NEXT STEPS BY ERIC S. WILSON
Copyright Š 2019 Eric S. Wilson. All rights reserved. This Workbook or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of the publisher except for the use of brief quotations in a book review. Printed by Graphic Resource, in the United States of America. First printing, 2019. Eric S. Wilson 6501 Peake Road, Building 300 Macon, GA 31210
ABOUT THE AUTHOR Eric S. Wilson is the Managing Director and Founder of Foundational Wealth Advisory, a Member of Advisory Services Network clearing through Fidelity. For the past 24 years, Eric has served the varied needs of individuals and families whose wealth has the potential to change the essential nature of their descendants’ lives. Eric began his investment career as a college intern at Merrill Lynch in 1993, which led to his being hired full-time as an Associate Financial Consultant in 1994. Though his titles changed in the years that followed, his passion for the betterment of the firm and how it served its clients did not. This passion would lead him to serve on a national council for Merrill Lynch, Representing the Southeast as an inaugural member of the Managed Solutions Advisory Board. Through his service on this select 12-member board, Eric helped contribute to enhancements to the institutional money management programs used by Merrill Lynch’s 14,000+ advisors. In February 2010, Eric joined the newly formed company of Morgan Stanley Smith Barney, which today is called Morgan Stanley Wealth Management. Seven years later, in May 2017, tired of the client constantly being displaced by the shareholder and the human resources department, Eric left “Wall Street” to build a firm focused solely on the client. He named the firm “Foundational Wealth Advisory”.
Eric is dually certified as a Certified Investment Management Consultant (CIMC®) through the Investment Management Consultants Association and both an Accredited Investment Fiduciary (AIF®) and an Accredited Investment Fiduciary Analyst (AIFA®), which are both earned through Fiduciary360. While at Morgan Stanley, Eric was also among the select few wealth advisors recognized and designated by Morgan Stanley as a Family Wealth Director, a designation reserved for advisors who have demonstrated high standards of delivering a depth and breadth of experience and knowledge in wealth planning and investment advice. A native of Waycross, GA, Eric graduated with a B.B.A. in finance, economics and accounting from Mercer University. He has served on the advisory boards of the Community Foundation of Central Georgia and the Children’s Hospital of Central Georgia and as a member of the Macon Estate Planning Council. Currently, he serves as the Chairman of the Board of Visitors of the Stetson School of Business and Economics at Mercer University and as a member of Mercer’s Athletic Foundation Board. Eric and his wife, Cindy, are proud parents of four sons, ages 17, 17, 17 and 10. They belong to Ingleside Baptist Church where Eric serves in various ministries of the church.
TABLE OF CONTENTS Introduction
2
The Beginning
3
The First 3 Weeks
10
The Executor
12
Titling Your Accounts
19
Transferring Your Assets
21
Real Estate
22
Automobile
23
Retirement Accounts
24
Personal Items
26
Beginning Again
29
Strategies and Priorities
33
INTRODUCTION The purpose of this workbook is to recognize that in every marriage there tends to be a financially oriented spouse and a non-financially oriented spouse. In fact, there are many couples where “our” money, “his” money, and “her” money still exists. One spouse pays some bills, and the other pays other bills. To complicate matters, if the wife looks at the husband’s system for paying bills, she may be as confused as he would be if he were to look at her method of paying bills. Each spouse has their own method to the madness. Yet, each is oblivious to the other’s. Add to this, corporate retirement plans, stock option plans, real estate parcels, military benefits, collectibles, and children/grandchildren, and the potential for chaos should one of the spouses become incapacitated or die, quickly surfaces. We have all experienced learning curves at various points in our lives. Going from regular math to algebra or regular science to physics in high school was one such time. Transitioning from college to being on your own for the first time was another. Having your first baby and learning how to build and run a family was still another.
