Over the years, I’ve worked with many women who find themselves newly single as a result of divorce or widowhood. Those life events can be incredibly demanding emotionally, even without the financial component adding to the shock. Women come to me with questions such as:
— How much money do I have left?
— What financial institutions did my spouse have accounts with?
— How much insurance did my husband have?
— Can I buy a car?
— Do I need to move to a new home?
— At what age will I be able to retire?
— How much money can I give to my children?
— How much money can I give to my favorite charity?
— Will I be OK?
The confusion is often exacerbated for families who are accustomed to upper-middle class lifestyles. I once worked with a woman who lost her husband at an early age and was under the impression that he was insured for several million dollars. In fact, her husband had only $350,000 in life insurance. Meanwhile, two thirds of the family’s $1.5 million house was mortgaged and the children were in college. Despite having made a comfortable living throughout their family life, the couple failed to prepare for tragedy, making the man’s death even harder to accept and move past.
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There’s a lot the couple could have done differently, and the same applies to most of the wealthy families I meet. They work hard, budget well, save money diligently and invest aggressively, but they rarely have adequate plans in place in the case of an untimely death.
Of course, I can understand why it’s hard to think about losing a loved one. But it’s an important topic to discuss. According to the Women’s Institute for Financial Education, 50 percent of marriages end in divorce and 35 percent end in widowhood; on average, women will be on their own financially for one-third of their adult lives. These statistics are alarming, but there are several things couples can do to prepare financially for a spouse’s death.
Communicate regularly. A Wells Fargo study found that Americans believe money is the most difficult thing to talk about, and death is a close second. While it’s hard to have an open dialogue about estate planning, the initial awkwardness gets easier over time. Most of my married clients feel relieved once they realize they can talk openly and honestly with their spouses about finances and estate planning.
[Read: 6 Ways to Teach Your Kids About Money.]
Inspect what you expect. We advise our clients to proactively speak with their spouses, children and other beneficiaries and set expectations about how an estate will be divided. When family members know exactly what to expect, they can plan accordingly. This can also help prevent disputes when similarly situated beneficiaries (such as children) are treated differently.
Get educated. As an advisor, I’m able to provide my clients with the information and context they need to manage their household finances. However, I understand that many Americans don’t have access to financial advisors. Fortunately, there’s an abundance of financial literacy resources available to them at little or no cost. Many credit unions, community colleges and other groups like the National Financial Educators Council offer free financial literacy workshops around the country. There are also a number of great books about financial planning, including Alexa von Tobel’s “Financially Fearless: The LearnVest Program for Taking Control of Your Money.”
I have cause for optimism regarding financial literacy. I have recently noticed that more women are increasingly educated and aware of their financial environment than a decade ago. However, there is still much improvement to be made in this area and these tools can help.
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Talk about charitable giving. One study by The Center on Philanthropy at Indiana University found that women who are baby boomers and older gave 89 percent more to charity than men their age. The best time to make decisions about philanthropy is when both spouses are alive and healthy.
Just recently, I spoke with a widow who felt strongly that senior citizens should have the resources to live independently in their homes. The woman is financially secure enough to be able to stay in her own home, but she knows that others are not as fortunate. I helped her identify a qualified nonprofit organization to donate to, while maximizing the tax benefits of the gift. When she initially became a widow, she was terrified that she wouldn’t be able to make ends meet. Today, she is able to stand confidently in support of herself and a cause she believes in.
There is a light at the end of the tunnel. Once women have the financial tools, information and guidance they need, they start to feel more confident and empowered.
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