Which advisory option for spouse surviving me?

[teej1985]

Pay $200 for a year's access to this database of RIA firms:

Advice-Only Directory

also see this testimonial about the above:

https://www.bogleheads.org/forum/viewtopic.php?p=4056222#p4056222

It would be interesting to know if that directory is any different from this free one: https://adviceonlynetwork.com/

 

[TheWizard]

She has little interest in it? Well that's kind of being lazy. She doesn't have to handle the numbers but if she knows nothing about the basics or mechanics of it...she can't be fully protected.

Have the 2 of you actually talked about this?

I agree.
There are big limits on what you can do once you are dead...

 

[jollystomper]

Jolly... your post is exactly what I'm referring too when I say some self education is really required for complete safety.

I person MUST know the basic details of how much they have, and the preferred places to put it. The mechanics of how to disburse can be left to a pro if that works out better.

Not having any kids or siblings to confide in or ask questions is tough. As far as you saying saying your DW can work some of these details out after you are gone, that's a tough one. Math challenged,doesn't want to deal with finances, similar to the OP this is not a road to go down if you have any choice in the matter.

BTW I am female so not female bashing just saying this isn't a good plan...

I should probably clarify that when I saw DW is "math-challenged", and does not want to deal with our finances it is not that she chooses to avoid them and skip away singing la-la-la in joyful ignorance . It is more that she just finds it difficult going thru and relating the numbers, and trusts me to care care of it. It is akin to me and languages. DW is fluent in 5 languages (English, Chinese, Spanish, Italian, Russian), is teaching herself Hebrew, and can read Greek. I can barely master English. I would love to be bilingual, but it is just too difficult for me. So I rely on her to handle those things. It is great traveling with her . Me looking at Greek text and trying to understand it is equivalent to her looking at a spreadsheet report of our finances.

However, when she hears of others in financial crisis, her reaction is to come to me and ask "is that something that could happen to us?" So she is attuned that bad things can happen. That is why we do the bills together, as that would be something she would want to be immediately aware of after my death. Our investments - she can take time with them, and in a pinch, with help, work on trying to understand. What is important to her, however, is knowing that she can leave them alone for a while and not have to do anything.

As for the relatives that may come a-calling, our kids are well aware of them, as well as my siblings, which include doctors, lawyers, and investment bankers DW at least knows to ask them things when she knows she does not know. For example, her mother was trying to get her to put pressure on her sister to sign some papers someone sent about a property of a deceased uncle, her mother thinking that they would be getting millions for it. DW instead first asked a BIL on my side if the family who deals in real estate law about this, and he provided her with good guidance on the truth behind what was going on (now of only MIL would listen to that truth).

 

[DrRoy]

I support your first option, but I would keep looking for an advisor that works on a flat fee basis. They are out there. I am quite against paying a % of assets for a FI.

 

[mystang52]

I should probably clarify that when I saw DW is "math-challenged", and does not want to deal with our finances it is not that she chooses to avoid them and skip away singing la-la-la in joyful ignorance . It is more that she just finds it difficult going thru and relating the numbers, and trusts me to care care of it. It is akin to me and languages. DW is fluent in 5 languages (English, Chinese, Spanish, Italian, Russian), is teaching herself Hebrew, and can read Greek. I can barely master English. I would love to be bilingual, but it is just too difficult for me. So I rely on her to handle those things. It is great traveling with her . Me looking at Greek text and trying to understand it is equivalent to her looking at a spreadsheet report of our finances.

However, when she hears of others in financial crisis, her reaction is to come to me and ask "is that something that could happen to us?" So she is attuned that bad things can happen. That is why we do the bills together, as that would be something she would want to be immediately aware of after my death. Our investments - she can take time with them, and in a pinch, with help, work on trying to understand. What is important to her, however, is knowing that she can leave them alone for a while and not have to do anything.

I think the 2 bolded sentences scream for a very simplified portfolio, literally no more than 2, or 3, categories, and housed in no more than 2 institutions.
Giving up a potential few points of return on investments, in exchange for the simplicity, is well worth it for your DW........IMO.

 

[athena53]

I'm dealing with a similar issue but with DS, my only heir. He's in a better position than most- smart, good with money and understands investments. He even understands compound interest. He just doesn't want to make a hobby of it the way I do! DDIL is similar but has less understanding of investing.

