Some of the most heartbreaking conversations for a financial advisor involve counseling clients who are dealing with the deep grief of losing a spouse. Especially for women who came of age during a time when the dominant view was that decisions about money were best left to the men, one of the most difficult adjustments can be the uncertainty surrounding finances. But even for women who are knowledgeable and more than capable of handling their financial affairs, all the changes and choices that arise around money matters in the wake of bereavement can become overwhelming in a time of great emotional upheaval; it can be very easy to end up paralyzed, making no decisions at all.
But there are things you can do, even as a recently widowed person, to take the steps that keep you moving forward. By segregating the various tasks in order of time priority, and then understanding the discrete actions involved with each, it can be easier to begin moving ahead constructively. The most important thing, however, is giving yourself enough time to understand what the priorities are, then tackling them in order. Avoid allowing yourself to be rushed into making decisions that you aren’t prepared for.
What financial documents do I need after losing a spouse?
Certain matters, such as funeral arrangements and filing notices of death with various governmental and financial agencies, should certainly receive priority in the early days.
Often, a family member, friend, or trusted financial advisor may be able to assist you as you work through these initial tasks.
- Follow any final directions that may be contained in your spouse’s healthcare proxy or living will. If your spouse was an organ donor, make these arrangements. You should feel free to ask for help from the medical coordinators at the hospital, nursing home, or home health service.
- Contact your spouse’s employer (if applicable) to inform them of the death and make arrangements to gather personal belongings from the workplace. You may also wish to ask them to begin any applicable processes for payment of workplace life insurance or pension benefits.
- Ask the funeral home or your state agency for at least 12 copies of the death certificate; you will need these for filing claims with insurance, Social Security, and possibly other organizations.
- After the funeral, contact Social Security, either at a local office or online (https://www.ssa.gov/agency/contact/) to notify them of the death and begin the process of claiming any benefits to which you are entitled. You may wish to discuss with a trusted financial advisor your various options for claiming Social Security benefits.
- Make arrangements to meet with your legal representative to go over your spouse’s will, trusts, or other estate planning documents. Discuss filing requirements, deadlines, and probate processes, and meet with the named executor or trustee (if they are not the legal representative). If your spouse left a will, you may be the executor for the estate (the person who is responsible for seeing that the estate matters are handled in accordance with your spouse’s wishes) or someone else may hold that responsibility. If a trust is involved, the trustee (an individual or organization, such as a bank trust department) is responsible for administering the trust and any assets it contains.
During this early period, it’s a good idea to avoid making long-range decisions. But by taking the initial steps listed above, you are preparing yourself to take greater control of your future.
What should I do about Social Security?
Spouses of deceased persons who were receiving Social Security benefits are entitled to receive 71.5%–100% of the deceased spouse’s benefit, depending on the surviving spouse’s age when they apply. Even if the deceased spouse was not yet receiving benefits, the surviving spouse may qualify for survivor benefits if they are 60 or older or are caring for the deceased spouse’s children under age 16 (older children may also qualify if they have a disability).
If you and your spouse were both receiving Social Security benefits, the Social Security administration will determine which benefit is higher and begin paying that amount; you are not allowed to continue collecting both benefits.
What should I do about taxes?
As for the financial decisions, it’s essential to reach out to your professional advisors—your CPA, your investment advisor, your insurance professional—for help with all the details that need to be attended to. In particular, your tax advisor can help you evaluate your options and devise a strategy, going forward. Here are four important tax matters that you will want to discuss with your CPA or other tax advisor as you begin the adjustment to life without your partner.
- When should you begin filing a single return? If your spouse passed away during the year and, as is most likely, you do not remarry before December 31, you are still eligible to file a joint return for the year in which your spouse died.
- Can you file as qualified widow? Some persons who have lost a spouse may be able to file as a qualified widow for as much as two years after the passing of their spouse. This allows the surviving spouse to file at the same rate as persons who are married filing jointly and utilize the higher deductions available in that filing status. In order to qualify, you must:
- have been entitled to file as married filing jointly in the year your spouse died;
- the death occurred within the past two years and you remain unmarried;
- you have at least one child or stepchild (not a foster child) living with you whom you can claim as a dependent; and
- you paid more than half the cost of upkeep for your home for the year.
Extra planning now can help you avoid the “widow’s penalty” (the extra taxes incurred by going from married-filing-jointly to single filer status) and save you money later.
What are the next financial decisions I need to make?
Thirty to sixty days after your spouse’s death, you may feel ready to begin putting your financial house in order (or re-acquainting yourself with your financial situation). Here are some of the most important tasks to attend to.
- Make a listing or spreadsheet of all monthly bills, including amounts, due dates, and (if known) sources of payment. Prioritize those with the earliest due dates. If there are major medical bills related to the death, set these aside for the time being. If you have a professional financial advisor, they can be of great assistance with this and the following tasks.
- If you had a joint banking account with your spouse, keep it open for a year or so. If your legal counsel or trustee has advised opening an estate account, do that at this time.
- Establish an emergency fund. A good goal is to maintain 3–6 months’ income in a liquid account for use in an emergency.
- Notify creditors and close credit card accounts that are solely in your spouse’s name. It’s advisable to provide copies of the death certificate to the three major credit reporting agencies: Experian, TransUnion, and Equifax. This will make it more difficult for identity thieves to exploit your spouse’s personal information.
As more time passes, you should continue to manage the necessary processes for settlement of your deceased spouse’s financial affairs, including transfer of any retirement accounts, pension benefits, and other assets, as dictated by the terms of the will or trust documents. Review the beneficiary designations on your own insurance policies, annuities, pensions, and retirement accounts and revise according to your new family situation. Begin educating yourself on the nature of any assets and investments you inherited from your spouse, including how they can be handled in the most advantageous way for current and future income as well as tax efficiency. Finally, you will want to continue aligning your financial future with your most important goals and priorities. Your long-term financial plan should reflect the future that you have begun to envision for yourself and those closest to you. Discuss with your trusted advisors any areas of “financial education” that you believe you need and form a plan for acquiring the knowledge you need in order to feel more in control.
Dealing with bereavement is difficult: emotionally, socially, and financially. As you move through the various stages of grief, always keep in mind that you can take the time you need to make the most important decisions. Seek counsel from trusted family, friends, and other advisors, and build your future financial plans on your most important values and priorities.