But over the last two decades I have found that the steepest learning curve by far occurs at the loss of a spouse. In some cases that loss takes a period of years, as is the cases with Alzheimer’s or dementia. In other cases it happens more quickly as with cancer, Parkinson’s, or the other myriad of diseases. In the rarest of cases, it may happen suddenly with an accident, heart attack, or stroke. Imagine the stress of coping with the loss of your mate while at the same time trying to cope with what bills need to be paid, the question of your financial solvency, and a host of other questions that will flood your mind if this were to occur. While not an exhaustive collection of thoughts and to-do’s, what follows is intended to empower the non-financially oriented spouse and bring peace of mind to the financially oriented spouse knowing they are each more prepared to deal financially with the tragedies of life. I hope you will use the exercises contained herein to draw you closer to one another as you give the ultimate gift of your knowledge to the one you love most in this world. NEXT STEPS | 2
THE BEGINNING What follows is a checklist that you should become familiar with while your spouse is able to assist. These items should be considered, located, and/or created. A separate ledger/notebook is highly recommended for the answers to the items below.
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Is there a will? Where is it? Who is the attorney who drafted it? Is he/she still alive/practicing law? (Make notes on following pages) Obtain a copy or the original and review it to ensure it still outlines your current wishes. Who is the executor or administrator of the estate? When is the last time this choice was reviewed and/or updated? Is this person still competent?
What are your wishes for end of life/burial as well as service arrangements and what is the plan to make certain those wishes are carried out? Make sure you have each other’s Social Security number, current/former occupation, address, and parent’s names. For military and former military, you will need their military ID badge as well.
For additional information, see www.5wishes.org
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HIS NOTES
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HER NOTES
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THE BEGINNING (cont.) Locate birth certificates, marriage certificate, prenuptial/postnuptial agreements, divorce decrees, military discharge papers, and cemetery deed. Is there a safety deposit box?
YES
NO
Which bank? Which branch location? Who can sign to access? Where is the Key? Make a list of important websites visited along with the username and password for each site. (See following pages)These digital assets are as important as other physical assets you own, but are much more cumbersome to deal with and/or access after the death of the first spouse. Estimate how much money the surviving spouse will need in the first 4 weeks following the death of the first spouse. Where are these funds to come from? How will they be accessed? It can take a month or so to provide the surviving spouse with a new checkbook, convert bank accounts to single name, re-direct pension and/or social security payments, etc., depending on the probate process.
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HIS USERNAMES & PASSWORDS Example: www.facebook.com
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HER USERNAMES & PASSWORDS Example: www.facebook.com
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INTRODUCTION: THE FIRST THREE WEEKS We all react to the shock of loss in various ways. Whether you are widowed with dependent children, a widower with no dependent children, or a corporate widow with adult children and adult grandchildren, the tasks we must complete are all similar. The following pages list a framework of different segments of time. In the first three weeks, there are to-do’s that are critical to begin.
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Day ONE - Notify your attorney, CPA, insurance agent and financial advisor of the death of your spouse. This gets your team working on your behalf.
You may need to open an Estate Account at a bank, investment firm, or other financial services firm and transfer all assets into that account that do not pass directly to you (via titling of accounts, as beneficiary, After the Funeral - Request 15 certified copies of the etc.). The estate account is what your Executor will use death certificate from the funeral director. This may to pay expenses from the estate. The Executor will then seem like a lot, but most insurance companies and distribute any remaining assets to the persons or entities/ financial institutions require a certified copy before they charities outlined in the Will. can process any claims. Re-title bank accounts from Joint to Single name. Any The Executor will need to probate the Will and get account in the decedent’s name alone will need to be several copies of the Letters Testamentary from the transferred into an Estate account and pass through probate court. (See following page) probate. One way to avoid this is to (a) add a joint owner, or (b) add a transfer on death beneficiary provision to the account. 1 1 | W W W. F WA D V I S O R Y. C O M
THE EXECUTOR WORKING WITH, OR AS, AN EXECUTOR If your family member had a Will, the Will needs to be probated in order to name an executor(trix) to carry out its provisions. Whether you or somebody else has been designated executor in the Will, you should be aware of the responsibilities this person must assume, which include the following:
Paying Any Income or Estate Tax Owed From Assets in the Estate
Filling Income and Estate Tax Returns
Paying Outstanding Debts From the Assets in the Estate
Distributing Assets to Beneficiaries
EXECUTOR
Notifying Creditors of the Deceased’s Passing
Safeguarding Estate Assets
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INTRODUCTION: THE FIRST THREE WEEKS (cont.) Cancel any credit cards in the name of the deceased, but not before checking on any rewards points, etc. You could be giving up substantial monetary benefits if you simply cancel the cards without checking on the points. Stop any automated payments in the decedent’s name, and also any automatic drafts from the decedent’s accounts. Include a list of accounts/automated payments. (See following pages) Contact all insurance companies as soon as possible to file claims and update beneficiaries. Contact the Social Security Administration for survivor benefits. If decedent was a veteran, assess if there are any veteran’s survivor benefits. Contact the decedent’s former employer for potential group life insurance proceeds, pension benefits, or other deferred compensation or benefits. If decedent was a business owner, ask partners about a buysell or other agreement covering disposition of the business. Cancel any unwanted magazine or newspaper subscriptions. 1 3 | W W W. F WA D V I S O R Y. C O M
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HER LIST OF PAYMENTS Payment Name: Payment Type (circle):
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TITLING YOUR ACCOUNTS HOW ACCOUNTS ARE TITLED DETERMINE HOW ASSETS ARE TRANSFERRED
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Individual account in deceased’s name
Tenants in Common (OR)
Assets are subject to probate and must pass through an estate account where they can then be distributed to the beneficiary(ies) of the estate.
