How would you protect a financially-uniterested spouse

[MarieIG]

Asking for a friend -

In the event you had a spouse that you cared about, but who was somewhat financially less than disciplined, what would you do to protect them in the event of them being the surviving spouse.

 

[GrayHare]

Set up a trust to provide for them.

 

[OldShooter]

+1

 

[Onward]

A spendthrift trust.

 

[Lawrencewendall]

Need to check state laws. I met with an attorney here in Maryland and DW would have to willingly give up the money to put in the trust. There is no his/her money. As the attorney said, who would hand over 50% of what they legally have 100% rights to?

 

[copyright1997reloaded]

Dare I say it? The A word? (A Single Premium Annuity.)

 

[MichaelB]

Dare I say it? The A word? (A Single Premium Annuity.)

+1

Either this or all the assets in Vanguard Wellington & Wellesley (half each) with instructions to not touch.

 

[CaliKid]

I would do a trust with a third party co-trustee to serve with spouse.

 

[kcowan]

I have a level term insurance policy that will cover the extra costs of a trusted AUM Manager who she likes. She loves to follow her hunches on stock so I do not want to leave that to her whims even in ETFs.

 

[OldShooter]

Dare I say it? The A word? (A Single Premium Annuity.)

Bad idea. Any method that produces fixed payments, including a badly written trust, eliminates flexibility to deal with future events. For example, if DW gets cancer and has only a few months to live, the fixed payments are unlikely to be adequate to pay for 24x7 home care, which the assets might otherwise easily cover. Less terrible events, like needing a new car or an expensive vacation might also be unaffordable under a fixed payment scheme. A well-written trust administered by a competent trustee solves this problem. The trustee can consider the assets and the needs any time extra money is requested and, if prudent, he/she can release the extra money.

I would do a trust with a third party co-trustee to serve with spouse.

+1

The idea of the spouse as co-trustee is something that should be discussed with an attorney. We have an acquaintance who is being pressed by an "investment advisor" to liquidate her trust and to give the money to him to run. Ack!

In some state laws, including ours, there is a role called "trust protector." This person has no duties except to monitor the trust and, if necessary, to correct major problems like the resignation of the trustee. In the case of our estate, which has testamentary trusts for both our boys, the trust protector is a very trusted family friend who is significantly younger than we are. IOW, the boys cannot get at the money directly.

 

[FANOFJESUS]

All in Wellesley if the dividend of 3.2 is ok for you. Send the dividend to the money market they can spend out of that. If they are not a spendthrift. With instructions to not touch nothing but the dividend.

 

[ckelly78z]

I'm not sure the spouse would be on board for still being leashed after being widowed. It's her earned inheritance, let her do as she pleases with stipulations made for health care, property taxes, and maintenance.

 

[REWahoo]

...all the assets in Vanguard Wellington & Wellesley...

^ I'm leaving a similar recommendation for my "You handle the finances for both of us, I'm not interested" spouse with a copy to DD#1, a CPA. No plans to manage DW's finances from the sweet hereafter.

 

[zippy2020]

That very question was one of the reasons I turned our portfolio management over to an independent CFP firm.

Scenario 1: If I die, it gives my spouse someone to ask questions of, who has experience in advising senior-age clients.

Scenario 2: We have no children. Spouse has high probability of eventual dementia impairment. Should I die and he becomes non compos mentis, our heir is absolutely honest/ethical, but also completely inexperienced in dealing with both mid-sized estates and seniorcare issues.

The biggest problem in dealing with a situation you know little about and have no experience in, is not in getting advice (you'll get plenty of that from everybody, most of it both free and bad). It's knowing the right questions to ask.

A good professional can help - but you have to find one or know one. I would not rely on her personal network to do either. We are very confident in our team of advisers, who have been working with us for over a decade, to help her avoid making serious mistakes.

I learned when I was working for a CFP that the IRS is very definitely NOT forgiving of mistakes by heirs, no matter how well-intentioned the action was. And half of those mistakes were made by will executors and trust trustees, who didn't realize the tax consequences of what they were doing!

