Estate Planning Advice for Women
They face challenges, making it wise to start sooner rather than later
Whether you’re single or married, divorced or widowed, a parent or not, you need an estate plan. That’s true for men and women, but women face challenges that make it even more important for them to start planning sooner rather than later.
It’s not that there are different estate-planning tools for each sex. But women are likelier to live longer, they’re likelier to be custodial parents and, speaking generally, women often approach the topic differently than men.
“Estate planning is different for women and men, but not because of anything technical. It’s different because of the psychologically different way that women approach the process,” said Patricia Annino, attorney at Prince Lobel and author of Women and Money: A Practical Guide to Estate Planning.
“Women spend all their time taking care of everybody else,” Annino said. In the process, she said, they forget those flight-attendant instructions: “You must put the mask over your own face first.”
If Your Income Depends on Others
One key aspect of estate planning women often overlook is what will happen when their husband, parents or other relatives die. Consider this: 36 percent of women 65 and older are widowed, compared with 12 percent of men 65 and older, according to the U.S. Census Bureau.
“People that you are depending on either financially or emotionally: What does it mean to you if something happens to them, if they are disabled or die?” Annino said.
She cited the example of one of her clients: The woman recently found out that when her husband started his pension payments, he chose to get the maximum benefit in his lifetime — a choice that means the benefits will end at his death.
“When he predeceases her — and he just had a stroke — her income goes to zero, because they’re living off of his income and it ends with him,” Annino said. “If you knew that 20 years ago, you might try to plan for that.”
Another of Annino’s clients, a wealthy businessman, came in to review his estate and business-succession plan. He was leaning toward putting his business advisers in charge of his estate plan, rather than his wife and three adult daughters. Annino advised him to reconsider.
If the advisers are in charge, the wife “would be absolutely at their whim,” Annino said. “They’d have a fiduciary duty to her, but they’d have all the ability to make all the decisions about what got sold, how it happened, how it was valued.”
She added that the wife made a mistake in not joining her husband at the meeting. “She knew where he was going,” Annino said. “She failed to understand that it was about her.”
For a lot of women, Annino said, “The keys to the kingdom are on the table and they just don’t understand that and they don’t pick them up.”
Start talking to your family about what their estate plans are. This doesn’t apply solely to married women. For example, if you’re a caregiver for a parent, talk to your siblings and parents about the potential implications of that: Does your time caregiving have implications for how your parent’s estate is divided?
A woman “can start a conversation that makes them put their planning into place,” Annino said.
Plans Will Vary
Your estate-plan focus will vary depending on your situation. Are you married or single? Children or no children?
For a single woman without children, “The hardest decision you’re probably going to make is who is going to be taking care of you,” Annino said, in the event an illness incapacitates you.
That is, who will make your medical and financial decisions?
For married women with children, often the first two estate-planning concerns are naming a guardian for the kids, and planning for income replacement through life insurance, Annino said.
For women who are widowed, key considerations include making sure their estate plan has been revised to reflect the husband’s death and to assess whether there are different financial-planning opportunities and challenges to consider, Annino said.
A first step for anyone who’s gone through a divorce is to check the beneficiary designations on retirement and other financial accounts. “A lot of people walk away from their spouse but then never do any of the cleanup stuff they should do,” Annino said.
Women who remarry or those who come to a marriage with significant assets should think carefully about their estate plan before tying the knot.
“We find that women are hesitant to discuss their net worth going into a new relationship, but that puts them in grave danger,” said John O. McManus, founder of McManus & Associates in New York and New Providence, N.J.
“If they keep the assets on their own balance sheet, the good news is, if they divorce, the new spouse won’t have access to that money,” McManus said. While state laws vary, in some cases the assets one brings to a marriage “are not an asset in divorce.”
The bad news, assuming your wishes are otherwise, is that, if you die first, your husband will get one-third of those assets. “By operation of law, your spouse is entitled to a minimum of one third of your assets. Social policy in the U.S. says you cannot disinherit your spouse,” McManus said.
Even if you write a will in which nothing is left to the surviving spouse, “by law, he’s entitled to one third of the assets,” McManus said.
There are a couple of ways to forestall that issue, though none are ideal, he said.
One tactic is to make sure beneficiary designations on retirement plans and the like are set such that your children or other heirs inherit — but those designations need to be in place before you get married. If they are, such designations “will control and overrule the right of election,” McManus said.
But changing beneficiary designations after you get married may be difficult, because some financial-services firms won’t allow changes that entail disinheriting a spouse without the spouse’s consent.
Another solution is to set up a trust, naming a child or other relative as the recipient, and put assets into it before you get married. You can still borrow from the trust, McManus said, but the husband will not have access to that money if you die.
McManus said he’s seen situations where a spouse changed the beneficiary designation on a retirement account to name her husband, rather than a child, with a verbal agreement that the money would go to the child in the event of the husband’s death. But at that point, there’s no way to be sure that will happen when you’re gone.
“Be clear in your head what you want to leave to your children and to your spouse before you get married,” McManus said.
Women who remarry also should realize that any assets they brought to the marriage are on tap to pay for the new spouse’s medical bills — that includes nursing-home care, which can quickly drain one’s resources, Annino said.
“It doesn’t matter whether you’ve been married two days or 50 years, the spouse has to pay for medical care,” she said, and a prenuptial agreement can’t prevent that. “Your assets are going to be on the line for his medical care, and you can’t get around that.”
Women who bring a hefty amount of money to a marriage should consider protecting her assets by purchasing a long-term-care policy for her husband, Annino said.
Just Do It
The prospect of estate planning can be overwhelming. The first hurdle is simply facing the fact of death. The next hurdle is trying to get a handle on complex topics that are often shrouded in legalese. Then there’s the question of finding and hiring an attorney. (If your financial situation is simple, there are do-it-yourself options, such as the software available at Nolo.com.)
The key is to just take one step. “Start wherever you are, and take a step,” Annino said.
Maybe that step is a financial power of attorney. Maybe it’s creating a will that names a guardian for your children. Whatever it is, just start — and keep in mind that you’ll need to revisit your estate plan at least once every five years, and more often if there’s a change in law or in your family status.
“This is a process that’s going to evolve as your life situation changes,” Annino said.
No matter what your age or how much money you should have, consider getting these items into place:
- A financial power of attorney, naming the person who will make money decisions for you if you can’t
- A health-care power of attorney, naming the person who will make health-care decisions for you if you can’t
- A living will specifying your end-of-life wishes
- If you have minor children, a will that names a guardian for them
- Make sure the beneficiary designations on retirement accounts and life-insurance policies are up-to-date.
- Talk to your bank and representatives of your other financial accounts to make sure the titling of those assets suits your situation.
Of course, even these relatively simple tasks pose challenges: You need to pick people whom you trust, and who will agree about the best course of action concerning your health care and finances.
You want to avoid conflicts “between the person in charge of your health-care decisions and the person in charge of your money,” Annino said.
“One person may not think it’s a good idea to spend money on round-the-clock care, whereas the person who has the health-care proxy may see no problem with that,” she said. “Think through those conflicts when making those decisions.”
Andrea Coombes is a personal-finance writer and editor in San Francisco. She's on Twitter @andreacoombes.