Barbservations as a Sole Next-of-Kin Survivor

 

Earlier this year, I lost my only sibling to cancer/heart disease and became the sole next-of-kin survivor from my small family of origin. My brother had no spouse or children. In addition to grieving the loss of my brother, I dealt with financial matters (e.g., unexpectedly paying for a cremation and doing a forensic audit of my brother’s finances) and technological hurdles (e.g., searching for a digital assets inventory and learning how to navigate an Apple Mac computer).

With some recent perspective, I offer the following Barbservations to help other sole survivors:

 

Take Care of Yourself- Emotional and physical well-being are extremely important when someone is grieving. Eat well, engage in physical activity, and get adequate sleep. Also seek out social support. I was very lucky to have my brother’s long-term partner to share stories, memories, feelings, and a multitude of postmortem tasks. We formed a close bond as a result.

 

Organize Important Documents- I used my financial planning skills to create a postmortem net worth statement for my brother using information from bank statements, credit card bills, tax documents, and other sources. I also prepared a binder to hold documents related to my brother (death certificates, social media account closure information, cremation paperwork, information about my brother’s websites, and copies of my brother’s identification information etc.). Having everything in one place kept things organized and provided a sense of control.

 

Take Contemporaneous Notes- As this definition states, contemporaneous notes are detailed, accurate, time-stamped notes that are taken when an event occurs or immediately afterward. Think: former FBI director James Comey and his detailed memos about conversations with President Trump. Starting when my brother became ill, I took detailed notes of conversations with him, his partner, and various people who helped us out along the way. Several of my conversations with my brother were long and deep and I now have notes about them to refer to.

 

Celebrate Their Life- Find a way to honor a loved one’s memory by celebrating their memory in meaningful ways. For my brother, his partner and I spread his ashes at sites (e.g., Blue Ridge Parkway) that he wrote about in his blog. In addition, he was cremated in a favorite motorcycle jacket and his creative works will live on in a Pinterest page that I found by accident. I also paid to keep his website up another year so I could re-read and save all his blog posts.

 

Consult Professionals- We contacted my late brother’s attorney and I asked my own attorney for advice on estate settlement steps. It was an eye-opener that he had a valid will naming his partner as executor and yet some entities only wanted to deal with me as next-of-kin. In an online search, I found that this can occur due to “procedural reasons” or “court discretion.”

 

Update Your Own Estate Plan- If your estate plans included your deceased relative, they will need to be reviewed and updated. For example, since my brother was a beneficiary of my will and “Plan B” health care proxy in my living will, I subsequently prepared new documents.

Planning Ahead for Widowhood: Changed Income and Expenses

 

I live in an age 55+ community in Florida and have observed conversations among residents (primarily women) who are mentally preparing for widowhood. They know the statistics about women outliving men and have done the math. This is especially true for those who are younger and have better health habits than their husbands. 

A few have plainly stated “as soon as he dies, I’m outta here,” to reduce expenses or to live closer to family or in a lifecare community or assisted living facility.

 

This post describes five changes in income and expenses that widowed persons can expect:

 

Reduced Income- I heard this example at a recent seminar. A married couple has four monthly income streams: $2,500- husband’s pension, $2,000- husband’s Social Security, $800- wife’s pension, and $1,500- wife’s Social Security for a total of $6,800 ($81,600 annually). If the husband dies first, the wife is left with $1,250 (50% of husband’s pension), $800-wife’s pension, and $2,000 (highest Social Security) for income of $4,050 ($48,600 annually). This is a 40% “haircut,” which some couples cover with spousal gifts, annuities, and/or life insurance.

 

If the wife dies first, the husband might receive a higher pension benefit because there will no longer be a reduction for spousal benefits. The wife’s pension and Social Security would go away, however, which could still result in a decrease in household income. For simplicity, this example did not include savings like IRAs, which would provide an additional income source.

 

Reduced Expenses- Monthly expenses will likely decrease when one spouse passes away. Some estimates project a 20% to 30% drop, which can help offset a drop in income. A car might be sold, thereby reducing costs for loan payments, gas, and auto insurance. In addition, less food is needed and the cost of the deceased’s health insurance ends. Entertainment and travel expenses may also decrease when a surviving spouse loses their “traveling companion.”

 

Tax Considerations- Income taxes often increase for the surviving spouse, who will be filing a tax return as an individual instead of as a married couple filing jointly. Single taxpayers have lower income ranges for each of the seven marginal tax brackets currently in effect as well as lower income “triggers” for tax on Social Security benefits, the Medicare premium surcharge called IRMAA (income-related monthly adjusted amount), and the net investment income tax.

