Frank Sisco, 30 Mill Road, New Rochelle, NY 10804

Cell - 914.740.4422; Email – ideasmoney@aol.com

www.LifeAndMoney.com

Copyright 2007 Frank Sisco

(Word count = 1,050 words plus 61 words for About the Author)

"I thought everything was already taken care of.   I'm really in the dark on a lot of this stuff."   As Mrs. S. spoke these words a few days after her husband died from cancer at age 61, I could feel the mix of her emotions - sadness, regret, surprise, anxiety, helplessness.   From what I knew of their financial situation, I thought her lifestyle could be sustained on the continuing income but only after further analysis and possibly changing some investments to protect them and to maximize the related income.   After further work, my impressions were verified and her financial condition was indeed good.   Now, twelve years later, she still lives a full life with sufficient income to handle her expenses and then some.  

However, it was not an easy road for Mrs. S.   She had to overcome her initial fears, largely due to her having very little knowledge about financial planning, taxes and investments.   Like many women of her age back then, she left the majority of financial matters to her husband, the main breadwinner, to handle.   It was his larger salary that generated the money to buy their house and send the children through college.   It was his pension and retirement funds that would allow them to live comfortably in retirement.   And it was his take-charge, man-of-the-house manner that made him the primary decision maker when it came to issues of money.   She, like many, was okay with that.   Then.   But now that he was gone, she needed to regroup and make her own decisions. This is very tough, especially given the heavy emotional toll of losing a loved one that changes one's life forevermore.    Luckily, she trusted me to expand my role from being their CPA to being her key financial advisor and I helped educate her as we set out to make plans for her new life following her husband's death.   In our first formal financial planning meeting, she wept after seeing a spreadsheet that I designed.    I intended that the spreadsheet would simplify matters but it totally confused her.   However, as we worked through the spreadsheet, side by side, at her kitchen table, Mrs. S. did truly understand her current financial circumstances and the changes I was suggesting.   She asked intelligent questions and grew more confident in her abilities to make reasoned decisions.   She got more familiar with the financial lingo and more importantly got to grasp key financial concepts like deferring taxes, minimizing debt, positive cash flow, financial risks etc.  

As she developed her skills and acumen, she needed my advice less.   Just for major decisions or where my technical knowledge was critical, or as a sounding board after she arrived at her best idea in dealing with an issue.   One financial planning lesson I learned from helping Mrs. S is that careful patient time that is spent between an advisor and a client can reap many benefits, including empowering the client to be a smarter independent decision-maker and more self-confident.   Another lesson is that the good plans laid by her husband, with some post-mortem adjustments, enabled her as the surviving spouse to continue living in a style in which she was accustomed and without upsetting her life by the necessary sale of a house, borrowing money from others, or going into the downward spiral of spending principal.   Had it been that her husband did not lay a good foundation, the outlook in the aftermath of his death could have been bleak, especially giving her helplessness at that time.   Currently, she and I are working toward getting her enough additional income, possibly through an immediate annuity, to pay a large share of the premiums for a long-term care insurance policy that would help to protect her assets and in turn her.

Mrs. M. had an entirely different situation when her husband died at age 83 from a heart attack two years ago.   Her and her husband were older than Mr. and Mrs. S. and had accumulated a much larger nest egg, primarily as the result of a successful retail business they ran together.   Mr. M. handled the buying, selling and operations and Mrs. M handled all the company's financial affairs.   And because she was so good at the business's finances, she also handled many, if not most, of their personal financial matters.   Thus when he died, Mrs. M. felt it very appropriate for her to handle the final financial affairs and to make what she thought were logical changes.   Also, throwing herself into the transactions allowed her to preoccupy herself and try not to face minute-by-minute the extreme loss of her cherished husband, with whom she spent most waking hours.

A few months after Mr. M's death, I was called by her oldest son to help evaluate whether any changes should be made and also to handle any new financial planning issues such as a living trust for Mrs. M.   When I prepared a financial snapshot of assets and liabilities and a snapshot of income and expenses, it became apparent that her assets and income were sufficient but it was then that I detected certain problems.   For one, in her eagerness to settle matters, she had cashed in several deferred annuities, subjecting her to significant income taxes, whereas she could have avoided that by electing a spousal continuance of the contracts.   Also, her actions put her husband's estate in the position of not fully utilizing his lifetime estate exclusion, which in turn caused her own estate to be at risk of possibly incurring very significant estate taxes upon her death.   This knowledge is known by experienced financial and tax specialists and not by business owners like Mrs. M.   The lesson I learned from this situation was that a surviving spouse should always seek professional help before taking actions.   For bright experienced women like Mrs. M. a suggested path would be for her to do all the research and identify the actions to take, but then consult with an advisor before implementation.   Fortunately, when I got involved we were able to "undo" some of the changes she made and preserve a good deal of Mr. M's exclusion and minimize the potential estate taxes upon her death.

In future columns, I'll recount other experiences of clients whose spouses passed away, and the related lessons.

About the author:

Frank Sisco is a CPA and Personal Financial Specialist and writes on topics related to life and money.   You can contact Frank by email at ideasmoney@aol.com or by phone at 914.589.1013 in order to express your opinion about this article or to obtain copies of prior articles.   He resides in New Rochelle, NY with his wife and daughter.