 

[Philliefan33]

CFPs are good until they aren’t. Where I do taxes, there are at least three widows who come in who are getting absolutely hosed by the guys managing their money. (To be fair, I don’t know if the money managers are CFPs or brokers). In each case, a high-earning husband with a disinterested spouse left all of the investments in the care of a paid manager.

The manager is churning the account to generate fees for himself. In one case the TP brought her yearly statement and we could see that her entire balance is being moved a couple of times per week, every tine among three mutual funds. By the end of the year she “made” $8000 in dividends & capital gains but almost all of that was eaten up by fees. Of course she had to pay income tax on that gain, but didn’t even understand that she had the gain because it was all reinvested. She kept arguing/crying that there was no way she made $8000 because she never got a check and her investment account balance only went up a few hundred dollars.

I’m sure there are some good honest people out there who could help an old widow/widower. Unfortunately I have seen what happens when a bad one gets control.

 

[MarieIG]

Just wanted to say, I have read all replies. Thank you.

 

[Katsmeow]

I would suggest the two spouses discussing it. So many of the responses seem to assume the potential surviving spouse is permanently incapable but disinterested doesn't necessarily mean that. In our house, I do the investing and money management. DH is, at best, mildly interested. It is just part of our division of labor. I do discuss major things with him (whether he wants me to or not). But -- he is not incapable. He does understand the different types of investments and I think could handle things if I wasn't around. It is just that I am around so he is happy enough to have me do it. My plan is to potentially leave enough instructions so he could invest in a few basic funds and be done with it.

 

[Gumby]

I'm with you , Katsmeow. When the young wife and I were first married, I was in the Navy and constantly at sea. Of necessity, she dealt with all our finances. And she was quite good at it. When I came ashore for good, she turned over that task to me, and I have done it ever since. I trust that she is a capable, intelligent woman. Accordingly, when I predecease her, as is likely, I have no intention of trying to direct her actions. As she demonstrated long ago, she will be fine.

 

[38Chevy454]

I think many of us on here have the same basic issue of a spouse that is less interested in the finances than us forum members are. In my case my DW is aware of the accounts and balances, but not interested in the intricacies of specific investments and asset allocation for example. Being that we have Fidelity for our accounts, and she has met the advisor there, and even is involved with our periodic meetings, she should be able to just let it ride for a while if I am gone. If she feels too much stress, she can use the Fidelity paid mgmt services.


We have our own revocable trust set up, along with the medical and financial POAs. Have trusted family members for the trustees.

 

[gwraigty]

I would suggest the two spouses discussing it. So many of the responses seem to assume the potential surviving spouse is permanently incapable but disinterested doesn't necessarily mean that. In our house, I do the investing and money management. DH is, at best, mildly interested. It is just part of our division of labor. I do discuss major things with him (whether he wants me to or not). But -- he is not incapable. He does understand the different types of investments and I think could handle things if I wasn't around. It is just that I am around so he is happy enough to have me do it. My plan is to potentially leave enough instructions so he could invest in a few basic funds and be done with it.

+1

My husband has always disliked handling finances, so he was happy to turn that over to me right after we married. I keep him in the loop, though he doesn't specifically ask me to. I have a document on file that explains how I do things, with recommendations on how he can simplify financial matters if he outlives me. To that end, I've added some simpler investment options to our current mix, which I'm finding desirable to use as well, for different reasons.

 

[OldShooter]

DW is completely capable of running our money if I go paws up as, it sounds like, some of the other spouses mentioned in this thread. I don't need to protect her from herself by setting up a trust.

But the OP said:

... spouse [is] ... somewhat financially less than disciplined ...

I'll stick with my recommendation of a professionally managed trust in this situation.

This is one of those cases where an error in judgment produces very asymmetric results; if he/she turns out to be able to run the money, then little is lost by putting in a trust. If he/she turns out to be a spendthrift, not protecting the money with a trust could be disastrous.

 

[PatrickA5]

Every month I print out a copy of our net worth statement and expense statement and put it on DW's recliner. Assuming the Bachelor or Kardashians aren't having problems at that moment, she may spend up to 30 seconds looking at it. I do this as my attempt to keep her somewhat updated on where we're at financially so if I kick the bucket tomorrow, she at least has an idea.