changing his will? No, she said. I asked why are you caring for him, knowing this outcome?
“Morally, I just have to,” she said.
Example 2: We are at a function, and I have just met the lady sitting next to me, who is aged about 70. She said: “I hope my spouse does not pass away before me because he handles all the financial stuff. I don’t have a clue what we own and where to start.”
This is a cringeworthy moment for me. You know she is worried — why else would she confide in a complete stranger?
Example 3: “He came home, so tired after his annual hiking trip. I went to wake him for dinner but he was gone — only 32 years old. I am devastated and alone now to support two small children. He did have some life insurance, nowhere near enough for the long term. Frustratingly, I’m getting constant calls from various financial people urging me to invest this money. I have no idea financially what we will need in the future and am, frankly, just terrified of losing it all.”
Example 4: “We were married more than forty years, raised a nice family. I worked part-time, so my pension is minuscule. We rarely discussed money because he said we owned everything together. At the will reading, I was horrified to find out that our home was owned jointly by him and his mother. She is selling it on, so I have had to move out.”
Example 5: The couple, in their mid-sixties, wanted a financial plan. We reviewed their current financial information: insufficient savings as he has always been the only wage earner.
Any life insurance? I asked. They said: “We don’t believe in life insurance.” Yet this man has already stated that his family is shorter-lived. How will you survive if he passes away unexpectedly, I ask her? They both refuse to discuss it. Another cringeworthy moment.
Example 6: She requested tax assistance for an unexpected inheritance from her ex-husband (they had divorced amiably years ago). His bank notified her that she was the sole beneficiary of his IRA pension.
You guessed it. Ex-husband and his current spouse never changed his beneficiary status to benefit her and three young children. Generously, the first wife felt very uncomfortable accepting this financial mistake; she decided to distribute the majority proceeds to her ex-husband’s current spouse. Yes, this is a true story, one I never forgot.
I think you would all agree that these examples were tough, difficult situations. And there are never any easy answers.
Dear readers, we cannot decide how our lives will end, but we can try to plan for the unexpected by ascertaining that your relationships are built on mutual trust, sharing, and decision making.
Here are some questions for a family discussion, there could be lots more!
• Do you talk regularly about finances?
• Do you know what each of you legally own and have verifiable proof, e.g. original deeds, pension documents?
• Are all beneficiaries to life insurance, pensions, investment accounts, your home, and any other related assets, titled correctly according to both your wishes?
• Have you made wills?
• Do you know where every single family document is: bank statements, life insurance policies, pensions and beneficiary designations, wills, property deeds, car titles, property insurance, life insurance, investment accounts (both domestic and foreign), personal loans, birth certificates, tax returns, passports, social insurance cards, credit cards and contract terms, health insurance, IDs and passwords to all financial, storage, and media accounts, etc.
• If you each hold individual accounts, do each of you know where they are, and how to access them in an emergency?
• Assets held in trust — do all beneficiaries know what they are entitled to and who the trustees are? This is particularly important where families with multinationals have placed property and other investments in trust to protect against invasive other country tax authorities.
• Divorced relationships. Have you transferred titles, pension and life insurance beneficiaries, account names, investment accounts, joint credit cards, etc, into your own name? Have you made a new will?
Financial planning can become emotional, hard-nosed, unsettling, and intimidating. It almost seems, to some, mercenary practical, not compatible with a loving relationship.
Life happens to ladies, especially, but premature spouse/partner loss happens to men, too. So, if you care about each other, both parties in your relationship must financially prepare to protect each other in best and the worst case scenarios.
Don’t put this planning off.
Next week, we discuss what kind of planning is necessary after loss or divorce.
• Martha Harris Myron CPA CFP JSM: Masters of Law — international tax and financial services. Dual citizen: Bermudian/US. Pondstraddler Life, financial perspectives for Bermuda islanders and their globally mobile connections on the Great Atlantic Pond. Finance columnist to The Royal Gazette, Bermuda. All proceeds earned from this column go to The Reading Clinic. Contact: firstname.lastname@example.org
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