To comprehensively detail how to approach the situation is beyond the intent of this essay. But there are a few things to mention:
- If one's partner was good at managing the family savings and investments, then chances are the resulting portfolio or nest egg can continue awhile on its own, without much or any additional fine tuning for the time being.
- There is little tax advantage to selling assets which, at one's partner's death or subsequently, are already for the most part trading at a loss, as many are at this time. One can claim just $3000 in net stock or mutual fund losses against one's income in any particular year. The losses to one's portfolio in 2008 probably well exceed that, if there was any substantial nest egg before this past September and October.
- In fact, the losses in general have been so severe in just the past three months that it may take years to recoup them. One might think that means we should sell stocks now lest they drop still further in value. There is a small chance that would later turn out to have been good advice, but in almost every case when the markets have been down this much they have rebounded significantly over the next year or two, certainly within the following 5-10 years, and especially if one includes the value added of stock dividends that would be paid year after year if one simply holds the assets.
- So, for the next year or so at least, in the untimely, and hopefully also unlikely, event of one's less equities market challenged spouse kicking the bucket in that period, it would seem best to either just sit tight, waiting for one's securities to go up in value by a substantial amount, say 100% or more, or to even add to stock or stock mutual fund holdings while prices are still unusually low, thus assuring the first part of the classic investing tip, to "buy low, and sell high."
- Once one does decide to sell some or all of the portfolio someone else had managed, one will need to decide, actively or by default, what to do with the proceeds left after paying off any credit card, medical bill, or other short-term debts. Of course, one might just leave them in a bank savings or a brokerage money market account, or else in some other reasonably stable and safe financial instrument (that being one default option, for instance).
- But it may be more rewarding in the long-term to allocate the assets among different asset classes. Brokerages and mutual fund families, Charles Schwab and Vanguard for example, make this step relatively easy and inexpensive. One can readily save 50% or even much more on fees and commissions by merely using such companies for one's investing rather than full service brokers and their representatives.
- If one does not wish to research individual stocks, stock mutual funds are an excellent way to invest to keep ahead of inflation for the long-term. Whatever one's chosen level of risk, partly dependent on one's age and other resources, it is a good idea to supplement stocks or stock mutual funds (equities) with bond funds as well as cash equivalent assets (to cover one's expenses in the short-term plus in an emergency).
- I personally like a 10/30/60% allocation for this reserves, bond, equity mix, respectively, but each person can determine the best allocation for him- or herself. Then one may adjust (or rebalance) the holdings about once a year or when equities have fallen or risen by 10% or more, thus keeping them within a reasonable tolerance of the intended allocation.
- Companies that have a wide variety of mutual funds available at low cost can be used for such a mix, and they are then easily exchanged online or via an infrequent telephone call or two.