June 14, 2017

In Case of Emergency: Creating Your Financial Option B

If your spouse suddenly died, would you know where to find all your financial information or what to do first or next?
Nina Mitchell, Principal, Senior Wealth Advisor & Co-President, Colony Sports & Entertainment

Two years ago, Sheryl Sandberg flew down to Mexico with her husband to celebrate a close friend’s 50th birthday. It was a rare getaway for the power couple, both of whom were involved in highly successful tech companies. Sandberg, of course, is the Chief Operating Officer of Facebook, while her husband Dave Goldberg, was the CEO of SurveyMonkey.

While on vacation, tragedy struck quite unexpectedly: Goldberg, just 47-years-old, passed away suddenly from heart-related issues while he was running on a treadmill. Sandberg’s life was changed in an instant. She had lost her husband. She was now suddenly a young widow at 45 with two children to raise on her own.

Sandberg took to Facebook to share her grief, writing: “Even in these last few days of completely unexpected hell – the darkest and saddest moments of my life – I know how lucky I have been. Because 11 years of being Dave Goldberg’s wife, and 10 years of being a parent with him is perhaps more luck and more happiness than I could have ever imagined. I am grateful for every minute we had.”

No One Really Wants To Talk About Death

Sandberg has just released her new book, Option B, where she shares more about her family’s heartbreak and how she went about rebuilding her life in the wake of such a tragic and unexpected loss. I was fortunate to recently hear her speak about her experience and the themes of her book – which got me thinking about several of my own friends and clients who have suffered through similar experiences where their lives were turned upside down by the unexpected loss of their spouse.

It’s impossible to measure the emotional toll of losing a loved one, especially a longtime spouse. The process of grieving may never end. That’s why most of us would rather not talk about death—or about what we might need to do after a loved one passes away, particularly when it comes to sorting out our personal financial situation.

This is an issue that is particularly important to women, especially those who haven’t taken an active role in their family’s financial planning. Did you know that the average age of a widow in the U.S. is just 55 years old? At that young age, you still have many years ahead of you! You may even still have kids in college. If this were to happen, would you know what to do first? By failing to think ahead and put an emergency financial plan in place before tragedy strikes, an already emotional experience can be just about untenable.

Consider another story, this time involving a client of mine – let’s call her Laura – who lost her husband in the horrific events of the collapse of the World Trade Center on 9/11. At the time, Laura was a stay-at-home mom in her 30s with young children still in diapers. Her husband was a partner in a well-known investment firm and a whiz with numbers, so he handled all of the family’s financial planning. By all counts, they were living the American dream. And then, in a single day, it was all ripped apart.

I met Laura at that time because, just as she was grieving the loss of her husband, she was also scrambling to put her personal finances together—something she had never had to do before. Much to Laura’s and her deceased husband’s credit, they at least had an estate plan with life insurance in place.  Many of her 9/11 widow-friends were not as fortunate and totally unprepared. Even with some things in order, we still had our share of frantically trying to find missing financial information like insurance policies, employer benefits and passwords to accounts.  Having this information would have made things a lot easier had we or Laura known where they were or that they even existed.

Settling Laura’s husband’s estate was just the beginning of a long list of financial issues that had to be dealt with head-on quickly and carefully. Just as shewas trying to get around the fact that her husband wouldn’t be coming home anymore, Laura was trying to understand if she had enough money to live on and for how long.  She was uncertain as to what her and her young children’s future would look like. To put it plainly, she was scared to death.  In the end, we worked together to put the pieces of her financial puzzle back together and give her peace of mind for the future.  

Be Proactive – Don’t Wait Until It’s Too Late

I think we can all be honest and admit that none of us wants to map out an emergency plan in case of the death of a loved one. We’d rather live in the moment and deal with this later on. I’m sure we are all know stories thatshow how painful and burdensome it can be to not have at least the basics of an emergency financial plan in place. What would have happened if Laura hadn’t had a team around to help?

That’s true even when you are dealing with caring for someone who has been ill for some time. A close friend of one of my colleagues recently lost her husband, who battled cancer for years. But anytime she asked her friend if they talked about what their finances would look like after he passed, or even where her husband kept his passwords, she demurred. “I don’t want him to think that I’ve given up,” she would say.  Nothing further would get done.

I think we can all feel her pain and sense of guilt – which is again why putting a plan in place ahead of dark times makes the most sense. That way, when time is truly of the essence, you can spend time with your loved ones while also knowing that your finances and estate planning are both already in order. 