At account opening, the owners determine what percentage of assets will be contributed by each. When an owner dies, his or her percentage is part of his or her estate and is subject to probate. The other owner continues to own his or her share of the assets.
Individual Transfer on Death (TOD) Assets pass to account beneficiaries without probate. In some jurisdictions a contrary provision in a will can override a beneficiary designation, in which case the account would be subject to probate. Joint Tenants with Rights of Survivorship (AND) When one owner dies, the other continues to own assets in the account, without probate.
Tenants by the Entirety Tenants by the entirety is a special type of joint property ownership that’s allowed only between a husband and wife. It’s not recognized in all states. Tenants by the entirety automatically have rights of survivorship.
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TRANSFERRING YOUR ASSETS Family Business This may be your family’s most valuable asset. Seek professional assistance. Look for a shareholder agreement, business insurance policy and/or stock certificates or certificate of ownership. Contact your family’s attorney, CPA and financial advisor to determine whether a business succession plan has already been put in place.
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GUIDELINES FOR TRANSFERRING ASSETS Real Estate If you and your spouse own a house with a mortgage, contact the bank or mortgage company. Check to determine whether there is a mortgage insurance loan. If so, the policy may cover future payments. If not, you are responsible.
Change the name on your home owners insurance. Review coverages to determine appropriate new level… it may need to be reduced. Talk to your attorney about registering the mortgage and ownership of the house with local government agencies in your name only. NEXT STEPS | 22
TRANSFERRING YOUR ASSETS (cont.) GUIDELINES FOR TRANSFERRING ASSETS Automobile Contact your state motor vehicle agency (local DMV) to re-title the ownership of any automobile owned by the deceased. If you now have an extra vehicle, seek advice on how to sell it or consider gifting it to a family member or charity. Change the name on your automobile insurance if the policy was issued in the name of the deceased. Review your coverage limits with your insurance agent…limits might need to be reduced.
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RETIREMENT ACCOUNTS Retirement accounts like IRAs, 401(k) and 403(b) plans are not held in joint name. Rather, they are owned solely by a single individual. Retirement accounts pass to beneficiaries designated by the account owner. This designation cannot be overridden by a will. This would be a good time to update your own primary beneficiary designee(s). For employer-sponsored plans like 401(k) and 403(b) plans, you will need to contact the employer or plan administrator. They will provide you will the paperwork you need to roll over this plan into an IRA for yourself. For IRAs and other individual plans, contact the financial institution where the plan is maintained. They will assist you in thinking through the options you have.
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RETIREMENT ACCOUNTS (cont.) If you are named the primary beneficiary of your spouse’s retirement accounts, you can roll over the accounts to an IRA in your name. You will not pay any current income or estate taxes on these funds. Note: These assets will continue to grow on a tax deferred basis and you will have control over future investment decisions.
Non-spouse beneficiaries can also roll over assets to an IRA. However, they must take taxable distributions from the plan each year. The formula for calculating these distributions depends on whether or not the deceased had begun taking required minimum distributions (RMDs).
