Items To Consider When Dealing With A Death

October 19, 2019

On this week’s show, Karl discusses key economic indicators that were released this week and their impact on the stock market.  Plus, what things should you consider when dealing with the death of a spouse or a parent?

Hey, good morning everybody. Welcome to the podcast. This is Creating Richer Lives. I’m your host, Karl Eggerss. We thank you very much for joining us. Just a reminder, the show is brought to you by Covenant Lifestyle Legacy Philanthropy. If you need to get hold of us, 210-526-0057, and I would encourage you to visit CreatingRicherLives.com. We’ve done a lot of work on CreatingRicherLives.com, and you’ll notice we have not only articles, we have video, we have audio, and there are tons of topics that will help you, a friend, a neighbor, a parent, a child out, and that is our goal on this podcast is to educate you.

All right, well, let’s jump right in. What happened this week? We did start the week with kind of a weird … it’s one of these hybrid holidays, I’ll call it, Columbus Day, where the bond market is closed and the stock market is open, and it was kind of a flat day. China said they wanted to talk some more. Remember, we saw previous week, we’ve got a trade deal, right? But it was it really a deal? It wasn’t signed, but there was some optimism around that. Had the market’s going up. And then China said, “We’d like to talk a little more before we sign this deal,” so you saw the market kind of flat. But we did see the lowest volume for the stock market in a full session. Remember we have half days occasionally for various holidays. This was the lowest volume for a full day session since December of 2017, so you’re talking about going back almost two years. Very, very light volume. It’s as if everybody’s on the sidelines waiting for something to happen either good or bad.

Tuesday, a pretty good day for the markets from start to finish, and we did see the yield curve. Remember, the yield curve’s been inverted. So we saw the three month treasury rates versus the 10 year treasury rates became unconverted, and that’s a positive sign. So we did see that, and then this is something that didn’t get a lot of attention, but the New York Stock Exchange saw a new all time high for its advanced decline line. Again, this tells you that there is broadening strength within market underneath the surface. So even though the major averages are kind of still bouncing around, we’re still near the highs but you’re not seeing them go straight up, we are seeing an all time high for the advanced decline line. Very, very positive.

Now, the last couple of days here, Wednesday, Thursday, Friday, you did see some more chatter about these overnight repo rates. Remember, we’ve talked about this where there was a shortage of liquidity and so the fed’s having to step in. Well, we saw another $75 billion overnight on Wednesday, so that garnered some attention. Retail sales missed, and this is something we need to watch carefully. Now, the previous months was revised up, but the retail sales report for last month was weaker than expected. And remember, this is really important because as we’ve been saying, the consumer is keeping us in this game from keeping us out of a recession because we’ve been running at a slow growth rate and the consumer, which is almost 70% of our economy has been spending money. You guys have been spending money, but we saw weak retail sales reports, so something to watch. Is it a onetime deal or is it something that is going to snowball? Because we also got on Thursday a bad housing number as well, so let’s watch that.

Now, there is one little stat I wanted to mention that also happened on Wednesday, that the S&P 500 has a dividend yield. This just means a few by the stock market, if you bought the whole S&P 500 in an index, whether it’s a mutual fund or an exchange-traded fund, it has a dividend yield. Let’s call it 1.5%, 1.7%, 2%. It’s some percentage. That yield is actually higher now then a 10 year treasury yield, and a lot of people believe that is one reason why stocks will continue to go higher is that people don’t want to put their money in bonds because they can get paid more by going and buying the S&P 500 from an income standpoint. The other 40 times this has happened from 1970 until now, the S&P 500 was up 95% of the time, so that is a very important stat.

Now again, one stat but interesting to see that again, that does tell you that people do like when the dividend yield is higher on the stock market because they’re going to go buy stock. So 95% of the time a year later, the S&P has been higher from 1970 to present 40 different times. I believe that either came from Jason Goepfert or Bespoke. I cannot recall. But that was a pretty flat day in the market Wednesday. Thursday had a little positive bias to it and kind of the bigger news was probably, did you notice the little mini, for you technicians, the little mini breakout in emerging market stocks? They’ve been making lower highs really for most of this year. We have dollar strength, weakening stock market and emerging markets, they technically broke out a little bit, so let’s watch that over the next few weeks. Are we going to start seeing foreign stocks outpace American stocks?

And then Friday, probably the biggest thing that I saw on Friday was the fact that the leading index of economic indicators … This is a really important one for me because if you look, these generally roll over well in advance of a recession, and this indicator also tends to roll over in advance of a stock market peaking as well, and we got a worse than expected reading and the prior month’s was also revised down as well. So let’s see if that’s a trend. Is it flattening out and rolling over or is it simply flattening out and pausing before it accelerates again? Remember there’s a lot of people who believe in the next few weeks here we’re going to start to see the economy re-accelerate, and that is something to watch. Remember, we have some vulnerabilities here, especially watching the consumer. Very important to watch.

