Between rising health care costs, a volatile market and ever-greater longevity risk, women have plenty to worry about when it comes to retirement planning. Add estate plans, powers of attorney and other legal issues to the mix, and things can quickly get complicated.
These issues are particularly pertinent to remarried women and women whose husbands have been married more than once. Boomers have driven a record-high divorce rate among adults 50 and older, and their remarriages and blended families make clear wills and beneficiary designations all the more important.
It's critical for any client to get their legal ducks in a row, of course, but given their tendency to outlive their husbands, the stakes are greater for women.
"What I find from my experience is that women do address these issues more diligently than men, perhaps because they want to take care of their families and not leave legal messes for their kids," says Mela Garber, tax principal at Anchin, Block & Anchin.
How can a female client figure out which assets are hers, which belong to her stepchildren and which have yet to be accounted for? If she was the breadwinner, how can she best pass on her earned wealth to her heirs? And if her partner passes, who will take care of her in her eventual time of need?
While advisors can't draw up the legal documents that address these questions, they can certainly help clients plan. They can also team up and create relationships with attorneys, accountants and other professionals who can act together on clients' behalves.
Documents in order
"The estate plan is the most important thing any client with wealth can do," says Kimberly Twombly, first vice president of wealth management at UBS Financial Services. "As advisors, we act as their CFOs, and it's our job to make sure they get their documents in order and have the right conversations with their attorneys."
To that end, a revocable trust is a great place to start.
"The reason I often recommend these is they provide certain benefits a will does not," says Garber.
A trust's assets may be controlled but not technically owned by the creator, and if the creator dies or becomes incapacitated, the trustee or co-trustee can step in, preventing a costly, drawn-out probate.
"I feel that, especially with today's market volatility, this is an important tool for making decisions immediately," Garber adds.
While wills don't avoid probate, they can be useful for other purposes. Only a will can name guardians for children and leave instructions on how debts should be paid, for instance, and they're cheaper and simpler to set up.
Important for advisors to note: Whether a client sets up a will or trust (or both), the allocation of the assets it assigns may impact its legitimacy. "Quite often, this is an issue with second marriages," says Garber. A husband, for instance, might set up a trust from which his current wife is entitled to all income and principal, and from which the remainder passes onto his children from his first marriage when his current wife dies.
"These types of trusts are quite often subject to litigation and present a challenge for money managers," says Garber. "It's important to structure the portfolio in such a way to benefit the current beneficiary – your female client – and take into account the future beneficiaries – her stepchildren."
While some couples don't make these decisions until after one has passed, they delay at their peril. Wills and even trusts that haven't been recently updated tend to generate litigation, particularly in families with children from multiple marriages.
Mixed marriages aside, a lack of preparation or an open-ended "I love you" will can also leave a widow in a tough spot. "It's very hard for a woman to make financial decisions within the first year of her husband's death," says Garber. "Very often kids other others start asking the mother for gifts, and it's very hard to handle when she doesn't even know whether she has enough to support herself."
The bottom line: prepare thoroughly, prepare early, and bring couples together before either falls ill. "It's extremely important for both husband and wife to be part of the estate planning process," says Garber.
