To download the printable PDF for how we helped the Mary Smith, click here 

Full Transcript:

Benjamin Haas  00:00

At the Haas Financial Group, we philosophically believe that everyone should have a financial plan, especially those who are going through a major life transition such as losing a loved one or spouse. It's an incredibly difficult time in someone's life and in addition to having to reorganize finances, and then oftentimes priorities are changing one’s needs, wants, and wishes. Someone going through a solo journey, there may just be too many things to have to handle and organize alone. So while every client we work with is different, and hence, our advice is personalized and unique, we know that someone going through this life transition is going to have typical concerns based on this experience. So we'd like to share today how we can help someone dealing with the loss of a loved one and having to redirect their financial life through financial planning, with an example, Mary Smith. So Adam, if you could kick this off, share with us who she is, the typical goals or pain points that now she's going to have to deal with and what may have led her to seek us out.

Adam Werner  01:11

We call it the solo journey, as you mentioned, and this could happen at any time, at any age. In our example, here for Mary Smith, it was a retired couple, where the husband passed away first, there will be additional considerations if the spouse was still working. So if Mary was still working, then clearly there would be additional considerations, but ultimately, the goals are pretty much the same, regardless. The number one goal is just getting through the initial wave of that emotional period and now having to start to sift through all of the fallout from a financial and accounting standpoint. I think what we typically see or what is very common is when there are spouses, they name each other as the executor or executrix. And at the same time of having to now deal with the emotional loss, it's now feeling like there's a lot of responsibility also on their shoulders, which makes it even a more difficult period to go through. Some of those items that need to happen: it's going through making sure you know what accounts exist, the insurances that may be out there, getting things into Mary's name now and then “settling the estate.” But then our role there is to help be involved in the communications. We certainly hear a lot of people say, “I don't know what to say to the representative on the phone, I don't know what to ask, I don't know what I should be finding out and what I need to do.” We can certainly play that role and be on the phone guiding the conversation. We call it the holding their hand moment, going through where we can hopefully take as much of that burden of the administrative work on our shoulders because that's what we do. The secondary part that happens over time, not the immediate need, it's the planning conversations. Does Mary have enough to maintain her lifestyle now moving forward? We help actively manage the taxes, making sure estate documents are updated, and if she has any life insurance policies herself and just making sure that they still fit. It really is just the typical planning questions that we would see based off a phase of life but that stuff is certainly secondary and we can wait to get to that point.

Benjamin Haas  03:47

I think you said that very well. The number one goal is really to deal with the pain points, whether it was expected or unexpected. I think there's naturally a lot of uncertainty that comes with this reality of loss. There's fear, there's worry. It's the “now what” kind of questions that I think can all be rolled up into the number one question we would want to help address with Mary and that is, am I going to be okay? From that financial standpoint, she needs to be confident that her assets are going to last her lifetime; she needs confirmation. Whatever security can be provided, we need to help provide for her. I think the second pain point is, no matter what the system was before the spouse was lost, it's now having to organize all those key documents. What's important, what's not, what needs to be kept, what doesn't. I think it's important to note here that the loss of the first spouse, it really is easier to settle the estate than it may be after the loss of the second spouse for those heirs. So, you said it well, we can be there to help hold that hand but it is the pain point of really having to settle that estate. I think there's going to be a lot of details, a lot of boxes that need to be checked to make sure that money is going to the next generation as efficiently as she would want. So that we need to keep that in mind when we are helping settle that estate and I think the other pain point that we'd want to bring out is, this is a time with a lot of uncertainty where hopefully, there's a lot of love and support. But it also may mean that she may be getting a lot of fractured advice, either from friends, family, other professionals that are going to say to her, “you need to be doing this” and they may not fully understand or may not know what her full situation is so Mary may not know what's right for her. This is where someone like us can help coordinate that big picture. She may want that trusted advisor to help her make those important decisions and I guess the last thing I would say on that is, we think it's really important to kind of recognize that big, irrevocable decisions don't need to be made in the short term. We think her maintaining her flexibility is really important. So let's maybe talk about after those goals and pain points, what is the process? How can we articulate what our process would be to help Mary get through this?

