It’s hard enough to deal with the loss of a spouse on an emotional level. For many widows/ers though, their new financial reality can be even more intimidating.
For many they are suddenly thrust into the role of controlling finances for the first time in their life. Having to take control of family finances and trying to get by on less income can be overwhelming. Unfortunately bill paying and other financial matters don’t pause until the end of a mourning period. I can’t count how many times I have sat with a client that lost a spouse and they are totally overwhelmed and inevitably they break down and start to cry.
Before I get to the crux of the article I want to give a tip to couples before they are thrust into this unfortunate situation. I know this may be old fashioned, but buy a notebook. Write down the contact information for the family lawyer, accountant and financial adviser. Then print out a recent statement from all bank, brokerage and retirement accounts as well as any current insurance policies.
In today’s day and age of online statements, especially when one spouse is in charge of the money, the most common problem I see after the death of a spouse is that they need to start trying to get into online access for all these accounts, and it’s very difficult. In addition, this alleviates the need to try and figure out where all the accounts are, because each one is listed in the notebook.
Here are some tips to get started with in the event you have lost a spouse.
Set up meeting with your trusted advisers. These professional have loads of experience in dealing with all the various issues that may arise and they can help guide you through this process.
An accountant can help you understand your new tax situation. Whether filing estate taxes, tax ramifications of benefits to be received, figuring out what new deductions you may be entitled to, to just walking you through what to expect in the future, your accountant should be contacted soon after the death.
No one likes lawyers until they are needed. Your lawyer will help guide you through the probate process. This will help take some pressure off and enable you to start moving ahead with your new reality. In addition, the lawyer can help prepare your new estate planning documents and make sure everything is up-to-date and current.
A financial adviser can help coordinate your new financial situation. An experienced adviser can draw on similar circumstances and really prepare you for what to financially expect in the future. You can analyze your financial situation and based on your new outlook, make sure your investments are in line to achieve what it is that you set out to do.
What to do first?
Suddenly there is a lot on your plate and you don’t even know where to start. Here are what I think are the four most important issues to deal with sooner rather than later.
Retitle all accounts — You will need to remove your deceased spouse from any joint account. I strongly urge that when retitling accounts it’s important to add either a joint account holder or give power of attorney to someone-usually a trusted child. You should live and be well, but if something catastrophic would happen, if you have an individual account and you aren’t able to make decisions, your money is basically frozen. If you need a large chunk of money for medical issues, to get a caregiver you are out of luck. If you have another person on your account they can see to it that your money can be accessed in times of trouble.
Life insurance — Start the process to collect your benefit from any life insurance policies that may be out there. Call your agent and she will guide you through the benefit process. If there was an employer based policy, contact the HR department to determine the process of collecting.
Probate the will — Call your lawyer and have her walk you through the process. If all is in order it doesn’t take to long, a couple of months. If there are complications and someone decides to challenge, be prepared for a long process that can take years to clean up.
Benefits — Contact Social Security to inform them of the death. If your spouse was receiving benefits they will be stopped at once, and you can apply for survivor benefits. If your spouse was working, speak to HR to determine if you are entitled to any benefits.
Wait a few months to try and determine how much money you will need on a monthly basis. The reason to wait is that you may have all kinds of immediate expenses that will totally skew your budget, and give you an inflated figure of what you need.
After things calm down, then start to track expenses. If you never were involved in the family finances, this may be intimidating at first but will ultimately give you a sense of empowerment. Many clients have told me that by doing this relatively simple exercise, they feel that they gained a level of financial control they never assumed they would have.
Whether you kept a budget while married or not isn’t relevant. You are going to have a whole new set of expenses and will probably have different sources and levels of income than you had previously. Break your expenses down to those that are monthly and those that are annual, one-time expenses. Once you have that organized, write down all of your various sources of income, salary, Social Security, rental income, etc.
What’s important in budgeting is to let your income drive your expenses. This means that once you know how much money enters your bank account each month, create a budget that limits your spending to the amount of income you have. While this seems basic, most individuals let their expenses drive the process, meaning that they spend money without discipline and hope that at the end of the month they don’t go into debt.
If you end up receiving a large sum of money from an insurance policy stick it in the bank for three to four months. Don’t make any rash or impulsive purchases or investments until you feel like you are in control and making rational decisions. I’ve seen many instances where a surviving spouse receives a large death benefit and squanders it immediately, by buying all those things that “needed” to be bought or by giving overly large gifts to children to help them out. Nothing against helping children — but make sure you have enough for yourself first.
The death of a spouse is emotionally devastating, but you need to continue living your life. By implementing these tips, you can start taking control of your financial situation, which is one thing at least that will help enable the healing to begin.