Five Financial Steps For Surviving The Loss Of A Spouse
Losing a loved one is akin to peeling an onion. Each layer you pull back is bittersweet, generating more and more tears, compelling every emotion imaginable to the surface. In the past four months, I personally experienced the tragic losses of my father and my uncle. Both times I was there to help my mother and aunt pick up the pieces, emotionally and financially. Not only have I faced this in my personal life, but in my business, where we have helped clients navigate what to do after they lost a spouse, as well.
The waters of loss are murky, and several things must be dealt with. So when death comes to your door, you’ll want to have a plan in place and a team to help you make the transition as smooth as possible, at least financially. Here are some of the major factors you’ll be dealing with as you move forward without your loved one:
1. Retitling Assets: Typically one of the first moves that need to be made after the loss of a spouse, this is the moving of assets from the name of the deceased person to the name of the surviving spouse. This includes everything from an IRA or joint bank account to an automobile or real estate. Each of these changes takes time too; they don’t happen overnight. It can be helpful to have someone who understands how to get these processes taken care of in a timely matter, like a lawyer or Certified Financial Planner (CFP)™. Having qualified help is often the key to a smooth transition.
2. Death Benefits: This is where things like life insurance policies, annuities and Social Security benefits, to name a few, come into play. Life insurance can be a highly emotional component of dealing with loss. I cannot even begin to explain how overwhelming it was to file that claim when we lost my father. However, it’s crucial to find all existing policies and file the appropriate paperwork as soon as possible, so you receive the financial benefits you are entitled to. This is also an area where employing an expert can be worthwhile. They can take care of some of these processes for you, ensuring everything is filed correctly, as well as helping you to avoid some of the emotional baggage you will experience in doing it on your own.
3. Surviving Income: In additional to immediate benefits, you may have benefits that will provide you with ongoing income after the loss of your spouse. There are calculations you’ll need to deal with to figure out exactly what money is coming in. For example, you must find out what you are entitled to in terms of your late spouse’s Social Security benefits. Perhaps it’s just you, or maybe you have children. Either way, those calculations need to be made and the necessary paperwork filed, not just for Social Security, but also any pension benefits you might receive. There are several vehicles of income you may be entitled to after losing your spouse, and you need to know what they are and fill out the proper paperwork to ensure you get the income your eligible for.
4. Estate Closure: One major mistake I’ve seen with a client of mine was that they never probated the estate of the deceased. That made for a mess; after the second spouse passed away, there were $90,000 in past probate expenses left to be settled. It’s imperative that you close out or move the estate. If proper planning is in place, then probate is often simple. However, if it hasn’t been done correctly, you may need to hire an estate attorney to help you get everything in order. During probate, you’ll be working to let creditors know what transpired and closing bank accounts, online accounts, credit cards, etc. You may need to rework contracts, remove names on phone bills, and other things of this nature. Your goal is to close out the digital footprint of the deceased individual.
5. Final Tax Return: Once a person is deceased, a final tax return needs to be filed. I highly recommend working with a CFP® and/or a Certified Public Accountant (CPA) for help in this area. You want to make sure the final tax return is completed properly, as mistakes could cause unnecessary harm to you as the surviving spouse and increase your tax liability in the end. A CFP® and a CPA can work hand in hand to minimize the tax burden on any inherited monies. There are also ways they may be able to reduce the taxable income through various investment strategies.