Adam Werner  06:13

Clearly we’re financial planners, so we have processes that we stick to and that's no different here. However, we do break this down into essentially three distinct phases: it's the now, the soon, and the later and we kind of alluded to that earlier. The formal financial planning process and just redirecting goals, that happens in the later phase. So we'll get to that but we have a specific checklist that we can help guide people through that breaks down those three specific phases. So in that now phase, the very first section, it's just gathering the information, trying to organize all of what could be multiple accounts, insurance policies, all of the things that need to get done sooner than later, and starting to contact those financial institutions, retitling accounts into the surviving spouse's name, all of those things, dealing with the estate on the front end, that that do need to occur in a fairly timely fashion. That second step, the things that need to happen in a sooner timeframe, it's now just taking a step back, once that initial fire is put out of the estate stuff that we need to do, and taking stock of the new situation. It's updating beneficiaries, going through all of their different options of what they now have in front of them to start to make some decisions. And then the later is, like I said, that financial planning section, “what are my goals?” and how do I align my assets to now support them acknowledging that my goals may have changed at this point with the passing of the spouse, and it may take some time to even figure out what those new goals even look like now moving forward.

Benjamin Haas  07:59

It may be different if we'd been working with Mary for a little while, but let's assume that we have not. I think the key for us throughout this whole process is while we're not pushing the limits of what I think needs to happen. Like he said, now we're in the soon phase and it gives us an opportunity, the key here is to listen and to learn, to do our best to understand her values and her vision during this difficult time. Then, we can start to financially help her as we move forward. So I wanted to add that but then maybe I'll segue into this specific example, on kind of how we're going to gather data before financial planning and that later timeline becomes far more interactive. You noted this, I think it's really our job to help organize the data and some of this is just going to happen behind the scenes. This isn't meeting time with Mary but whether it's scanning the paper statements or using technology, like eMoney to sift through facts and gather data. It doesn't have to be technology, we can work with paper, but either way, this tool gives us the ability to see the big picture so that we can start to advise when decisions need to be made.

Adam Werner  09:11

That also helps us, hopefully, give someone like Mary confidence to make those decisions and answer that number one question of, “am I going to be okay?” with all of all of the changes that are now occurring. Potentially, am I going to be able to continue to live the lifestyle that I want to live throughout the rest of my life now and that planning tool allows us to start to illustrate how income can cover expenses, both now and into the future.

Benjamin Haas  09:44

Let's talk about that later stage. Once we get to financial planning for the solo journey, it's first going to be to confirm all the fundamentals are still covered. Let's maybe go through some of those fundamentals.

Adam Werner  09:59

The obvious first one that comes to our mind is, does the income situation change? Right? If they were in a situation, Mary and her deceased husband, Gerald, were retired collecting social security and pensions. So is the income going to change? Was there a survivorship option on the pension that Gerald had? Does that just go away completely if there wasn't a survivorship option? Depending on whose social security was higher, if his was higher than hers, she could now start receiving his benefit, but then hers goes away. So regardless, there's usually an impact from an income standpoint. If there was an annuity that was paying some sort of income guarantee, then we just need to address does that need to change? Will it change? Should there be any changes on our end to recommend, but we just want to make sure that she understands how income is going to come to her moving forward and that her bills are going to continue to be covered.

Benjamin Haas  11:08

I think the other checkboxes under the fundamentals we often talk about is insurance and estate documents. So in this case, if there are still insurance policies and she's really not sure what they are or if she should continue them, then we need to go through the process with her thinking about what makes the most sense. We don't want to continue to maybe put out a lot of money but at the same time, it may be part of our goals to continue to have that for her family and in the same way we talk about typically wanting to update the will. Clearly with the unfortunate passing of her husband, now all of those estate documents should be updated to now reflect her situation, her children and grandchildren. Confirm a new executor, make sure the power of attorney is there, the health care directive and I think it's really important to articulate here that once the first spouse passes away the onus, and unfortunately, the burden is really now on Mary to get it right; to make sure that anything that passes is going to go exactly how she wants because that natural connection of just to the spouse is not there.

