Doc's note: This week, we want to help you get your 2021 started right... by getting your financial house in order. Whether you're a beginner investor, an experienced investor, or haven't even thought about your finances before, you don't want to miss this week.
Today, we're sharing the story of how the 'King of Wall Street' kept his family financially secure and how you can do the same...
He was as famous for making money as he was for losing it...
In the 19th century, Leonard Jerome was dubbed "The King of Wall Street."
He started dominating New York City in the 1850s when it was the hub of explosive American growth.
At the time, the stock market was often more about short-term speculation than long-term investing in real businesses. And Jerome was born for it. Reportedly, his confidence and appetite for risk was only matched with his love for living lavishly – from thoroughbred racing to building a mansion with its own 600-seat opera theater.
However, while he made and lost multiple fortunes, Jerome was careful to ensure his family would be secure after his death.
For example, when Lord Randolph Churchill married his daughter, Jerome set up a trust so that she would always have her own income – a shocking notion at the time. Their son was Winston Churchill.
And by the time of Jerome's death in 1891, most of his fortune passed on to his family, mostly to his wife Clara. He whispered on his deathbed, "I have given you all that I have. Pass it on."
Most folks don't give their futures much thought. Fewer still create a financial plan for their families after they're gone.
If you haven't thought about the death of your spouse and the financial aftermath you'll face, it's time you do. It's not an easy or pleasant topic, but it's important.
So today we're highlighting three assets that can be a headache if you're unprepared when your spouse passes.
Keep in mind, these are just the basics. Having a conversation with an estate planner or financial advisor will help you navigate all the nuances we can't discuss here.
Bank accounts. This might be the most contentious part of marriage. According to a 2016 survey from TD Bank, one quarter of couples surveyed chose to keep all of their finances in separate accounts.
Now, this offers some benefit, like maintaining financial independence. And there are certainly concerns over things like debt that could make separate finances work.
If you do share a bank account, it's wise to consider a joint account with rights of survivorship. That means if one spouse dies, the account will pass ownership to the surviving spouse. But it also means it's not included in your estate. So if you want any of the funds in there to go to someone else upon your death, you won't have that option.
If one of you joined the other's account instead of opening one at the same time together, be sure to check the type of account. You want to make sure you will get full rights to the account upon your spouse's death.
House deeds and mortgages. If you purchase a home together, both names will be on the deed and the mortgage. But here's the thing... if one spouse purchases the home without the other, the asset may be at risk.
You see, if the owner of the house ends up owing money (say for a court settlement), creditors may take a claim on the house. Worst case, the couple could lose it.
But if you add your spouse to the deed, it becomes joint property and therefore provides protection from this kind of loss.
Check with your mortgage company before changing the deed and find out what regulations or penalties are involved.
Credit cards. It might surprise you, but many people lose access to their credit cards after the deaths of their spouses. That's because most credit-card companies don't offer joint accounts. Other people may appear on the account, but they're simply authorized users, not owners. For instance, your spouse might own the account and add you on as a user. And you may not even know that distinction until it's too late.
For credit purposes, it makes sense. The liability for payment rests with the owner only. This means only the owner is legally responsible for paying the bill, regardless of the authorized user's spending.
Unfortunately, this also means that once the credit-card company learns of the owner's death, the account closes, and any authorized users lose access. What's more, you can't transfer ownership of credit cards, meaning the surviving spouse can't take it over.
Worse, it can also mean legal trouble. If the owner of a credit card dies and an authorized user continued to use the deceased's card, the police could arrest him for fraud. That's because the estate pays off all debts. The user could simply add up charges that the estate might not pay.
Now, there is the possibility of getting a joint credit card. For liability purposes, both owners are responsible for paying off all charges. Banks typically offer this through their own credit cards. But if you do use traditional cards, be sure each spouse is the owner on his or her own card.
Again, we know thinking about your or your spouse's death is uncomfortable. But planning now will save you from a lot of stress – and potential problems – later.
Have you started planning? Let us know at [email protected].
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
December 28, 2020