Life can bring joyous changes like welcoming a new spouse or child, or sad ones, like experiencing divorce or the death of a spouse or child. While these experiences have significant emotional implications, each also has a financial planning dimension.
During these life changes, taking care of financial planning tasks might not seem urgent. But updating your wealth plan can help protect your income and assets. Let’s look at some of the financial steps to take when major life events happen.
Caring for New Additions
When your family expands because of the birth or adoption of a child, marriage or remarrying, these events trigger the need to update key financial and estate planning documents, as well as beneficiaries on certain accounts. You’ll also want to consult with your wealth team to determine if creating trusts makes sense.
Insurance Policies
As your family grows, it’s important to plan for a scenario in which you’ll no longer be able to provide income. Income-replacement solutions include term life insurance and disability insurance. It’s vital to update the beneficiaries named in your insurance policies. You also may need to increase coverage amounts or add new policies.
Tax Benefits for Growing Families
Families adopting children are eligible for an IRS tax credit for certain adoption expenses of up to $15,950 for 2023.1 They can also exclude from their income any employer-provided adoption assistance.
When You’ve Suffered a Loss
After the death of a spouse or child, it’s certainly difficult to think clearly and manage logistics. One of the more immediate needs will be to obtain death certificates.
This proof of death, which is embossed with a government seal, can be obtained from funeral services providers. It’s necessary for:
- updating bank and investment accounts and life insurance policies
- claiming spousal Social Security survivor benefits
- collecting life insurance proceeds
- opening a probate court proceeding
- claiming assets in an account with a stated beneficiary (such as retirement accounts, transfer-on-death accounts or payable-on-death accounts)
Gathering Estate Planning Documents
In the event of a spouse’s death, you will need to locate their will and any trust documents they created, as well as any other estate planning documents. Your estate planning attorney can explain which estate-related actions a death sets in motion and can identify any necessary changes involving beneficiaries and property distribution.
In the unfortunate event that you lose a child, your wealth advisor team can help you make sure that beneficiaries listed on your financial accounts, including insurance policies, are current. It’s not sufficient to only update beneficiaries in your will; beneficiary designations must be made current in individual bank accounts, retirement accounts and insurance policies.
Organizing Investment Accounts
It’s highly advisable that spouses maintain a shared list, during their lifetimes, of investment accounts as well as accounts created on behalf of your children, along with usernames and passwords. If this is not the case, you’ll need to gather all this information after your spouse has passed. In addition, your spouse’s death will trigger the transfer to you of their interest in any joint tenants with rights of survivorship accounts.
To simplify the inheritance process for your heirs, consider adding a “transfer-on-death designation” to such accounts. It will specify a new beneficiary and ensure the asset won’t have to go through the probate process after your death. If you own a revocable living trust, you can also help heirs avoid probate by transferring ownership of your investment accounts to the trust during your lifetime. Consolidating accounts from several firms to one or two can also simplify your heirs’ work when the time comes.
Ensuring Bills Are Paid
Especially if your deceased spouse was responsible for paying many of the household’s bills, it’s important to review all ongoing bills, including loan payments. The goal is to understand the cash flow required to cover these bills and to make sure none fall through the cracks. You’ll likely also need to transfer certain accounts into your sole name.
Meet With Your Wealth Team
Your wealth team is here to provide advice through every big change your life brings, whether joyful or difficult. Please don’t hesitate to contact us if you experience a life-changing event.
Footnotes:
1“IRS Provides Tax Inflation Adjustments for 2023”
Disclosures:
This article is being provided for informational and educational purposes only and does not consider any individual personal, financial, legal, or tax considerations. The information contained herein is not intended to be personal legal, investment, or tax advice or a solicitation to engage in a particular strategy. Please consult a qualified professional regarding your personal situation prior to making any financial, legal, or tax-related decisions.
AdvicePeriod does not provide all services listed in this piece. Some services may be provided by affiliates and may be subject to additional fees.
AdvicePeriod is another business name and brand utilized by both Mariner, LLC and Mariner Platform Solutions, LLC, each of which is an SEC registered investment adviser. Registration of an investment adviser does not imply a certain level of skill or training. Each firm is in compliance with the current notice filing requirements imposed upon SEC registered investment advisers by those states in which each firm maintains clients. Each firm may only transact business in those states in which it is notice filed or qualifies for an exemption or exclusion from notice filing requirements. Any subsequent, direct communication by an advisor with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For additional information about Mariner, LLC or Mariner Platform Solutions, LLC, including fees and services, please contact us utilizing the contact information provided herein or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you invest or send money.
For additional information as to which entity your adviser is registered as an investment adviser representative, please refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov) or the Form ADV 2B provided to you. Investment adviser representatives of Mariner, LLC dba Mariner Wealth Advisors and dba AdvicePeriod are generally employed by Mariner Wealth Advisors, LLC. Investment adviser representatives of Mariner Platform Solutions, LLC dba AdvicePeriod, are independent contractors.