Adam Werner  12:18

Then let's talk about the typical, the goal-oriented questions, that we would want to help answer in that later phase of going through that planning process for someone like Mary Smith now on this solo journey through retirement. How do we best align her resources now moving forward? We alluded to it, it's that initial, making sure she's going to be okay just from an income and expense standpoint. So between any fixed income, the Social Security or the pension, if that doesn't fill what she needs to meet all her expenses, then we need to figure out what accounts and what savings are going to need to be relied on to help fill that gap. Another question that we certainly see is if there is a mortgage, should she pay that off by pulling from a retirement account or an investment account or life insurance proceeds? Does it make sense for her to do that in lieu of leaving her investments intact?

Benjamin Haas  13:22

I think we like to give the education around bucketing her assets in order to do these things, right? Fill the needs, fill the wants, cover these things, but then maybe it's creating some sort of bucket to cover the uncertainty of her future right now being on the solo journey. Does she need to create a plan ahead of time to help cover healthcare expenses or long-term care expenses? Who's going to assist her later in life or does that need to be outsourced? Then we also often get as part of a last bucket after uncertainties are covered, it's this legacy bucket for her. Maybe that has become some of her priority to see with her adult children and grandchildren. If she can give it away, she may want to help them financially, as she ages or certainly if she feels secure in her own plan and I think you alluded to it. This is where we really like to have the ability to do things interactively through the decision center of eMoney because we find it very helpful for somebody like Mary, where the impact of certain decisions is hard to wrap your head around. This is a way to see and quantify the dominoes and how they impact certain decisions, we like to call them trade-offs of financial planning. So if that is really the map on how we're going to try to educate her into what decisions she needs to be making, let's talk about the actual services that we are truly, formally providing to her.

Adam Werner  14:51

That initial process is very interactive on the front end. It's meeting time sifting through the information, handholding through that initial process, making sure that all those boxes get checked in a timely fashion. There is definitely a lot of time on the front end spent developing that relationship. On the planning side, then after that it's documenting the advice, giving the education and ultimately having the accountability of who is going to do what and by when. So again, that's where we can play that role of “let's set out our to do list and start checking these boxes.” Some people like to delegate a lot of those things either to us or to other professionals. Others want to have their hands in every decision and that's fine too. We will play what role we need to play there but for Mary, it's really important for her to have our planning process or that document with our written advice to reference as she goes through this next phase of her life. So for her, the actual services that we would provide is that comprehensive financial planning service for a flat fee that is known and transparent on the front end. Then, if there are investment accounts that she chooses to have us manage on her behalf, then there's a separate fee for that service as well. We have accounts through LPL Financial and those are asset-based management fees that are charged, there's no commissions, there's no transaction costs. Again, in the effort of clear and transparent fee structures, it's a percentage of the account that we receive to manage those on an ongoing basis.

Benjamin Haas  16:42

I think we like to articulate that comprehensive financial planning process as an ongoing relationship. It's not a transaction just as this life transition may have uprooted what Mary really thought was going to be her future, or at least the way things are going to change in her life, she's going to continue to reassess her own situation. So this isn't a transaction. People don't come to us to sell them a product or answer one question and then go on their way. We're here to be an ongoing resource for her and have that relationship model which means we're checking in multiple times a year. We're sharing updates with each other, we're reviewing parts of the plan to make sure they still fit in and are relevant, and making adjustments when life throws her curveballs again. Maybe for Mary and for Gerald, getting to retirement was a huge milestone but now the focus of course shifts to her going through this next phase of her life, whatever that brings, and we're happy to support her however she needs.