While we have little control over when each of us will die, we can plan for the future financial well-being of those we love most. You can do that by proactively working with your financial advisor and estate-planning team to create your own personal emergency plan – a “Must Do” list – for those family members who will be most impacted by your death.  

Create Your “In Case of Emergency” Checklist

To help you get started, we created the Her Wealth In Case of Emergency checklist as a handy resource. This checklist is designed to help you take care of your family and your financial responsibilities in the event you cannot. It will provide your loved ones easy and immediate access to the critical financial information they need during an emotional and stressful time. Here are a few of the items this checklist will help you to organize:

1.    Your Estate Plan

  • ‍This includes a Will, Trust(s), Living Will with end of life care, Health Care Power of Attorney (w/HIPAA Authorization) and General (Financial) Power of Attorney.
  • Review your estate-plan on a regular basis together and make it is truly “updated.”
  • Inform your family members who your legal team and advisors are in case of emergency.
  • Review your life insurance needs to ensure you have sufficient death benefit protection.

2.    Location of all Permanent & Important Documents

  • ‍Permanent documents include your most recent and updated original Estate & Trust documents, Deeds, Titles, Notes, Birth and Marriage Certificates, Life Insurance Policies.
  • Do you have a safe deposit box or in-house safe – who has key/combination/access?
  • Do you have an updated Personal Financial Statement, listing of all Investment and Savings accounts, current and prior year’s tax returns, work benefits, etc.?
  • Pension, Insurance, Social Security, Workers Compensation benefits.
  • Business-related documents.

3.    Passwords for All Accounts

  • ‍With so many transactions done and stored electronically, make sure you know where all updated passwords are for all investment and bank accounts, bill paying, medical insurance, iPhone, Facebook and other social media, etc.
  • If one family member pays the bills on a regular basis, make sure another family knows “how” to do this in an emergency and where current (and last year) bills are saved.

4.    Ongoing Financial Management

  • ‍Are you comfortable with your current wealth advisory team?
  • Revisit your financial, tax, investment and insurance needs based on the new circumstances.

While even the best emergency plan won’t heal the deep emotional wounds that come from losing a loved one, it can at least give you the chance to grieve without the added turmoil of trying to put your financial life back together.

Losing her husband was clearly not Sheryl Sandberg’s first option. But life is never perfect. That’s why, as the title of her book puts it, we all need to actively plan for some form of Option B. That’s what life is all about.

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Shawn: Now you hear all kinds of deals about leasing cars, how can you negotiate a better deal if you want to lease?

Nina: Okay, well many people don't realize that they can actually negotiate the sticker price on a leased car in the same way that you would do that if you're buying a car. And since when you lease -- when you're, you know, your lease payments basically cover the depreciation, the difference between the sales price and the residual value. So it's definitely in your best interest to try to reduce that sales price as much as possible because then you'll pay you know, smaller dollars over the life of the lease. Make sure you pay attention to the down payment at the lease signing. And so here's an example, you might see an ad that says you know, lease payment is only 1.99 a month and that sounds like a great deal for thirty six months. The catch is, is that it might require a $3,600 down payment. So, if you amortize the down payment, then actually that 1.99 special, becomes 2.99. So, you really have to kind of look at total costs. 

And then lastly, dealerships use the term, money or lease factor, when they're calculating your financing costs and a lease factor is not the same as an interest rate. So, you have to make sure the dealer converts that lease factor into a comparable interest rate so you know what your financing charges are. 

Shawn: At the end of the day, does one method wind up being more expensive more often than the other, or can we tell that?

Nina: You know what, it really depends on how long, if you're going to hold the car for a long time, you're better off buying. But if you know, and if you're not, if you just really enjoy driving and you want to have a new car, then go ahead and lease. I mean, there's pros and cons to both, to be honest with you, it's not one size fits all.

Shawn: Alright Nina, great. Happy Thanksgiving to you. Alright, Nina Mitchell is with The Colony Group, for more go to wtop.com and search Her Wealth.

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Nina Mitchell, Principal, Senior Wealth Advisor & Co-President, Colony Sports & Entertainment

With over 25 years of finance, tax and investment advisory experience, Nina advises an elite group of professional athletes, executives and high net worth individuals. She is a driving force behind Her Wealth, Colony's initiative to empower women with financial knowledge, resources and confidence.