Everyone encounters grief differently. There are stages of grief and some people linger over each stage. Others jump back and forth or skip stages or even miss them entirely. There’s no normal and there’s also no right or wrong.
There are a few universals, though.
One universal is that everyone wants to help. No matter the circumstance or age or relationship, there’s a strong desire to reach out. Family and friends bring food, flowers, condolences and expressions of faith, hope or remembrance. They pick up the phone or drop by or attend a celebration if there is one. They just want to do something.
And, of course, it’s all appreciated. Family and friends are the only good remedy. Acts and words offer comfort.
Under this umbrella, though, I offer words of extreme caution. Please resist the temptation to provide financial advice.
We sometimes jump to this old standby when we can’t bake cookies or write flowery sympathy cards. We want to help, so we go where we feel most comfortable … talking about finance or investments.
I call this the grief bomb.
Take a powerfully emotional moment, toss in a few nuggets of homespun advice, stir in numbness, anger, agitation and confusion. Along comes an authority figure or trusted friend (or mere acquaintance) with a financial suggestion or idea.
Boom! A bad situation just got worse.
Why? Because there is so much that friends, relatives and colleagues don’t know (I call these people FRCs, pronounced Freaks). They probably think they are helping. But bad advice, even with stellar intentions, often has disastrous consequences. These are the correct versions of just a few topics that FRCs get wrong:
Most common spousal transfers aren’t taxable. For most couples, assets are held in joint ownership. The survivor gets the asset automatically upon death. No tax.
Wills only apply for assets held in single name. No minor children? No assets in sole name? A will isn’t necessary and doesn’t apply.
IRA, retirement accounts and pension payments transfer via Beneficiary Designation (only!). Surprisingly, a will doesn’t apply here, either. Whomever was designated beneficiary gets the money.
Life insurance proceeds aren’t taxable. People struggle with the notion that this large payment doesn’t require income or estate taxes, but it usually doesn’t. And again, whomever was designated as beneficiary gets the money tax-free.
The highest household Social Security benefit continues. Social Security is confusing but this is the general rule for spouses. (This is one reason why good choices need to be made when starting benefits.)
Most estates don’t require probate. Probate is only necessary when a decedent owned property in sole name. See above.
Some debt survives the deceased. Check with a lawyer on this, but most credit cards, mortgages and bank loans are issued to joint owners. When one is gone, the other is still responsible for the debts.
Chances are high that you learned something from this list and that proves my point. People don’t know all these things and offering financial advice without knowing can be a major mistake! Offer sympathy and empathy but leave money matters to competent advisors.
Here are the five financial steps I recommend to survivors in grief:
Survive and stabilize. First, take care of yourself. Few financial things are urgent upon a death. Make funeral arrangements and pay other immediate expenses. Pay pending utility bills or household items. Ask a friend or relative for help on these matters if you need it.
Survey, consolidate and simplify. It takes time to find records and accounts. Both health and life insurance may require months. Pensions and Social Security, too. Combine similar accounts and corral financial assets to a few convenient providers.
Solve for a new beginning. This is important and it takes deliberation. Stay in the same house? Same city? Same job? Same church? Make no major financial decisions until you know. Ask a counselor or trusted pastor if you need help. A year or longer is fine for this step.
Fund your new lifestyle. This is tougher than it seems. But once you’ve solved #3, it’s time to align money and goals. Find a quality advisor to help implement a solid plan.
Systemize ongoing review and adjustments. This is where people falter. The world is complex, and survivors often live a very long time. Plans put in place today – no matter how good they are – will need adjusting later. Again, a quality advisor is key to long-term success.
Avoid the grief bomb. This is the wrong time to be casual about personal finances. People enduring grief are emotional and vulnerable. They need our acts and words and attention. They don’t need bad advice.
Dan Danford, CFP is a CERTIFIED FINANCIAL PLANNING professional and a member of the Financial Planning Association of Greater Kansas City. He learned early ideas about money from his late father, Thad Danford, who charged rent on the family lawn mower while Dan cut neighborhood lawns. Danford is a practicing investment advisor and author of Stuck in the Middle: The Mistakes That Jeopardize Your Financial Success and How to Fix Them.