Here’s a story you might be familiar with: John and Mary have been married for 62 years when Mary was diagnosed with Alzheimer’s and had to go into a nursing home. The household responsibilities now fall to John, including paying the bills. The problem is, in those 62 years of marriage, John never paid one bill. While John was the provider and worked for 35 years at a local manufacturing plant, Mary handled those chores and took care of the kids.
One spouse handling a couple’s finances is not unheard of. It’s more common than you think. That’s because the other spouse either had no interest in or no understanding of money matters. This arrangement can become disastrous when the financially-minded spouse dies or goes into the nursing home. This problem is called the ‘shoebox problem.’
At this point, the widow/widower or at-home spouse is left with little knowledge or direction on the couple’s financial situation. All he or she knows about paying the monthly utility bills is sticking the stamp on the envelopes and dropping off the payments at the post office. Where does the husband/wife put the monthly water or garbage bill? Is it in the stack of mail on the dining room table, or on the desk in the spare bedroom? Where are the extra checks? (Even in this electronic age, there are people who still prefer to pay via paper checks.)
All these bills, plus the yearly tax records and tax deductions are jumbled in a shoebox, an old manila envelope or even plastic grocery sacks. That is how the shoebox problem begins. And it only grows worse. This can make an already emotionally situation even more overwhelming.
What can be done to avoid this mess? Here are six steps to avoid potential ‘shoebox problems.’
1. Open the discussion. The most important thing couples can do is to initiate a conversation about it. Discussing the very topic of personal finance repercussions that will arise from one partner’s death or admission to a nursing home can actually help ease the transition from one-spouse money management to two. It also lets each partner know how the other would want his or her money handled.
2. Get involved. The spouse who has been ignorant of the couple’s finances needs to step up. Learning about your household’s investments, assets and monthly bills is a great place to start. Couples should set aside a particular time each month to discuss their financial situation. Regular meetings leave less opportunity for surprises down the road. They’re ideal times to mention, for example, a new store credit card you opened or a checking account you closed.
Dedicate one meeting a year to discuss such big picture items as when the mortgage will be paid off and whether to prepay the loan to move up the date.
3. Create a unified organization system for finances. Online services can help you combine all your accounts and financial obligations in one place. If you’re less comfortable with online financial tools, try creating a large folder or accordion-like binder that houses all your valuable records. Then keep this in a secure and fire-safe box.
4. Know how your family’s assets are protected. An estate plan, which includes a will, financial and health care Powers of Attorney and an advanced medical directive or living will, is the best way to ensure your finances will be handled the way you’d like after you die. A properly drafted estate plan is a wonderful legacy to leave your heirs.
Insurance is a major component of any financial plan. Some couples should carry disability and life insurance, and perhaps long-term care insurance. Both spouses should be aware of not only the types of coverage they carry and how much they own, but where the policies are held. A financial professional can help you understand coverage options and make appropriate decisions based on individuals.
5. Consider seeking help from a professional. If your spouse can’t or won’t explain things, you may want to hire a financial planner who can get you started on the right path. No, guys, it’s not a sign of weakness to admit you don’t know where to turn. You’d be glad you sought professional assistance in the long run.
6. Know the first financial steps once a spouse dies. It’s often confusing and overwhelming when a husband or wife dies so you’ll want to know ahead of time exactly what you’ll need to navigate your family’s finances when the time comes. An important first step is securing the death certificate. Many funeral homes will jumpstart the process as part of their services. Next, the surviving spouse must call the Social Security office to alert the agency of the death.
Transferring account titles and investments can be handled within six to eight months after a spouse’s death, sooner if they’ll provide the survivor’s only income.
Once you’re armed with knowledge about all of these money matters, you’ll never need to worry about the shoebox problem.
In no way does this article presume solid legal advice. It is to serve as a consumer guide in the complicated world of long-term care and financial strategies. It is best to consult an elder law attorney who can properly advise and draw up the necessary legal documents.