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Investing Specialists

Who Manages Your Portfolio When You No Longer Can? Ways to Plan Ahead

Readers say they rely on written instructions, simplified holdings, and getting outside help if needed.

Managing your finances in retirement can be tricky business. There are asset-allocation decisions to make, choices about which investments to use, and calculations to determine how much you can safely afford to withdraw each year. Things are complicated enough without having to suddenly take over a portfolio that is brand new to you, one that has been managed by someone else for years and is based on investing philosophies and choices you had little, if anything, to do with.

Unfortunately, it's a scenario that's all too common. In many couples, one partner manages all the investments while the other takes care of other responsibilities, such as paying bills and household expenses. Then, when the partner who manages the investing piece becomes incapacitated due to injury, illness, or death, the other is left wondering how to take on this new and important responsibility. In some cases, it's not the healthy or surviving spouse who will manage investing matters but the person's heirs.

Scenarios such as these are why many financial planners recommend that retirees, and even those who are still working, make preparations for their spouse, child, or whomever will take over for them financially. These can include everything from making portfolio management easier by streamlining holdings to writing out detailed instructions about what is invested where along with relevant account passwords.

Last week, we asked retired Morningstar.com readers to tell us what steps they've taken to prepare their portfolios in case their spouse ever has to take over. The full discussion can be found here and includes the comments that follow.

'My Objective Was to Consolidate and Simplify'
Some readers described ways they've made their portfolio easier to manage. Comments from blazetester were a good example.

"First, instead of having our retirement savings invested directly with a handful of mutual fund companies, I consolidated all our holdings into a brokerage account," he wrote. "Secondly, instead of trying to use individual equity and bond mutual funds to build a balanced portfolio, moderate-allocation funds (about 60% of our savings) are now used as the foundation of our 60/40 allocation. My objective was to consolidate and simplify as our assets grew, not only for my wife, but for myself as well."

ARYKEMPLER said, "I have simplified my estate so that I am down to a total of three accounts plus checking. I make a detailed list every year-end of all assets, which I put into the envelope with the will."

Bruce58 reported making the following simplification moves: "Consolidated everything with Vanguard, 401(k), Roth IRA etc. rather than have it scattered all around. Left written instructions with passwords to bank and investment account. All accounts were opened jointly with my wife. Showed our sons where the information is and gave them instructions in case [my wife] has trouble figuring things out."

In fact, writing down instructions was one of the most frequently mentioned tips and a key component of many readers' succession plans.

"I have detailed guidelines written down in a very simple format listing all accounts, telephone numbers, and points of contact, along with how to manage our bucketed portfolio, which will be as hands-off as practical," wrote ColonelDan. "I then provided a copy to my son and went over it with him as he is the investor/business man of our children. He has the mission of managing the portfolio for my wife if I'm not around."

Hoodee wrote, "My partner--not a spouse, but my beneficiary--has been given a written explanation of investment philosophy, Morningstar portfolio password, and general guidelines. ... I have set up accounts and assets as transfer-on-death. He also has financial power of attorney."

'My Spouse Didn't Want to Learn How to Do Investing'
In several cases, readers said their spouses or partners simply weren't very involved in running their portfolios and that they are planning accordingly.

"There isn't any way I can transfer my 20 years of knowledge and experience in successfully managing a retirement portfolio to my wife," wrote martina. "However, this is what I have done. 1) Consolidated all accounts at one firm. 2) Written a fairly extensive investment policy statement. 3) Have vetted a small local financial-planning firm whose folks are in their 40s. 4) Wife and I have met with the financial planner and we understand what they do. They also understand what we want and need."

Martina wasn't alone in turning to a financial advisor for help in case he can no longer manage his money.

BMWLover wrote, "We have done two things to get my wife prepared should something happen to me. The first is that we have met and are working with a financial advisor. My wife doesn't have the knowledge, nor the interest, to try to manage our portfolios, so we have found somebody that she is comfortable with to help her manage our finances should I not be able to. The second is that I have written a diary of all of our accounts, including credit cards, investment, bank, etc. This includes account numbers, logins, and passwords. We keep it in our safe deposit box. This will give her the background she may need to keep things in order."

For fillmoredds, hiring a financial professional was a necessity.

"My spouse didn't want to learn how to do investing," the commenter said. "I spent a fair amount of time finding a portfolio manager who follows closely my type of index investing. Low fees were one of the top priorities. There are reasonably priced managers out there. Do your research and take your time. I enjoyed investing and did fairly well, but I sleep well knowing it's taken care of in the event of my sudden demise."

Some readers said they were motivated to start planning ahead by seeing what others in their life have gone through.

Cyrusandmag said, "A few years ago, after hearing of the mess that a friend left to his wife, I moved the funds in my IRA (98% of assets) to [a] target retirement income fund. My daughter has access to all funds and is trustee of our estate. She also knows information about my RMD, tax liabilities, and payments, and would be able to handle all financial matters when I (we) become unable to manage."  

While some readers described taking just a few steps to prepare, others went into much greater detail.

Not only has bluefishdeep provided information for contacting financial advisors, made his or her spouse a beneficiary on all accounts, and reduced the number of holdings in his or her portfolio, the commenter also has provided detailed instructions about using Morningstar tools such as Portfolio Manager and the  Portfolio X-Ray tool to track performance.

Of course, sometimes leaving written instructions is no substitute for a face-to-face discussion.

"In joint meeting with spouse and adult kids verbally went over all of above and provided copies," bluefishdeep wrote. "Made known that I want my son in charge of working with spouse to manage investments even though kids are only contingency beneficiaries on my accounts. Told son that spouse has final say in changes in investments and in timing withdrawals."

'We Review Our Holdings Together'
While many readers said they've gone to great lengths to prepare their portfolios for the day someone else has to manage them, others said their spouses or others have always been involved.

"While I manage our investments, I do nothing sizable without explaining and discussing it with my spouse," wrote freeland. "We review holdings together once or twice a year. Of course, I've organized all our statements on our computer (with backup), along with balance sheets, cost-basis worksheets, etc. and made sure that my spouse knows what is there and where to find it. ... Beyond that, we've made sure that as a couple most of our property will pass directly (for example, joint ownership with rights of survivorship, named beneficiaries for IRAs and HSAs). Afford your spouse respect. Unless the person is money-phobic, don't 'dumb down' your portfolio."

One reader even turned our original question on its head.

"Changing the question: What steps have I taken to prepare my spouse for our portfolio?" wrote xBanker. "Before we retired, I maintained the portfolio. Since we retired, we have been working on the portfolio together, with my spouse learning about the investment process. This includes involving my spouse in the decision-making for stock and mutual fund buying/selling, plus a considerable amount of discussion and reading. We have both learned a lot and the portfolio benefits by the interaction."

Finally, reader KTInvesting offered advice from the perspective of someone who expects to one day assume responsibility for managing a loved one's financial affairs.

She wrote: "I have my father's power of attorney and am a co-trustee on all his accounts and two other family trusts (mom is deceased). I have spent a lot of time with him over many years and understand his philosophy, his preferences, and the lay of the land. I have streamlined his accounts (where possible and with his agreement) to simplify administration of all financial activities for the day that he cannot do it himself. ... When the day comes, my siblings will join me as co-trustees. In the event that I am incapacitated, the power of attorney turns over to sibling number two, and then sibling number three, if necessary. In the meantime, I am 'training' the siblings with info and written instructions on what is required and where things are via regular emails and in-person chats." 

Some comments have been edited for clarity and brevity.