The death of a spouse is a traumatic, stressful life event. You are going through grief and adjustment. This is also a time when financial issues may come to the forefront as well. Financial decisions can be clouded by the emotions that you are feeling. Here are a few tips for your first year as a widow.
There are some financial decisions that you will need to make sooner than later, but in most cases it is OK to step back and wait until you’ve had a chance to let some time pass. Making financial decisions that can impact you and your family on a long-term basis while in an emotional, grieving state is not a good idea.
Don’t let yourself be pressured
Many people will try to give you well-intended advice. Others may try to take advantage of your fragile emotional state to pressure you to make financial moves that might not be in your best interests. Aside from a few things that will need to be taken care of now, most financial decisions can wait.
There are some things you will need to do right away. These include:
- Make sure that all monthly household bills get paid like utilities, your monthly rent or mortgage payment and any other regular bills that need to be paid on an ongoing basis.
- If your husband was still working, contact his former employer to learn about any potential life insurance benefits, retirement accounts, or other compensation he might still be owed from the employer. If his company was the source of your health insurance coverage, check on COBRA continuation coverage.
- Get several copies of your husband’s death certificate. The funeral home can help with this. In the state of Kansas, certified death certificates can also be ordered through the office of Vital Statistics for $15 each. You will need them for most of the things you will need to do going forward.
Evaluate your new financial situation
As soon as you start to feel up to it, you will need to get your arms around your new financial situation.
What are your ongoing monthly expenses compared to the money that is coming in every month? What sources of monthly income do you have available to you? It’s important to gain a full understanding and then compare your income against your expenses.
This process might entail taking a hard look at your situation to see what, if any, changes you may need to make. This is a good time to gather all your financial documents so you know where you stand. This includes items like:
- Wills, trusts, any estate planning documents, powers attorney, etc.
- Your mortgage and the titles to any cars you own
- Statements for bank accounts, credit cards plus any outstanding loans
- Statements for any investment and retirement accounts
- Your latest tax return and Social Security statements
Apply for benefits
In addition to contacting your husband’s employer (as discussed above), you will want to contact:
If your husband was eligible for a benefit, your dependent children may now be eligible. In addition, you may be eligible for a survivor’s benefit based on his earnings record. This may or may not be your best option and is something to discuss with them.
If your husband was a veteran, or active military, you may be entitled to certain benefits.
Inheriting Retirement Accounts
Assuming that you were the beneficiary of your husband’s various retirement accounts, you will want to look at your options.
IRA accounts – As a spousal beneficiary you are entitled to treat the IRA account as your own. This allows you to take required minimum distributions on your own schedule. This is beneficial if you were younger than your husband because it doesn't subject you to any restrictions that go along with an IRA inherited by a non-spouse beneficiary.
Generally, the best move is to roll the IRA over to your own account. HOWEVER, you might want to wait if you are younger than 59 1/2 and anticipate that you will need to withdraw some of the money in the account to meet your needs. Spousal beneficiaries can withdraw funds and not be subject to the 10% penalty.
Company retirement accounts – Assuming that you are the beneficiary, it generally makes sense to roll 401(k) and similar retirement accounts to your own IRA. You will also want to check to see if your husband was eligible for a pension at any of his former employers, notify them of his passing and be sure that you are set up to receive the benefit when he/you are eligible.
Filing Taxes As A Widow
You may be single now, but that doesn’t necessarily mean you should be using the single filing status for your income taxes. You are considered to be married for the full year of your husband’s death and will need to file a joint tax return. Why is this important? Because your filing status dictates the size of your standard deduction and how your tax brackets are set up. Be sure that you adhere to all tax filing deadlines and that you seek help preparing your taxes if you don’t already use a professional tax preparer or have the knowledge to do this yourself.
Retitle The Bank Accounts
In most cases you will want to retitle joint accounts to your own name. I always recommend keeping at least one joint bank account open for a period of time in case any checks made out to your husband arrive so you have a place to deposit them.
You will likely want to retitle your home to your name only if owned jointly, likewise with your mortgage if applicable.
If you don’t have credit in your own name you will want to establish it as soon as possible. As far as debts that were in your husband’s name only, you may or may not be responsible.
Review and Update Your Beneficiaries
Reviewing and updating your estate planning documents such as a will or trust is important following your husband's death. Additionally, you will need to revise your beneficiary designations for retirement accounts such as an IRA or 401(k), insurance policies, and bank accounts to reflect your desired heirs.
Seeking Professional Advice
This may be a good time to engage the services of a fee-only CERTIFIED FINANCIAL PLANNER™ if you are not already using one. This also brings up another question. If you and your husband were working with a financial advisor, how is your relationship with that advisor? Was your husband the one who had the most interaction with the advisor? Do you feel comfortable with this advisor?
If the answer to the last question is no, then perhaps it’s time to find your own advisor.
Working with a credentialed, ethical financial advisor well versed in the special needs of widows can make your difficult transition as a widow more manageable.
If you’d like to discuss your situation please give me a call at (785) 256-9150 or schedule your FREE initial consultation here. And if you found this information helpful, please pass it along to someone else you think might benefit from it.
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About the Author:
Desmond Henry is a fee-only CERTIFIED FINANCIAL PLANNER™ professional and founder of Afflora Financial Life Planning in Topeka, Kansas. He helps the retiring/retired plan their finances and invest their money. CLICK HERE to learn more.