And so we ended the week … I don’t know if that was what caused the stock market to kind of sell off, but we did have a selloff on Friday of 255 points on the Dow Jones, almost 1%. The S&P wasn’t as bad, only 0.2%. The NASDAQ also down about .65%. What was interesting, though, is value stocks were up on the day, so we’ve mentioned this in the past that we saw a big difference between what the Standard and Poors 500 and the Dow Jones was doing versus some specific indices There was tons of green stocks on Friday. Very interesting to watch. Regional banks were higher. Some foreign stocks were higher. Just banks in general were higher. We had home construction stocks were higher. Financials were higher, and I’m talking considerably higher, 30, 40, 50, 60, 70 and 80 basis points, metals and mining, utilities. So there’s a lot of things that were up on Friday despite the 255 point drop in the Dow Jones. So that was the kind of though the wrap up for the week.

Now, unfortunately, I’ve been around some death lately. Some friends’ parents have passed away and just seen some sickness and it got me thinking about, what are some things that you should consider if one of your parents were to pass away, some things to think about? You have a lot of things coming at you, right? And it’s unfortunate that as I was attending a service this week, I thought, “This is sad that a family has to deal with some of this grief and at the same time put on almost what’s the equivalent of a wedding reception,” right? You have to plan for all these things, and it costs money and you have to organize all these things and obituaries and death certificates and just all the things you have to deal with with the passing of a loved one, and it’s unfortunate because that’s not the time you should be dealing with that. You should be celebrating their life, obviously being sad, being with family as opposed to having to think about the logistics of putting a service together.

It got me thinking what things should one consider, and I just wanted to run through a few things that I think should be top of the list, which is if there was, in terms of benefits and cashflow items, is there something that, for example, social security, surviving spousal benefits? You’re talking about things like an IRA. Did the spouse have an IRA? Remember, if the deceased spouse had an IRA, the surviving spouse can transfer that existing IRA into their IRA. Does not have to be a stretch IRA or an inherited IRA. That would be if the kids were the survivors. So that is something to consider because again, that spouse can take that IRA, no taxes, put it in their own IRA. These are, it goes without saying, things that will be thought about over the next several weeks, not next several hours, but just some things to think about.

Was there a pension involved? Very important. Also, just start thinking about retitling of accounts, updating beneficiaries. If the surviving spouse did inherit an IRA, they need to make sure that the beneficiaries are updated properly on their new IRA or their existing IRA. Usually two parents will have each other as the primary beneficiary and maybe the kids as contingent. That may be changing. There’s one surviving spouse and now the remaining kids will now be the primary beneficiary in a lot of situations. Was there a beneficiary on the deceased spouse? Was there a beneficiary that was a child or an uncle or some other family member that needs to be notified? That’s something to have to consider.

How about the estate? How large was the estate? This won’t impact most people, but was the parents’ estate in excess of $11.4 million? Now, most of you are saying, “Yeah, I wish,” but some of you are saying, “Yeah, I have an issue.” Again, the planning should take place in advance of this, but that is something to consider as well, the size of the estate.

Was there life insurance involved? If there was, again, finding out what were those insurance companies, what are policy numbers and getting those proceeds to the proper place on that. If there was an estate tax liability, we talked about the 11.4 million, and that includes life insurance. If there was a liability, it does need to be paid. There’s a form that can be filed to change the valuation date.

How about a safety deposit box? Those are becoming probably less common, but was there a safety deposit box? What’s inside of there? Who’s on the account? Sometimes people don’t put somebody else on that account and it’s hard to get into that safe deposit box. I’ve heard of that situation popping up before, so make sure there’s a second person on there while obviously the person’s alive. Doing a lot of this planning, you understand the more you can plan in advance, the less you have to do afterwards.

How about digital assets? That’s something we’ve talked about over the years. Nowadays, our pictures are stored online, right? And those are called digital assets. Are those supposed to be kept going? Does someone else have access to that account, whether it’s Facebook or Google Photos or Dropbox? Any of those things, any of that stuff that is again digitized, does somebody have access to that and where do those things go and are they to be preserved or not?

How about if the person that passed away was employed? Notifying the employer, figuring out what benefits there might be. There’s insurance to take into consideration. Of course, was the death caused by an accident or was it caused by work-related? That could be where the employer situation comes in, as well.

