📝 usncan Note: The Roles Of Women In Wealth Transfer
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Strategies for women to prepare for caregiving and wealth transfer and gain confidence in managing family finances.
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Women often find themselves in a complex and challenging position when it comes to wealth transfer. Whether it’s helping managing the finances of aging parents or becoming the family CFO overnight after the passing of a spouse, women are playing a much larger role in managing the family finances.
In many marriages, one spouse (often the husband) acts as the family Chief Financial Officer (CFO). This isn’t a bad thing, as the day-to-day management usually isn’t a two-person job, and partners often divide to conquer daily tasks.
But it is problematic when the non-CFO spouse has very limited knowledge about the family finances, as is typically the case.
It’s like having a backup quarterback who has never thrown a football!
The reality is that many women will outlive their male partners, and they also stand to inherit significant assets from their parents. This makes getting informed and organized not just a good idea, but a necessity for peace of mind and ensuring the financial security of the surviving spouse.
The Caretaker Role
The responsibility of caretaking, whether for a spouse or a parent, often lands on women. This can happen gradually or abruptly, and it often comes with a sudden need to take on financial responsibilities. This includes paying bills, navigating insurance, needing cash and liquidity, and so on – all while juggling existing responsibilities at home and work.
Having the right documents in place – such as a financial power of attorney and health care agent – can prevent lapses in care and help ensure financial continuity. Importantly, these documents can also spare caregivers from the added financial and emotional stress of starting from scratch in an emergency, especially if the medical wishes of loved ones are not already known.
Getting Organized: A Proactive Approach
Information is power. Taking an active role in your family’s finances is the first step toward gaining confidence and control.
There are two certainties in life, and we all know what they are. The key to navigating these transitions smoothly is preparation. We recommend creating an “In Case of Emergency” document or folder and review it annually. This document should cover two main areas: basic estate planning and financial organization.
Women often encompass many roles during their lifetime. So consider keeping separate checklists for your own household and parents or other close relatives where you might be called on to step in. Though women should take additional steps with their own household finances (more on that later), for some families, getting this initial lay of the land may be all you can do for now.
Basic Estate Planning Checklist
- Legal Documents: The attorney and location of the original documents (wills, trusts, powers of attorney).
- Key Roles: The executor and person(s) who hold medical and financial powers of attorney. If there is a trust, find out the current and successor trustees.
- Accessibility: Can you get copies of these documents now?
- Beneficiaries: Confirm that beneficiaries are listed and current.
Basic Financial Organization Checklist
- Professional Advisors: Do you know the family’s financial advisor and CPA? Consider asking for an introduction, even if it’s over email.
- Account Information: Get a list of all accounts, including bank accounts, credit cards, pensions, annuities, and life insurance policy information. Get the ownership (titling) and beneficiaries, including transfer on death or payable on death elections, as applicable.
- Physical Security Measures: Are there any valuables or key documents located in a safe deposit box at a local bank or home safe? Do people named to key roles know how to gain access when needed?
- Durable Power of Attorney: Especially for elderly parents and senior partners, consider the pros and cons of attaching a durable power of attorney now. By setting up permissions in advance, the agent (individual with the power to act on behalf of someone else) can step in immediately if the account owner is incapacitated. This can be a simple way to ensure continuity and lighten the load for family during stressful times.
Having this basic financial information organized can be invaluable for women who may be called on to help aging parents during life or after it. Without a roadmap, family members are left to grieve while simultaneously serving as an executor or trustee, closing out an estate, and playing “financial detective” to locate accounts and documents.
Combatting You Don’t Need To Know: Communicating With Parents
In a perfect world, there’s a family meeting to lay out key roles, name advisors, and share where information is located. But in reality, many aging parents prefer to keep their financials close to the vest. If your parents are hesitant to share details about their estate plan or financial situation, emphasize that you aren’t asking how much you stand to inherit. You just want to know what to look for and who to turn to for help when the time comes.
If money is a sensitive topic in your family, when asking for an account list, consider narrowing the focus to only the necessary information. For example, that you’re not looking for dollar amounts. At the very least, they should share this information with the individuals named to key roles in their estate plan.
Additional Steps For Your Own Household
In your own household, it’s vital to have confidence in understanding your financial situation. This might require becoming more involved in financial matters. Again, it’s common for one spouse to be the family CFO, but that doesn’t mean the other spouse should be in the dark.
- Join Meetings: Periodically join meetings or calls with your financial advisor to stay informed.
- Know the Numbers: Go beyond a simple list of accounts. Understand your household income, expenses, and a complete picture of your assets and liabilities.
- Participate: Engage in conversations about money, expenses, major purchases, and affordability. You can only spend a dollar once! So make sure you’re involved in the money aspects of big decisions and contemplating financial trade-offs.
- Understand Your Estate Plan: Make sure you understand your estate plan and how assets will flow, which is especially important for blended families. Has it been a while since your estate plan was last reviewed? Then it is a perfect time to revisit it with your attorney and spouse and consider any changes.
- Define Goals: Consider whether you have any unspoken financial goals and priorities, such as lifestyle, family support, and charitable giving.
For women looking to learn more about ‘The Great Wealth Transfer’ and ways to plan, consider attending this upcoming webinar.
Difference Between Organization And Planning
This article focuses on how women can gain confidence and a deeper understanding of their own finances, as well as their parents’, to reduce stress and ensure a smooth transfer of wealth when the time comes.
But it is important to note that organization is very different from planning. In an ideal world, these conversations about money turn into reviewing current strategies and potentially further discussions with advisors about potential changes.
For example, on the estate planning side alone, consider whether there has been a change in state residency or major life changes (death, divorce, assets, etc.) since the plan was last reviewed. Is there significant probate exposure? Is there adequate liquidity to pay estate taxes? Or what if there isn’t an estate plan at all?
Preparing Women For Their Future Role In Family Financial Matters
While you can’t prepare for every eventuality, taking these steps can significantly ease the wealth transfer process for survivors and caregivers who are already dealing with immense grief and responsibility. It can also lay the groundwork for future planning, empowering women financially and potentially saving families time, stress, and money.
Important disclosure: Kristin McKenna is a Forbes contributor. The material in this article is for general information and should not be misinterpreted as personalized advice of any kind or a recommendation for any specific investment product, financial, legal, or tax strategy. This general communication should not be used as the basis for making any type of tax, financial, legal, or investment decision. Darrow Wealth Management does not offer legal or tax advice.