I have a longer time horizon- I hope to be around for at least another decade- but a previous discussion here has spurred me to start simplifying my investments- reducing the number and more ETFs- to the point that it can further transition into a "lazy portfolio" of ETFs with periodic rebalancing. My two brothers are named as trustees of the revocable trust and are experienced investors; I plan to add DS as a trustee this year when I re-write everything. Hopefully my brothers can help if further simplification is needed.

I do feel bad that if I were to depart this earth tomorrow, they'd get a $1 million inherited IRA that would have to be withdrawn over 10 years. Ack. Good problem to have, I guess.

 

[jollystomper]

I think the 2 bolded sentences scream for a very simplified portfolio, literally no more than 2, or 3, categories, and housed in no more than 2 institutions.
Giving up a potential few points of return on investments, in exchange for the simplicity, is well worth it for your DW........IMO.

That is what I have done. It is a factor why we have consolidated to Fidelity and Vanguard, have multiple years of expenses in cash (advisors have always told me "you don't need that much in cash", I am sure they would say that to DW), do not dabble in real estate, and have a conservative AA.

 

[fgtayl01]

Same situation here. I have metastatic ca. We set up with Vanguard Advisory. But that's mostly for my comfort of mind that I do what I can while I can.

The reality is once I'm not there she'll turn to others she knows. She'll have a circle of friends, some of who are widowed. She'll see what's happening with them. What's working, who got scammed, etc. That's where she'll get her advise.

You could ask her about their experiences if you to what advise she might get.
Just don't expect any plan now will necessarily be the actual.

 

[EastWest Gal]

DH has very little interest in money, but he is fortunately quite frugal. I didn't understand much about investing in 1993 when we started our taxable account, so we used an AUM advisor. At the time, their fee was reasonable. But then they started going into riskier products and made mistakes, so we changed advisors. I'd consider a fee-only advisor, but I'm concerned about DH. We switched to a company founded by Rick Ferri (Look him up on Bogleheads). He has since moved on, but their philosophy is the same in that they do passive investing, take care of rebalancing, and keep an eye out for tax loss harvesting opportunities. They charge 0.37% for assets under management. I also keep part of the portfolio self-managed, about 30% of the taxable.

Yes, it is a drag on the returns, but the tax loss harvesting has made it a win overall, for us. And I have peace of mind.

 

[MarieIG]

My widowed SIL had no help and was not knowledgeable on their finances when her husband died 5 years ago without warning. She ended up with Edward Jones from a recommendation by her tax guy. Got sold TWO annuities and then lost half of the remainder of their cash in the market. What a mess her son had in getting this under control. She may lose her house eventually.

That is awful. Predators on the surviving spouse are a concern. I guess those annuities did not even provide her with sufficient monthly income for her ongoing needs . . . One of my concerns is that someone will look to pray on DH once I shuffle off this mortal coil.

Strikes me as a balance is needed.

To a few other's points, having her lean into the basic of the structure and rationale is important. Otherwise someone else will do it whether they mean well or not.

This seems like maybe a good place for an income annuity and/or a trust. You could select/hire a trustee and put it all in your will. If you die, the trust springs into existance and the first thing the trustee does is secure an immediate income annuity that delivers $x in income...ideally enough to cover all the essential expenses plus some.

The lifetime income annuity will take a lot of the decision making out of the mix. Money shows up, bills get paid, repeat. An income annuity, by definition and design, protects the beneficiary for life...unless the person gets snookered into selling the annuity to someone for cash.

That's where the trustee comes in. The trustee's job is run the trust within strict guard rails as to investment allocation, asset placement, and distributions. That person must have zero financial interest other than a modest, annual fee. Perhaps require the trust to be audited/reviewed annually by a one-time fee CFP who an also advise the trustee. The CFP can also help keep an eye on things like inflation and work with the trustee to generate more income if needed.

. . .

In the end, someone must have decision rights as to the money and those rights will by necessity get larger over time as DW herself ages. Choosing the trustee who does this will be the single most important decision.

Best of luck!

All good points.

. . .

Since he retired with a pension in 2010 he knows that there is enough income to cover the outgo and that the monthly stuff all happens automatically.


. . . but I felt better knowing that someone will be there to help DH if I'm gone first.

DH also has a pension and income which would cover ongoing expenses so that is a plus.

. . . I really do need to get hopping on the "After I Croak" instruction book.

There's that.

You might consider a Trust with someone as Schwab Trust Company as Trustee that has reasonable fees. You can have an estate attorney as a Trust Protector who can fire the Trustee if your wife has a problem. Your wife of course is the beneficiary of the Trust.
It might be worth giving them a call. We use them.

