Married women in heterosexual relationships have more financial power than ever before. According to a recent Pew Research study, the percentage of wives who out-earn their husbands has risen to 15 percent of married households with children, up from four percent in 1960. And of all married heterosexual couples with children, 65 percent of wives are employed, up from 37 percent in 1960.
And yet, studies indicate that wives in heterosexual marriages are, on the whole, not as confident as their husbands to assume full responsibility of their finances if needed. Also, as CNBC reported recently (and which industry anecdotal evidence backs up), husbands are more often the point of contact with the couple's financial advisor than wives. When you consider too that between 40 percent to 50 percent of heterosexual married couples get divorced, and women still outlive men by substantial margins, wives often find themselves in the position of having to be in complete control of investments, retirement, property, taxes, etc. and not as prepared as they should be.
Like a lot of financial analysts, I see this in my practice on a regular basis. I also know that when someone has suffered the loss of a spouse through death or divorce they have other pressing things on their mind. As much as tackling finances can be particularly tough to deal with at that moment, it will be tougher to deal with the financial realities that the death or divorce of a spouse bring if you don't know where to begin.
So if you find yourself divorced or widowed and are having to assume total responsibility of your finances for the first time here are four areas you should look into first:
Expenses and liabilities: Taking an accounting of liabilities and expenses -- ie. what's owed -- is an essential first step to taking full financial control. In the case of divorce, which spouse will continue to pay for certain expenses is typically decided in the settlement.
Nevertheless you should do an audit of whose accounts are being used to pay for what as soon as you've decided on divorce. For instance, if you were making the payments on both cars, both cell phones, or both insurance policies, you want to make sure you're no longer paying his bills. So a first priority in case of divorce is to separate your expenses from his. If you've done financial planning it is likely your financial advisor already has an accounting of the couple's expenses. If the account with the advisor is jointly held then you can contact the advisor directly to get a list of all of your and your husband's expenses. If your husband's name was the only name on the account the advisor will not be able to speak to you and you will have to do the accounting yourself.
In the case of a deceased spouse, the first priority is to make a list of all liabilities and find the account or accounts the payments are coming out of and make certain that everything still in use is being paid. Widows will also then have to consider what liabilities to keep -- say a car -- and what they may want to sell -- say a house. You also need to make sure to shut off payments for things like the deceased spouse's prescriptions or health insurance.
Assets: Similarly, a full accounting of assets needs to be taken. In the case of divorce, the settlement should determine who will own what after the legal proceedings are over. However, to get a proper accounting of the couple's assets the financial advisor or the financial institution the advisor works with should be consulted. If your name was not on the account, you will have to have your divorce lawyer request the information.
In the case of a deceased spouse, you will need to notify the financial advisor and / or the financial institution. If the account with the advisor was with the husband only then you will need to send a death certificate to the advisor or the financial company to get the name switched over to yours and / or to get any information on the accounts. At that point, the job will be to get the deceased's name removed from joint assets. As for who will receive the deceased's assets, the will determines that, with the exception of pensions, 401ks or IRAs that list a specific beneficiary. In those cases the person listed as the beneficiary will supersede the will. If the husband's estate is listed as the beneficiary then who receives the benefits will also default to the will.
Insurance: A divorcee needs to first find out what policies the couple had, what accounts payments were coming out of, and whether she is a beneficiary or not. For instance, if you have an annuity and the payments come out of your and your husband's joint account, but he is both the owner and the annuitant (ie. the person who receives the income from the annuity) you need to make sure you do not continue to fund his retirement. Similarly, if your husband has a life insurance policy you helped pay for and your name is removed as a beneficiary you need to make certain the payments are no longer coming out of your account.
If you are a widow, you need to find out if there was a life insurance policy or policies and, if so, contact the company or companies right away. The financial advisor may or may not have this information depending on whether he or she did a comprehensive financial plan for you and your husband. If not you'll need to hunt for statements coming in the mail; papers such as the actual policy kept amongst his personal information; or other paper-trails such as receipts, auto withdrawals or check book records. You will then need to provide the insurance company a death certificate in order to get the death benefits processed.
Income: In the case of divorce, the only issue at hand is whether alimony or child support are negotiated. Otherwise there is no guaranteed income from the spouse.
With the death of a spouse there are several points related to income. If, for instance, the spouse had a pension one of two things may happen. If there was no survivor option -- ie. the pension was for "life only" -- then the payments will usually stop at the time of death. However, if there was a survivor option -- ie. a "life with survivor benefits option" -- then you will receive the benefits if you are listed as the beneficiary. Note: there is usually a decrease in payments for the survivor listed as beneficiary.
Similarly, if the deceased husband paid more into Social Security than you did because he was the primary bread winner you may be able to receive his higher payments at his time of death.
When the financial issues that death and divorce necessarily bring are settled, the important thing to do is to begin to make a financial plan for the future so you will always stay in the financial driver's seat.