 

Changes in Housing- Widowhood often precipitates a change in housing if the surviving spouse feels that the marital home is too large to maintain or too expensive to afford on one income. Other rationales for moving include wanting to live closer to, or with, family members and the need for care in an assisted living facility or continuing care retirement community.

 

New Household Expenses- New household expenses are common to provide services that a deceased spouse performed previously. Examples include lawn mowing, tax preparation, and driving to an airport. In addition, older widowed persons who live alone may decide to get a medical alert system or a monitoring service that checks in on their well-being daily.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Take-Aways From a Back-to-School Virtual Conference

Each year in August, Next Gen Personal Finance holds an all-day Back-to-School Virtual Conference for financial educators. I recently attended part of this program to learn about topics related to my work for clients. I firmly believe that, when you are well versed on current events, you enhance your credibility with clients and students. 

Below are six of my content take-aways:

Generative AI Prompts- Users need to “poke and prod” prompts for generative AI programs (e.g., ChatGPT, Bing, and Gemini) to get what they want. The more detail, the better. For example “Explain AI to a 10-year old in 60 words or less” versus “Explain AI.” Be very specific. Examples: “Write your response in narrative form instead of a bulleted list” and “The tone should be casual and exciting.” Use AI output as a tool but make the final product your own.

 

Frictionless Spending- Due to increased use of financial technology (fintech) tools, the processes of spending and borrowing money have become much more seamless and hassle-free. While this is good from a convenience standpoint (i.e., quick transactions with minimal steps and obstacles), fintech tools can also enable overspending and overborrowing.

 

Dark Patterns- These are deceptive user interfaces on websites that trick people into doing things that they didn’t plan to do such as signing up for recurring payments, buying something, or sharing personal information. Three common places where dark patterns are used are online shopping, gaming apps (e.g., paying money to get to the next level of a game), and social media. For example, ads that pop up for items that you were just searching for online.

 

Confirm Shaming- This dark pattern method words the option to decline an offer in such a way that website visitors feel ashamed to proceed. Example: “So you really don’t want to save money?” Other dark patterns include making it very difficult to cancel a service or subscription that was so easy to sign up for (e.g., requiring a phone call) and “bait and switch” dark patterns that try to get consumers to upgrade when a low cost product or service is “unavailable.”

 

Inflation Rate- Good news! The U.S. inflation rate fell below 3% for the first time since 2021. Specifically, the consumer price index rose 2.9% from July 2023 to July 2024 according to the U.S. Bureau of Labor Statistics. While the increase in prices for goods and services has slowed considerably from mid-2022, we are not experiencing deflation (i.e., a sustained decrease in prices). Therefore, Americans cannot expect prices to go back to where they were in 2019.

 

Vehicle Purchases- The average price of a new vehicle is slightly under $50,000 and 96-month (8-year) car loans are becoming increasingly available. A longer loan term (e.g., 7 or 8 years vs. 4 or 5 years) reduces monthly vehicle loan payments but increases the total interest paid. According to a 2024 J.D. Power study, Toyota is the most reliable mass market brand followed by Buick (ranked second) and Chevrolet and Mini (both tied for third).

 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Serving as a Personal Representative: The Good, The Bad, and the Ugly

 

Earlier this year, my brother passed away. Recently, I was appointed by the Surrogate’s Court of Suffolk County, New York as his estate’s personal representative and provided Certificates of Appointment indicating my authority to collect, manage, and distribute assets of the estate.

 

Under New York law, estates with assets under $50,000 are considered “small.” My brother’s estate, with just an $11,363 bank account and about $90,000 of unsecured debts is virtually “micro”… and insolvent (i.e., estate assets are insufficient to pay debts, let alone make any bequests to heirs).

This is the situation that I have been tasked with administering and, needless to say, it has been a huge learning experience. Below are five things I have learned along the way that may be useful if you are ever asked to serve as the executor or administrator (when someone dies intestate without a will) of someone’s estate:

 

Forensic Accounting is Difficult- My brother left little information about his finances and never discussed money with me or his partner of 16 years. Drawing on my CFP® training, there was only one way to begin: a thorough examination of his assets and debts. It took me days to construct a pro forma net worth statement using data from bank and billing statements, a checkbook register, and tax records. Needless to say, his partner and I were both shocked when I finished doing the math.

 

Legal Advice is Necessary- A Long Island lawyer charged the estate a $1,500 fee for small estate legal services. It is well worth the cost to have a legal professional process required court paperwork and advise on process steps and state laws (e.g., the order in which debts are paid and the fact that creditors in New York cases have seven months from my appointment as personal representative to submit claims).

