One of the areas of estate planning not frequently talked about is the requirement we all have for cash. There is often considerable planning around the preparation of various documents (including a Will) to govern the transfer or sale of assets of a Willmaker; far less common is a focus on the expected cash position of a surviving spouse.
This is important. Over the course of many years in practice we have seen surviving spouses placed in difficult and embarrassing financial situations unnecessarily. Even though they were ‘asset rich’, the death of their spouse cut off normal income streams, impacting their lifestyle at a time when they were left grieving over the death of a loved one, as well as being faced with extra costs such as funeral expenses. There are several recurring themes which we see. These often revolve around bank accounts and credit cards.
Sometimes, all bank accounts are in the sole name of the deceased. Where this occurs, financial institutions will typically ‘freeze’ all transactions as soon as they have been advised of the account holder’s death. On several occasions we are aware of, this has required the surviving spouse to borrow money from family or friends while waiting for cash to be available from their deceased spouse’s estate.
A common way to avoid this is to keep a cash buffer in a joint account. If a bank account is jointly held by a couple, the account is owned by the survivor on the death of one of them. This means that the surviving spouse can continue to access the funds in the account, and the account will not be frozen. Joint account holders have equal status with each other in the eyes of the financial institution where the account is held. And a joint account is not part of the deceased’s estate.
The situation is different where there is a credit card held by a primary cardholder and another card is issued to a spouse as secondary cardholder. Recently we had a client who had lost her husband. Her deceased spouse had been a primary cardholder of their credit card, and she was the secondary account holder.
Our client’s card was automatically cancelled when the financial institution concerned was advised of the death of her husband. She was not given any notification of this: it simply stopped working. This had a knock-on effect for a range of direct debits that had been set up on the card. All of this was as embarrassing as it was avoidable. Had each member of the couple held their own credit card, this would never have occurred.
All of this means that when thinking about estate planning, consideration should be given to how the surviving spouse will have access to cash until the estate is administered and (where required) a grant of probate is obtained.