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Statistically speaking, married women might want to financially plan for a day when they are single.
While the topic may be unpleasant, the average male-female couple in the U.S. can expect the wife to outlive the husband: The average life expectancy at birth is 81.1 years for women, compared with 76.1 for men, according to government data. If both husband and wife reach age 65, the difference shrinks but persists: age 85.6 for women and age 83 for men.
In other words, whether by choice or not, currently married women might one day find themselves charged with navigating their financial lives on their own — which makes it important to know the nuances of their finances and how sudden singlehood would affect them.
“Women are often the last one standing,” said Leslie Geller, a wealth strategist for Los Angeles-based Capital Group, during a presentation at the recent Schwab IMPACT conference in San Diego.
“It’s so much better to deal with it now instead of waiting until you get into the realm of death or divorce, when emotions can run high,” Geller said.
Here are some questions that women should get answered to help them know their full financial picture, in case they find themselves in that situation, based on Geller’s presentation.
Who owns and owes what?
It’s important to know what you own, what your husband owns and what you share ownership of, as well as how debt — shared or not — could affect your assets down the road.
For starters, find out how your state of residency treats marital property, Geller said. While most are common-law property states — whoever acquired it during the marriage owns it — some have community-property laws that treat assets acquired during the marriage as equally owned by both. And in the event of death or divorce, those differences can matter, depending on the complexity of your situation.
It’s also important to understand what debt you share with your husband or would be liable for down the road. If you have co-signed any loans, consider it yours except in certain situations (i.e., federal student loans are discharged in the event of the student’s death).
However, even if you don’t share the debt directly, creditors have the right to seek repayment from your husband’s estate if he still owes money upon his death. Translation: You should know how any debt can affect marital property.
What’s in the estate plan?
Not all assets pass on the same way, so it’s important to know what’s in your husband’s will and what should be addressed separately, Geller said.
For example, whoever is listed as the beneficiary on some accounts — i.e., an individual retirement account or life insurance policy — is generally the person who would inherit the money regardless of what the will says.
Additionally, make sure you think about the family home. In most states, if it is deeded as “joint tenancy with right of survivorship” or “tenancy by the entirety,” the property automatically belongs to the surviving spouse, no matter what your will says. If you own the house in “tenancy in common,” though, your spouse could leave his share to someone other than you (i.e., a child from a previous marriage).
However, some states have different rules. Moreover, there can be other considerations when it comes to how a house is titled, including protection from potential creditors or for tax reasons later when the home is sold. In other words, it’s best to get professional guidance.
You also should know who is named executor of the will and, if a trust would be involved, who is named trustee, Geller said. Basically, the idea is for you to be comfortable with both of those people and their responsibilities.
And, of course, those estate plan documents — including your will, any trust documents, etc. — should reflect your wishes if you pass away before your spouse, she said.
Will I have enough money?
While you might generally know that there’s a retirement account, you should also know how much is in it and that you are the beneficiary of the account. (With 401(k) plans, the wife must be the beneficiary unless she legally agrees not to be.)
You also should be familiar with the composition of the investment portfolio, Geller said, as well as the financial consequences of your husband’s death. In other words, be sure you know what your income will look like and whether the assets you’ll have will be enough to maintain your lifestyle (whatever it may be).
What about our tax return?
When you file a joint tax return, your signature indicates that you are responsible for its contents.
“Never sign a joint return unless you are comfortable with what it says,” Geller said. “Signing the return indicates you are.”
For example, say your husband owns a business. Unless it is set up as a corporation, there’s a good chance the income flows through your joint return. And if the business ends up being liable for back taxes or penalties from unpaid taxes, the wife could be liable, as well, Geller said.
Additionally, she said, women should participate in meetings with the professionals who advise on the family’s finances and make sure they are comfortable with them.
What if we divorce?
Things can get tricky when it comes to this topic. While a post-nuptial agreement can help solve the issue of who gets what if the marriage ends, drawing that up can be distasteful to married couples.
And, for many couples who divorce, the division of assets is a fairly straightforward process — at least from a financial standpoint. For others, though, it can be complicated and messy.
Suffice it to say, if you own assets that you’d want to protect in the event of divorce, it’s worth consulting with professionals about how best to do that.