There may be a house to sell, and that is something again, that if it was a primary residence, you have the $500,000 capital gains exclusion, but that is something … that’s a tough one because there’s a lot of memories there and the surviving spouse needs to decide and you helping them decide how long they want to stay in the house. Do they want to stay in there forever or do they want to make a plan to move? Those are things to consider, as well.

If the couple filed taxes jointly together, they can still file jointly. So if somebody passes away in 2019, the surviving spouse can still file a joint return for 2019, but that would change obviously in 2020.

The other thing to consider is identity theft. Remember, obituaries are published. There are bad people out there, so it’s a good idea to cancel email accounts or at least get those forwarded. We’ve talked about digital asset, social media accounts. Notify the credit bureaus, driver’s license, all those types of things, so there’s a big checklist of things to do. And one thing that we offer our clients is a tool. It’s a piece of software that we give them access to that does a lot of these checklists internally in one place, and each spouse has a separate login, and the idea is you put all this information in there, where you have an extra car, where the car keys are held, who the insurance agent is and what the policy number is as well, what medications were being taken. Wills and any legal documents can be stored in this vault, and so what it does is it gives a big peace of mind to the surviving spouse to have the to do list, which is extremely helpful.

We encourage our clients to take the time to fill that out, and it does take some work, but it is extremely helpful. You even put pictures of your insurance cards in there, and if you are a couple that is getting up there in age, you can put a child on as a deputy so the child can have access to that, so again, if something happens to both of the parents, whether they’re incapacitated or they have passed away, the child can step in and see exactly what some of their … and again, this is non-legal. The legal documents are stored in there, but the non-legal stuff, that’s just practical things, what was my social media accounts and the passwords and what was the pet medication that my pets were taking. Anything you want to put in there to make it easier for surviving spouse or a child, you can do that.

And so this can be done obviously in a spreadsheet or Word document. What we use is something that just makes it much simpler because it walks you down item by item in terms of wishes, in terms of insurance, both life, medical insurance, and it’s just a great organizational tool. That’s something that you need to be thinking about that now even if you’re in perfect health, because I’ve seen situations lately where things change on a dime, and this isn’t just something about working with your parents. This is something you listening should do as well.

The more you can plan now, the easier it makes it on everybody else down the road. Usually one spouse is kind of in the dark regarding how bills are paid or what certain assets they may have and where they are, who the advisors are. All those things can be put in one place and it just makes it easy. And make sure you communicate. If you’re somebody listening that’s saying, “I need to do this,” communicate with your spouse about where these things are. The more you can communicate upfront, again, the easier you’re making it on the surviving spouse and the children, again, at a time where you don’t really want to be thinking about a lot of this stuff. You want this to be kind of dominoes. It’s already set in place.

And it goes without saying, on the legal side, when’s the last time you did review your estate? Yes, many people don’t have estate tax issues anymore. That may not be the case in the next 5, 10, 15 years, right? The laws can change as we know. What if we went back to a $600,000 lifetime exemption? It would affect a lot of people. So doing the planning now in getting those docs down and review them periodically to make sure everything is set … Once a year, check your beneficiaries on your brokerage accounts. Is it still the people you want to be on there? And again, check those legal docs.

There’s all types of things in terms of medical powers of attorney, living wills, the traditional wills, could be trusts involved and again, your situation does change over time, and so it’s always good to review that. Those are not the things that are very fun, right? But they are the things that are necessary to make sure that your wishes will be carried out and it’ll be as convenient as possible. I don’t think anybody that has deceased wants a complicated mess for either their surviving spouse or their children or whoever else is in line.

All right, well, that’s going to wrap it up for today. I hope that was helpful for you. Again, if you need information from us or need help doing any of that stuff, 210-526-0057‘s our telephone number. We have tons of people skilled in this area, or just go to CreatingRicherLives.com, and there’s a place on there if you want to get in contact with us, quick little form, and we will do that. But as always, we will continue to put more information on CreatingRicherLives.com in an effort to help you. Don’t be afraid to share the podcasts, especially on topics like this where you think people might need this information. All right, folks, have a wonderful weekend. Enjoy the weather. Take care, everybody.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy or product, including the investments and or investment strategies recommended or undertaken by Covenant Multifamily Offices, LLC, Covenant, or any non-investment-related content, will be profitable, equal any corresponding indicated historical performance levels, be suitable for your portfolio or individual situation or prove successful.  Moreover, you should not assume that any discussion or information serves as the receipt of or as a substitute for personalized investment advice from Covenant. To the extent that a listener has any questions regarding the applicability of any specific issue discussed above to his or her individual situation, he/she is encouraged to consult with a professional advisor of his or her choosing. Covenant is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of our current written disclosure brochure discussing our advisory services and fees is available upon request or at CreatingRicherLives.com.