 

Handling an Out-of-State Estate is Manageable- A personal representative has a legal duty to administer an estate according to state law. One of my fiduciary duties was establishing an estate bank account. Living 1,200 miles away from my late brother's New York home, I was worried this would be costly (read: require expensive travel expenses) and/or problematic. Instead it was “easy peasy.” A big gratitude shout out to Bank of America's estate planning division which seamlessly transferred the $11,363 from my brother’s New York bank to the Florida based estate account.

 

Vultures Are Out There- My brother co-owned a house with his partner through a legal titling arrangement known as joint tenancy with right of survivorship. When he passed, the house automatically passed to her as the surviving co-owner. This has not stopped over a dozen vulture realtors and house flippers (to date) from contacting both of us  by mail and phone with offers to buy the house for “quick cash.” Apparently, these vultures scour probate court filings to get data about a deceased person's home address and contact information for their personal representative. Some of the vultures have been exceptionally cruel including one that sent a fake check made out to my deceased brother.

 

Spreadsheets are Your Friend- I created an Excel spreadsheet to manage the distribution of limited estate assets to creditors after the seven-month waiting period (for creditors to submit claims) is over in February. There is now $8,174 left in the estate account after paying the lawyer and reimbursing funeral expenses (the top two priority claims) and a check printing fee. There are also already tens of thousands of dollars of formal debt claims. Since the estate is insolvent, each unsecured creditor will receive pennies on the dollar based on the percentage of their debt claim to the overall debt total. My spreadsheet makes this math very easy and will also serve as a final accounting document to submit to the New York court system when the estate is closed.

There were other learning lessons as well, but I choose not to share them in a public forum. Suffice to say, things that I learned about how estate planning is supposed to take place in an ideal world may not happen with an insolvent estate in the real world. 

Bottom line: If you are asked to serve as the personal representative of someone's estate, know what you are getting into and get assistance from an attorney who specializes in estate planning. Also, you have the right to say "no" by filing formal declination documents. In this case, the surrogate's court will find someone else.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Take-Aways from #AFCPE2023- Part II

 

As I noted last week, I slowly made my way since last December through over a dozen video recordings of presentations made at the 2023 Association for Financial Counseling and Planning Education (AFCPE) Symposium.

Below is another very eclectic summary of key take-aways from recorded presentations on topics of personal interest:

 

Debt Repayment Acceleration- The best way to pay off debt quickly is a “rollover method” where extra payments on debt get shifted from one creditor to another as debts are repaid. The free Utah State University PowerPay program is a great resource to create a debt reduction calendar. There are four PowerPay payoff methods to apply extra payments to: highest interest rate first, shortest term first, lowest balance first, and in the order that debts are entered.

 

Estate Planning- About 60% of the U.S. population dies without a will. In that case, state-specific intestacy laws apply. One reason for a lack of wills is that people come to a standstill over who to name as a guardian for minor children. If a guardian or executor does not want to serve, they can decline at the outset or in the middle of estate administration. Step-children are not considered children unless the creator of a will defines them as such.

 

Insolvent Estates- This is where a deceased person’s debts exceed their assets (i.e., a negative net worth). Every state has a law that states “here’s who gets paid first” (e.g., 1. Attorney, 2. Payor of funeral expenses, 3. Executor, 4. Taxes, 5. Medicaid, 6. Recent medical bills, and 7. Everybody else (credit cards, old medical debt, loans, etc.). In estates with limited assets, entities on the bottom, like credit cards, don’t get paid and there is no money for heirs.

 

Scams- Experts estimate that only 15% of scams are actually reported. Fraud is rampant and some businesses, with the same structure as legitimate corporations, actually exist solely to perpetuate scams. Scammers collects bits of information about people, put it together, and compile in within data bases to be used for fraudulent transactions. Scammers know how the human brain works and how to put people in a state of fear or greed and apply time pressure.

 

Professional Uses of AI- The session began with a quote (“If you don’t like change, you’ll like irrelevance even less) and noted that AI is already part of our lives. Think virtual assistants like Siri and Alexa and autofill in Microsoft Word). Professionals should not use generative AI platforms like ChatGPT unless they have expertise to verify the accuracy of the output and AI output should always be considered a first draft. AI prompts need to be very specific, such as including a word count and level of understanding (e.g., “explain ChatGPT to a 10-year old”).

 

Cryptocurrency- Almost a third of investors, especially young adults, own cryptocurrency. Disadvantages include the following: 1. Use for illegal activities and scams, 2. Fees can be expensive, 3. Regulatory risk (it is possible that countries could outlaw its use), 4. Price volatility (there have been bubbles resulting in big losses), 5. Security risk (crypto miners could be hacked), and 6. No government (e.g., FDIC or SIPC in the U.S.) protection.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.