Life Insurance for Widows


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The Technical Aspects of Being a Widow

By Mary Dean, J.D.

After a funeral, friends and family get to go home and resume their lives. But for the widow or widower, it gets very quiet and lonely and frightening. When I lost my husband a few years ago, all the nitty-gritty details hit me at once. Here are some of the fundamental issues I had to face at a time I was least capable of making sound decisions.

I hope they'll help you prepare for the death of a loved one, and I hope they'll help you help your clients.


Get Your Financial Affairs in Order

First and foremost, do you have a will? Is it up to date? For many families, the will is something they think about before they go on a distant trip. For families with minor children, it is unconscionable not to have a will. Imagine the state determining who could best raise your children! My husband, Michael, an attorney, made it a practice to draft wills for many of our friends with children for no charge. But a few of our friends never finalized them.

The night my husband died, I couldn't remember where the will was. I needed a copy to begin making arrangements for his funeral and burial. I remembered a friend of ours was named trustee -- fortunately, we'd sent him a copy of the will and he could tell me the provisions relevant to funeral arrangements.

Make sure that the naming of the executor or trustee is carefully thought out. Many people spend a lifetime accumulating property and then willingly place that accumulation after death into the hands of an unqualified or mourning executor. Knowledge, experience, impartiality and availability all must play a role in the choice.

I was named executrix of my husband's will. I had to arrange for probate, assemble relevant financial records, file tax returns and more. My husband didn't have a complex estate, but sometimes I wished there was an intermediary -- a close friend, or one of my husband's siblings -- between me and the outside world.

Keep important names and papers in one place. Sometime after my husband's death, one of my brothers started a loose-leaf notebook to gather all the facts of my husband's estate in one place. He made up tabs for copies of wills and insurance policies; lists of assets; advisers' addresses; employee benefits; 401(k), stocks, mutual funds and bank account numbers; and safety deposit box locations and keys. I wasn't in any shape to think coherently -- I could answer questions, but I couldn't think logically.

The substantive part of having the paperwork together helps get to these questions: Are your financial affairs in order? Are the assets distributed properly? Where can you draw the necessary funds for short- and long-term expenses?

Even a week's worth of mail is quite a pile. The bills all continued to come in. My husband took care of them; I never even saw them. The lesson here is to make sure emergency funds are available. Decide what amount is needed and available for immediate access to the funds -- perhaps six months' expenses are adequate.


Determine Your Support Network Now

Is there a family member or a trusted friend who can step in to help make the necessary decisions when something traumatic happens? The decision-making process for the funeral is not a positive one.

Do you have a network of professionals to whom you can turn? I found that we were short. My husband had prepared the wills and all our other legal needs. I had no other attorney to rely on. At such a critical time, it's not appropriate to assess the quality or the competency of a professional.

I received insurance proceeds but, again, I did not have a trusted financial adviser. The person who handled our brokerage account didn't know my personal situation. Think of your relationships with the professionals you deal with today. Do you trust them? Do you have good relationships with them?

My brother-in-law contacted the Social Security office to see what I was entitled to. He didn't want me to miss any payments -- every dollar was important. But I can assure you that it wasn't on the top of my list. Many people probably lose additional funds by filing late. Since I'm working, we weren't entitled to a family benefit, but my son is entitled to receive benefits until he turns 18. We're using the funds to supplement my income and to offset expenses.

My husband had his own business. He and his partner ran a small law firm. I was faced with all these questions: Was there a written partnership agreement? What was Michael's interest? Who owns all the equipment? Was it worth getting an accountant to assess the business? To this day, I'm not sure I handled this properly.

Proper titles on your property ensure ease of transition. My husband and I were not married when we bought our New York City apartment, so the title to our residence was tenancy in common -- a legal ownership status for two unrelated people to own property. We neglected to change the title to joint tenancy after our marriage. At Michael's death, his estate owned half the net value of the apartment and was therefore subject to creditors' claims.

I wasn't prepared for these kinds of claims. Many years ago, my husband invested in a general partnership real estate investment. To make a long story short, the partnership defaulted in loan payments, the property went into foreclosure and the result was a deficiency judgment. One of the partners bought the judgment and filed a lawsuit against my husband's estate. Along the way, I've had five attorneys in two states giving advice.


How Much Insurance Do You Really Need?

I've had many discussions with people about the amount of insurance that's needed. I can give you my experience. Estimate your monthly expenses and multiply this by 12 to get total annual expenses. Think of the interest rate you can earn from investments you can live on without touching the principal. The principal should be a minimum face amount for your insurance policy. If your monthly expenses are $5,000 a month, you need $60,000 after taxes a year. Assuming you can get a 6 percent return on your principal, you need a $1 million policy. I admit this is very simple, and it doesn't take into consideration expenses like your children's education or your future retirement needs, but I assure you that if I'd done this simple exercise, I'd be in a better financial position today.

I've also heard many fallacies about the widow's needs. One was the thought that "If anything happens to me, my wife won't need such a big house -- she can move to a smaller one." The shock of losing my husband was traumatic and I couldn't handle the possibility of moving out of my home. It was lonely, but it did offer my son and me the comfort of being in a familiar place. Make sure the residence is safe, with enough mortgage insurance or life insurance so the housing expenses can be met. To relocate after a spouse dies is an emotional impossibility.

Another fallacy is that the food and clothing expenses are less after a spouse dies. Not true. One less person doesn't mean you buy half a chicken. It was total havoc when my husband passed away -- I didn't know how to shop anymore. I had to re-educate myself to buy different foods. The expenses are not less. As for clothing, my son's bills in the last couple of years more than match my husband's expenses. He continues to grow.

Some of my expenses have actually gone up. I know I've tried to overcompensate for my son, buying him material things to make up for his father's absence. And I'm not a handy person; I can't fix anything. I want everything functioning properly, so I probably end up spending more by buying new items rather than fixing old appliances.

You or your clients who expect to keep working after the death of a spouse should perhaps rethink that concept. Loss of a loved one gives you a different perspective toward work. I preferred to spend more time with my son at a time when we both needed to be with each other -- to learn how to live again. Make sure your loved ones are left financially self-sufficient so they have choices.

Finally, what do you do with the insurance proceeds? How can an insurance professional help with these decisions? Can you help the widow so she doesn't fall prey to a series of advisers?

What is your role? Do you have relationships with your clients that are really helpful? Have you asked all the hard questions? Have you made sure your clients don't procrastinate putting their affairs together? Many advisers -- the attorney, the accountant, the broker -- tend to offer perfunctory services. It's often the insurance professional who visits the home and forms a lasting relationship. Please don't shrink from your responsibility!

Mary Dean, J.D., is vice president of marketing with Prudential Insurance Co. (This article was edited from the author's presentation at the 1997 annual meeting of the MDRT in Atlanta. Copyright MDRT 1997.)



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