Dealing with the Loss of a Spouse

One of life’s most devastating events is the loss of a spouse. Understanding what you should do if you are found in that situation can make a lot of difference as you cope and move forward in your life.

Many couples delegate their roles in marriage, such as who manages the bill paying, housework, shopping, cleaning, repairs, gardening, and such.  But what happens when one half of that team is no longer there to help?

According to the US Department of Health and Human Services, over 80% of widowed people over age 85 in the United States are women.  35% of the women aged over 65 are widows, and 46% of women aged 75+ are living alone.   Sadly, in the United States, over 48% of the poor elderly are widows. 

And the poverty rate among elderly widowed women is substantially higher than other households.  Expenses may be reduced when a spouse dies, but a widow will likely see a higher reduction in income due to reduced survivor pension benefits and overall Social Security benefits decreasing to one check. 

FINANCIAL ADVICE FOR WIDOWS

Finances are likely the last issue a newly widowed person wants to tackle.  But there are important steps that need to be taken, some urgently, and others a little later.   If at all possible, get help from trusted family, friends and professionals.

Advocacy for widows/widowers includes helping them to have time to adjust.  The help of trusted advisors, such as your CPA and Financial Advisor, can be invaluable during this difficult time.  There are so many potentially confusing documents to find, fill out, and follow up with, that having an advocate by your side will help immensely.

In my experience, just explaining the implications of choosing between options can ease some of the feelings of being overwhelmed.   From a financial advisor and women’s advocate perspective, I’d like to share some critical financial items to arm the newly widowed with knowledge. These points will help them to ask the right questions and get the correct advice, treatment and benefits.

1. Maintain your financial routine; pay bills on time and especially make tax deposits on time. It may be a burden for the partner who hadn’t regularly paid the bills to assume this  role without someone to help them organize and understand what is needed, when and why. The consequences of not paying attention to this would certainly add to the stress.  Reach out, let others more experienced help.
2. Make sure your health insurance is still in force if your spouse was still employed.  Contact the employer if applicable to get the required information. 
3. Get help understanding what benefits, such as Social Security and Life Insurance Proceeds you are entitled to, and apply promptly.
4. Go over your tax return with a professional.  If you have a CPA or other qualified tax preparer, make an appointment to go over your tax return, learn what you need to keep track of, save, or otherwise maintain to make your next tax return preparation process easier and less stressful.  Even if you’re not sure something needs to be saved, set aside a filing drawer or organizing box and collect statements, donation receipts, and other important items.
5.  Meet with your Financial Planner or investment adviser to understand what is important about making changes to accounts:
   1. Combine any IRAs if applicable.  A surviving spouse beneficiary can transfer the IRA to their own IRA without any tax implications.  If there are 401(k)’s from employment, contact the employer for information and forms to transfer the account to your IRA. 
   2. If your spouse was over age 70½ and taking Required Minimum Distributions from their IRAs, be sure that you receive that for the year of his/her death.  Be careful, however not to withdraw a significant amount before checking with a tax advisor.  IRA withdrawals are subject to income tax, and a surviving spouse may be shocked to learn that a large percentage of the amount taken out will be owed to the US Treasury!
   3. If any accounts were held jointly or solely by the deceased spouse, be sure that that the investment manager provides a “step-up” in basis for applicable investments.  This means that as of the date of the spouse’s death, the cost of his/her investments is changed to the price as of that date.  This can be a complex calculation, but it may save the surviving spouse significant amounts in taxes when the investments are ultimately sold.

This is just a small portion of what newly widowed spouses may face, but I mention these issues primarily so that the bereaved spouse will seek the assistance of experienced, trusted advisors who will advocate for them in areas that are unfamiliar. 

PLAN AHEAD

For those who have not lost a spouse, consider the information above and work together to plan so if such an event should occur, you are better armed to deal with what is ahead.

1. Share the financial responsibilities.  Both spouses should know where important documents are kept, and where accounts and safe deposit boxes are held.  Both spouses should know the professionals who attend to their finances: tax preparers, financial planners, investment advisors, insurance agents.
2. Know your financial plan.  Do you have the savings, and insurance coverage needed to help a surviving spouse and family?
3. Know who the beneficiaries on your accounts are.  Especially if you are in a second marriage, it’s critical to know that these accounts have been updated.
4. Make sure estate planning documents are up to date.

You never know when you will have to address these things.  Planning and preparation will help when you face this untimely day.