I have been mulling this over.

. . .

I have a longer time horizon- . . .

I do feel bad that if I were to depart this earth tomorrow, they'd get a $1 million inherited IRA that would have to be withdrawn over 10 years. Ack. Good problem to have, I guess.

Well, I hope I have a longer time horizon - but ...

Perhaps you might want to do Roth conversions (even a small amount) up to a certain tax bracket and/ or consider how to best tax arbitrage your estate while achieving ultimate goals - son, grands, charities?

DH is my beneficiary on my IRAs - the kiddos are contingent beneficiaries, but I expect that there will be no further Roth conversions following my demise.

 

[engineernerd]

prudent_one, I don’t like any of your three choices. Paid advisors can’t really be trusted entirely, especially since turnover happens and someone reasonably well-meaning (and competent) can be replaced by someone not so well-meaning (or not so competent) at any time.


I think the biggest thing you can do for her is to limit risk, and to train her to do the same after you are gone. That means, first and foremost, avoiding all debt. Credit cards are OK only if you (and she, after you are gone) pay the full balance every month. She should not even THINK about taking out any other kind of loan.

Then you might buy some annuities, especially if her guaranteed income stream from social security, pensions, etc. will not be enough for comfort. I’d say keep it simple by buying AN annuity, but I don’t necessarily trust these companies not to go bankrupt so I would buy annuities from at least two different reputable companies.

[FONT=&quot]The advice to always keep a list of what you own, including information about how to get access, in a location where she knows to get it but others can’t see it (encryption is good), is excellent advice. But she will need one of two things to get the full benefit: a completely trustworthy hand-holder after you are gone, or personal practice using your in-case-I-die instructions. If you really have nobody she’ll be able to trust, then make her use the login information regularly while you are still alive.[/FONT]

 

[teej1985]

DH has very little interest in money, but he is fortunately quite frugal. I didn't understand much about investing in 1993 when we started our taxable account, so we used an AUM advisor. At the time, their fee was reasonable. But then they started going into riskier products and made mistakes, so we changed advisors. I'd consider a fee-only advisor, but I'm concerned about DH. We switched to a company founded by Rick Ferri (Look him up on Bogleheads). He has since moved on, but their philosophy is the same in that they do passive investing, take care of rebalancing, and keep an eye out for tax loss harvesting opportunities. They charge 0.37% for assets under management. I also keep part of the portfolio self-managed, about 30% of the taxable.

Yes, it is a drag on the returns, but the tax loss harvesting has made it a win overall, for us. And I have peace of mind.

Rick advises this company now: https://www.libertycapitalmi.com/team I believe it's still .25bps The guy in charge used to work for Rick.

 

[zippy2020]

The problem with a spouse who is going to truly need help going it alone, is that they don't know the right questions to ask.

We have an independent CFP firm for that precise purpose. Are they expensive? Yes, but less than an investment bank. And far more knowledgeable on issues like elder care, professional referrals, senior living options, et. al., than discount brokerages.

You are right to be concerned about staff turnover. I would not recommend my spouse use an investment advisory firm whose staff has been hired/promoted solely on the basis of sales. Reason? The better ones are marking time until they can either go out on their own or find a more senior position elsewhere.

My Spouse knows the basics (I've drummed those into him, at least) but he hasn't the faintest interest in investments and financial planning. And now that he's beginning to show slight signs of mental decline, I would NEVER expect it of him, either.

The problem with hourly CFPs is that meeting with one tends to push people in favor of 'somebody they like the most.' If you assume your spouse will require extensive hand-holding (or even moderately so), then your requirements for professional help for HER are very different than for yourself.

Frankly the biggest problem people have is that if you don’t have access to the better independent CFP firms, it’s virtually impossible to know who they are. One Yellow Page ad looks pretty much like another, after all. The best firms get 80+% of their clients solely through referrals. It’s how we found ours, and unless you subscribe to the CFP monthly magazine you’d never know they exist.

The firm we use has been rated by its peers as one of the top firms in the US, based on customer satisfaction, staff retention, and overall staff professional accreditation. I chose them over the other two firms I interviewed for their expertise in senior care issues (we were originally looking for an adviser for my MIL) and history of staff stability.