Check with BOTH the deceased’s Financial Advisor and your Financial Advisor to verify whether RMDs had begun. 2 5 | W W W. F WA D V I S O R Y. C O M
PERSONAL ITEMS In addition to a Will, the deceased may have left a letter of instruction that spells out his or her wishes as to what should be done with particular assets (generally personal items) upon death. In some cases, items with sentimental value to particular friends or family members may be passed on to these individuals. (See following pages.)
Check with the Executor and/or attorney about handling these final wishes.
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HIS PERSONAL ITEMS LIST
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HER PERSONAL ITEMS LIST
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BEGINNING AGAIN THOUGHTS ON BEGINNING AGAIN At some point your thoughts will turn to beginning again emotionally, relationally, and financially. While difficult, all the preparations that you have undertaken should actually make beginning again somewhat easier. As you are closing out the estate of your loved one you will be, by default, creating your own estate plan.
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What gaps were there in your spouse’s planning? What hurdles did you have to overcome that were not anticipated? What things aggravated/angered you because they were not set up properly?
Keep all of this in mind as you begin to construct your own plan. The goal could be settling out your estate as easily as possible for your loved ones. Consider the bullet points on the following pages as you embark on your new journey.
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BEGINNING AGAIN (cont.) THOUGHTS ON BEGINNING AGAIN Once you have addressed your immediate concerns and begun to take care of the many short term tasks involved in settling an estate, it’s time to start thinking about your longer term goals and objectives, such as:
Making certain that all the financial documents you recently located are organized and that someone you trust knows where they are. Updating your Will, beneficiary forms and any trust agreements to account for the loss of your spouse. Also, arrange for the guardianship of minor children and their assets should anything happen to you. Making sure that you know who your creditors are and when they must be paid. This includes mortgage payments, utility bills, credit card invoices and home/ car insurance premiums. Understanding whether automatic debits are being made from your checking account and whether you want them to continue.
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Contacting your family member’s employer if he or she received insurance benefits from work. Find out if you’re eligible to continue that coverage and what you must do to continue making payments. Ask about long-term care, dental, vision and life insurance, as well as health coverage. Thinking about your new life insurance needs, especially if you have children who depend on you. If you have your own insurance coverage, review your policy to make sure you are adequately covered. If you need life insurance, compare the terms and prices of various providers. Does your investment asset allocation still make sense or should it be adjusted to reflect your specific goals, new circumstances and risk tolerance?
STRATEGIES AND PRIORITIES Your life has changed, and with these changes comes the need to examine your priorities and formulate new strategies.
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Here are a few things to consider: What is your current financial situation - your cash flow, expenses, assets, liabilities and net worth? Are you retired or planning to retire in the near future? Do you have sufficient assets to provide adequate cash flow for the rest of your life? What about your children’s education? How much have you earmarked for this purpose and how much will you need to meet projected costs? Does your investment asset allocation still make sense or should it be adjusted to reflect your specific goals, new circumstances and risk tolerance? Do you have adequate insurance coverage for yourself and your possessions? You may have too much coverage at this point. Is your estate plan designed in a way that provides for your children and other loved ones in the way you desire? Is it structured to minimize taxes and maximize your legacy? Is giving to charity important to you?
There will inevitably be unforeseen things that arise as you settle the estate of your spouse. Some things will be easier than anticipated and others will be frustrating to deal with and remedy. As you begin putting together your new estate plan and updating your documents, use the good and bad of your experience in settling your spouse’s estate to amend, simplify, and streamline the process for your executor and heirs.
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NOTES
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65 01 PE A KE R OA D, BUIL D ING 3 00 | M ACON, GA 312 10 TF: ( 8 4 4 ) 53 3 -6 53 3 | F: ( 4 7 8 ) 3 3 6 -54 4 0 W W W. FWA DVISORY.COM This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal and/or tax advisor for specific information pertaining to your situation.
Advisory Services offered through Foundational Wealth Advisory, a Member of Advisory Services Network, LLC. Phone: 770.352.0449. Securities offered through Calton & Associates, Inc., Member FINRA/SIPC. 2701 N Rocky Point Dr., Tampa, FL 33607. Foundational Wealth Advisory, Advisory Services Network, LLC, and Calton & Associates, Inc. are separate and unrelated entities.
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