By Charles Rotblut, CFA, AAII
My father-in-law passed last week. Les was a person who was willing to take risks when the potential payoff seemed to warrant doing so. This led him to stop his graduate school studies at the University of Chicago and join what was then a brand-new government agency: NASA. His attitude toward risk carried over to investing where, like many investors, he realized profits and occasionally incurred some bad luck, such as the Enron bonds he owned. Though many of the conversations Les and I had involved non-financial topics, it was not unusual for him to discuss investing with me. Les even once gave me his copy of Benjamin Graham’s “The Intelligent Investor” to read, not realizing I already owned a copy of it.
Among the best financial steps Les made didn’t involve security selection or portfolio allocation, but rather the management of his finances. The process of assisting my mother-in-law with her finances has been greatly helped by what my father-in-law did before he passed. I’ll share some of the actions Les took with you in the hope you’ll consider following in his footsteps.
Conversations: I cannot begin to stress how helpful I am now finding the conversations Les and I had to be. My wife and I know about all the accounts my in-laws have, bank or brokerage. We also know about the sources of retirement income and the life insurance policy. There are also no disagreements about how to manage the money, since it was previously discussed. The simple act of conversing has allowed me to me quickly start on the transition, including making calls on my mother-in-law’s behalf.
Good Record Keeping: My father-in-law maintained copies of his account statements and tax returns. Having access to both allowed to me to quickly assess my mother-in-law’s financial situation. The tax returns were particularly helpful for filling out their 2016 tax returns. Though I write our annual tax guide and have done my own taxes for as long as I can remember, doing somebody else’s taxes was a new experience. Being able to both identify what tax forms I needed and have a prior return to compare my work against were immensely helpful.
It’s not just the record keeping, but also knowing where everything was located. A few months ago, I followed my father-in-law around the house with a notebook, writing down where the various documents were kept. This has helped me to know what to look for and where to find it.
Estate Planning: My parents-in-law updated their wills and set up trusts. My wife accompanied her parents to the estate attorney, while I dialed in. Knowing who the attorney is, having her know who I am and having a plan in place has provided much peace of mind.
Account Access: My wife and I are listed as agents on the investment accounts. This allows us to act as if we were the account owners. We also have the powers of attorney over my in-laws' finances. Combined, these authorizations enable us to make financial decisions and take actions on their behalf.
There are issues of trust and competency to be considered when granting such authorizations since it can leave the door wide open for mistakes, abuse and fraud. My father-in-law trusted us; my wife and I are being fully transparent with my mother-in-law, and she is doing the same with us. Not every family is fortunate to have this type of trusting relationship. As such, while naming agents and granting powers of attorney can be very helpful, much thought must be given to the decision of who to give them to.
Pre-Planning the Funeral: My in-laws previously established their final arrangements. There are no questions about what Les would have wanted. We also don’t have to worry about purchasing a plot, deciding which casket to buy, etc.
Though nobody likes to think about their own demise, planning your own funeral has big advantages. The fixed costs are locked in at current prices. (There still may be variable costs, such as transportation.) Your surviving loved ones are not put into a position of making costly decisions at a time when they’re grieving. (Making financial decisions when you are emotional is never a good idea.) Plus, your personal wishes are more likely to be carried out. The latter particularly matters if you have special requests, such as casket preferences, cremation or a mausoleum. If you desire to be buried in a particular cemetery or a specific area of a cemetery, pre-planning can give you the option of waiting for a plot to become available on the secondary market.
There are a few other things worth mentioning. I’ve been keeping a separate notebook dedicated to my father- and mother-in-law’s affairs. It has proven to be invaluable for keeping track of various items as well as detailed notes about what still needs to be done. Call about survivor benefits as soon possible following the deceased’s passing to get the ball rolling. For instance, the Office of Personnel Management told me it could take two to three months before survivor benefits start. Be prepared to get copies of the death certificate (the funeral home should assist with this) and marriage licenses. Finally, don’t be afraid to reach out to friends and extended family. Many of them will want to help, even if it's just sending food or being there for you.
The Week Ahead
Five members of the S&P 500 are scheduled to report: Red Hat Inc. (RHT) on Monday; Carnival Corp. (CCL), Darden Restaurants (DRI) and McCormick & Company (MKC) on Tuesday; and Paychex (PAYX) on Wednesday.
The week’s first economic reports will be February international trade, the January S&P Case/Shiller home price index and the Conference Board’s March consumer confidence survey, all of which will be released on Tuesday. Wednesday will feature February pending home sales. The second revisions to fourth-quarter GDP will be released on Thursday. Friday will feature February personal income and spending, the March Chicago purchasing managers’ index and the final University of Michigan’s March consumer sentiment survey.
Seven Federal Reserve officials will make public appearances: Chicago president Charles Evans on Monday and Wednesday; Dallas president Dennis Kaplan on Monday, Tuesday and Thursday; Kansas City president Esther George on Tuesday; Boston president Eric Rosengren on Wednesday; San Francisco president John Williams on Wednesday and Thursday; Cleveland president Loretta Mester on Thursday; and St. Louis president James Bullard on Friday.
The Treasury Department will auction $26 billion of two-year notes on Monday, $34 billion of five-year notes on Tuesday, and $13 billion of two-year floating rate notes and $28 billion of seven-year notes on Wednesday.
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