It is common for couples who have been married for many years to assign roles and responsibilities for the management of the household, and one of those roles is the management of the family’s finances. Although this is not always true, our experience is that most families appoint one spouse to act as “Chief Financial Officer” (CFO) of the household, while the other spouse is less involved (or in some cases, not involved at all).
The “Family CFO” is the person charged with writing checks, paying bills, filing tax returns, executing mortgage documents, applying for life insurance, executing wills and planning documents, making investment decisions, and communicating with the various advisors who may be assisting with these functions. Most often, this responsibility falls on the husband, while the wife manages other critical activities.
However, as we shared in our last post, most wives are likely to outlive their husbands, faced with a period of five or more years during which they may be responsible for managing their money. This can be an overwhelming change if they haven’t already taken an active role in their finances. Rather than delegating the Family CFO to one spouse or the other, we recommend that both spouses serve as the Family CFO. This helps to ensure joint decision making for outcomes that will affect the family for years to come, as well as helping to avoid potential challenges that may occur due to a lack of involvement.
For example, as we age, cognitive challenges may begin to surface. We may start to become more forgetful, have a harder time remembering details, and experience more difficulty keeping up with the volume of administration required in daily life, and particularly financial management. If both spouses are involved, it’s easier to mitigate such issues. If the husband has been solely responsible for the family’s finances, it can lead to their wives and children concerned about – or dealing with the ramifications of:
- Cash management and checking account errors, including missing the payment of important bills, or perhaps making payments that were not required.
- Improper trading of brokerage accounts or inappropriate investment decisions.
- Missed tax filing deadlines, or errors in preparing returns
- The lack of adequate estate planning documents – or an inability to locate them.
Developing a trusted advisory relationship early on can also help with these issues. The importance of choosing trusted people to make decisions on your behalf, who have your best interests in mind, cannot be overemphasized. It is optimal to put these plans in place while your cognitive and physical functions are adequate and your desires can be communicated clearly. This will not only ensure comprehensive financial management support – filling in gaps related to wills, health care proxies, and powers of attorney – but it will also provide a supportive, knowledgeable advisor who will be there when you need them the most.
Financial management can be a particularly tricky topic for couples to discuss, but it is worthwhile to work together to achieve the future that you want. Talk to your spouse about how you can get more involved in your finances and work with your advisors to put a plan in place that makes the most sense for your financial situation and that will give you confidence and relieve stress related to your wealth. Open, regular communication can result in a stronger relationship and a happier retirement.