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Retired couple who need more than a will.

Preparing for a Spouse’s Death: It’s More than Making a Will

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The prosperous couple—we’ll call them Bill and Mary, though those aren’t their real names—thought they had done everything right. Bill had maximized his Social Security benefit by waiting until age 70 to begin receiving it; Mary was taking her spousal benefit, because it was larger than the benefit she could claim on her own. They had investments earning dividends and interest, and they were also collecting half of the income from a property that Mary, age 67, co-owned with her mother, age 87. They assumed that when Mary’s mother passed, they could add the other half of the rental income to their cash flow.

But Mary died unexpectedly at age 68, and the full amount of the rental income began going to her mother, who was now the sole owner of the property. Also, Mary’s Social Security checks ceased with her death. Bill was faced with a sufficiently reduced income that he had to sell their family home and move to a less expensive state, where he would be able to live within his means.

Clearly, Bill and Mary had failed to take fully into account the financial implications of Mary’s untimely passing. Though their will was in order, they would have benefited by paying more attention to the way all their assets were titled.

The problem can also run the other way: sometimes the surviving spouse is left with too much money, which throws them into a much higher tax bracket, since they must now file as single, rather than married filing jointly.

One of the most important parts of a sound financial plan is how it accounts for the possibility of the unexpected. Especially when a spouse dies, the financial implications—not to mention the emotional ones—can run in some surprising directions.

It’s important to carefully evaluate not only the adequacy of life insurance coverage and how assets are titled, but also to look at the character of the assets. For couples with large balances in tax-deferred accounts like traditional IRAs, 401Ks, and other tax-favored plans, it can make sense to begin converting to Roth accounts in advance of retirement. Though this necessitates paying taxes now on the amounts converted, it can often save money on future taxes for the eventual beneficiary, especially since Roth accounts do not require distributions in retirement, which is when a suddenly single person can often find themselves in a higher tax bracket than when their spouse was alive.

For couples with significant investment accounts, it can also be important to make timely decisions about offsetting investment gains with losses. This action must be taken in the same calendar year as the death of the spouse, however, so time is often of the essence. For example, if, at the time of a spouse’s death, the couple’s investment account has a holding with an unrecognized $10,000 loss, and another with an unrecognized $10,000 gain, it may make sense to recognize both, allowing the loss to completely offset the gain. If desired, the “winning” asset can even be re-purchased, thus re-setting the cost basis and potentially avoiding a capital gains tax bill in the future. But the loss must be claimed in the same calendar year as the death of the spouse. According to IRS Revenue Ruling 74-175, only the taxpayer who sustains a capital loss is entitled to take the deduction (ie., it cannot be transferred to the taxpayer’s estate), and it must be taken on the final tax return filed for that taxpayer.

At Mathis Wealth Management, we specialize in helping our clients make smart, timely decisions to save on taxes and to maximize income for the future. If you would like to learn more, please contact us.

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Cameron received his BBA in Finance from Northern Arizona University, where he also completed the certification program in Investments. 

As a licensed Accident, Health, and Life Insurance agent, Cameron serves our clients as an Insurance Specialist while also working toward the credentials necessary to become an Investment Advisor Representative. 

Best of all, Cameron shares our rock-solid commitment to placing the best interests of our clients ahead of every other consideration. 

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A licensed Life and Health Insurance Agent, Paula also works alongside her husband, Phil Adams, helping in an administrative capacity with his clients.  

Honesty and integrity are her most highly esteemed values and she hopes to impart them to all Mathis Wealth clients. Her main goal is for each client to truly feel valued and respected.

Paula has been happily married to Phil for 33 years and together they have three children—Austin, Nate and Nicole.  She loves her dogs, Bo and Bella, and enjoys working out, reading, hiking, camping and spending any time she can with her family and friends.

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Meet Vickie Gray

Vickie brings a wealth of experience in business to Mathis Wealth Management.

At Mathis Wealth, Vickie schedules Larry’s appointments and processes accounts forms and other paperwork.

While she grew up in Florida, she moved from New York to Arizona with her husband of 30 years, Gary. They currently have two dogs, Jasper and Yogi, as well as one grown daughter. Vickie’s leisure activities include target shooting, reading and jewelry making.

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Meet Jennifer Panicker

Jennifer’s role is to help make sure everything goes smoothly for our clients.

Jennifer graduated summa cum laude from the University of Wisconsin – Whitewater, with a Bachelor of Business Administration with an emphasis in International Business and a minor in economics.

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Meet Phil Adams

Phil joined Mathis Wealth Management in 2016, after a successful career as a firefighter.

Most of his career he spent at downtown stations as part of the high-rise team. The last 5 years, he headed up the high-rise task force in the Special Hazards Unit.  Phil has made it his business to understand the ins and outs of the public safety retirement system. He strongly believes that helping firefighters prepare for retirement and guiding them through the city’s sometimes complicated retirement process is his true calling. Phil enjoys teaching and coaching members on how best to take advantage of the excellent benefits provided by the Phoenix Fire Department. 

Phil also has over 20 years of experience in business; he was the CEO and President of Stoneridge Construction for 15 years and CEO and President of Stoneridge Development for over 19 years. He was a founding board member and served as president of the Phoenix Metro Public Safety Football Club, which was the 501(c)(3) non-profit organization behind the football team for Phoenix Fire and Police, the Thunder. That football team won multiple national titles and gave thousands of dollars to charity. He even found the time to coach high school football for 20+ years. The skills he learned from business and coaching are directly applied to the retirement planning, business consulting, and wealth management that he does with his clients.

Phil married his high school sweetheart, Paula, while they were at Northern Arizona University and they have been married for 33 years. They have three adult children, Austin, Nate, and Nicole, and two dogs, Bo and Bella.

Phil is a voracious reader, a huge football fan, and loves to travel, fish, and hike.

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Phil Adams

Meet Larry mathis

Larry is the author of Mom Was Right: Family Tragedy to Financial Freedom—How a Widowed Mother of Seven Retired Debt-Free. He has spoken for numerous organizations, including the Third Annual Invest in Women Conference, the American Association of Orthodontists, and the Arizona School of Dentistry and Oral Health at A. T. Still University.

Larry founded Mathis Wealth Management intent upon providing retirees and pre-retirees with comprehensive financial services based on each client’s unique hopes, needs and values. His comprehensive approach enables him to customize strategies for all aspects of a client’s financial life and weave the strategies into an integrated plan so all aspects work together efficiently.

A financial professional since 1987, Larry has the kind of in-depth knowledge that comes from over 30 years of experience. His credentials include a Bachelor of Science in AgriBusiness from Arizona State University and the elite designation of CERTIFIED FINANCIAL PLANNER™ professional (CFP®), which trained him to help clients with virtually all of their financial needs. As an Accredited Investment Fiduciary (AIF®), he has a fiduciary responsibility to work strictly in his clients’ best interests.

Larry is a native of Phoenix, and has served the community on the boards of various charitable and religious organizations. He coached youth sports for many years and is still a certified Little League umpire, having officiated in Cooperstown, New York: home of the National Baseball Hall of Fame. He and his wife, Rhonda, have been married for 35 years and have three sons. His leisure activities include hunting, fishing, and singing, and he especially loves horses and riding.

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Accredited Investment Fiduciary®