The firm had over 20 yrs in business at that point; a joint partnership (now a triple partnership) equipped to handle long-term accounts. We are childless and in case MIL outlived us, we did not want any turnover in handling the account (she was already diagnosed with mild dementia). Relatives have no professional expertise in local seniorcare issues (all of them live several thousand miles away).

First, surviving Spouse should be advised - by you or any adviser - not to make big/expensive decisions for at least 6 months. Settling an estate, no matter how up-to-date the legal docs are, is NO picnic.
* This includes: selling the house/moving.
* Be sure to get sufficient copies of the death certificate; many companies require the notarized originals while others will accept copies.
* Depending on date of first Spouse’s death, what is the tax situation for the current calendar year for the surviving Spouse? A professional tax adviser needs to answer this, and make sure the final return(s) are filed on time with the IRS.
* There will be issues and future goals that need to be prioritized. What (legally) needs to be done immediately? What is merely short-term: 1-3 months? What items can be put off 6-9 months? What can be classified as uncertain/long-term issues?

Your adviser should make certain to explain how portfolio accounts are rolled over; i.e., the differences between taxable, non-taxable, and Inherited. Titling of the last MUST be correct; the IRS is exacting and quite nasty about mistakes. You don't get a "grace period" with them if something is not done correctly - you just get slapped with a large tax bill!

You need to make a list of ALL your assets/debits:
* Any past employer you were vested with, and contact address. If you have any retirement benefits coming, they are required to send you a letter prior to your 65th birthday. I have 2 small pensions from companies I had NO idea owed me a retirement benefit; I had taken my 401k money upon leaving and thought that was all there was. One company tracked me down through 3 address changes, which is not legally required (thank goodness for that stubborn New England persistence, LOL).
* HSA account
* Social Security – there is a small death benefit; she might as well claim it.
* All joint credit card accounts – do NOT cancel credit cards. It can harm your credit scores and reduce credit lines available to her. Ask the lender about removing the deceased spouse from the joint cardholder account rather than opening a new single cardholder account in her name.
* All three major (and there is a fourth minor one, to be thorough) credit agencies should be notified after the above steps are taken.

Anyway, HTH. It’s really an incomplete list, but these were the major items I thought of, off the top of my head.

Congratulations for thinking ahead of time. Too many people don't, and severely under-estimate the kinds of issues faced after death by grieving heirs with little or no investment/tax/legal expertise.

 

[zippy2020]

Ugh - one more thing I forgot:

On the survivor's "to do", medium-term at the very latest: update all legal docs including Healthcare PoA and Financial/Legal PoA.

This is one of those things there is a strong tendency to procrastinate on - reminders of death, unfortunately - but it is really, really important to get done.

 

[Route246]

When I hear EJ stories like this and read the response it was like an echo. My response would have been, "This is tragic" which is not too different from "That's tragic."

The fact of the matter is, it is a tragedy.

My widowed SIL had no help and was not knowledgeable on their finances when her husband died 5 years ago without warning. She ended up with Edward Jones from a recommendation by her tax guy. Got sold TWO annuities and then lost half of the remainder of their cash in the market. What a mess her son had in getting this under control. She may lose her house eventually.

That's tragic. Hope things work out for her. That's the scenario I'm wanting to prevent.

 

[Route246]

Seems like a fortunate situation but why not make the the lazy portfolio lazier? (is that a word?)

I would just leave it in some fund or funds and skip the rebalancing, too complicated to autopilot when you're no longer around. I am sure there is some low-expense balanced fund out there you might be comfortable with to target all or most of the assets to after you are gone.

I'm dealing with a similar issue but with DS, my only heir. He's in a better position than most- smart, good with money and understands investments. He even understands compound interest. He just doesn't want to make a hobby of it the way I do! DDIL is similar but has less understanding of investing.

I have a longer time horizon- I hope to be around for at least another decade- but a previous discussion here has spurred me to start simplifying my investments- reducing the number and more ETFs- to the point that it can further transition into a "lazy portfolio" of ETFs with periodic rebalancing. My two brothers are named as trustees of the revocable trust and are experienced investors; I plan to add DS as a trustee this year when I re-write everything. Hopefully my brothers can help if further simplification is needed.

I do feel bad that if I were to depart this earth tomorrow, they'd get a $1 million inherited IRA that would have to be withdrawn over 10 years. Ack. Good problem to have, I guess.

 

[RetiredHappy]

My instructions to my only heir/son is to only withdraw dividends in taxable account for living expenses and leave the portfolio alone. The problem is with IRA, and I think I will tell him to liquid them proportionally.