The period immediately following the death of a spouse is understandably difficult. First, there are the emotional issues to deal with, but then you also have practical decisions to make. Many widows and widowers may have to take on new responsibilities, which is often the case when the deceased spouse oversaw the couple’s finances.
The conventional wisdom makes sense: Don’t rush into significant changes in the immediate aftermath of a spouse’s death. However, there are time-sensitive decisions you’ll have to make, and the time will come for you to take stock of your new financial reality and plan accordingly.
There are some important steps you’ll need to take, such as dealing with a will, rearranging assets, ensuring that the bills are being paid, and so forth. After these are out of the way, it becomes time to begin making long-term plans.
The team at Global View has assembled the following 5 tips to help widows and widowers navigate this emotional time. Please also take a look at our recent guide: Estate Planning in the Carolinas. Unfortunately, we’ve all heard estate planning horror stories. Who gets what when you’re gone? What do you do when there’s no will? A little planning ahead of time can help your loved ones tremendously.
1. Put Together a Team
You may inherit a team of professionals that helped your spouse with financial decisions, or you may have to assemble one on your own. In either case, make sure your team includes a financial advisor you trust, an accountant, and an estate planning attorney. At Global View, we have all of these professionals under one roof, so we can coordinate your full financial picture in one place to help ensure nothing slips through the cracks. Your team’s job is to provide the financial advice you require to meet your unique needs while ensuring that no details are overlooked.
2. Take Stock of Your Assets and Income
When you lose a spouse, there are several important financial actions that have long-term consequences. For example:
- Social Security: Do not cash any Social Security checks sent to your deceased spouse, as you will eventually have to return the money. Make sure to contact the Social Security Administration to discuss survivor benefits, including the one-time death benefit. At Global View, we have two Registered Social Security Analysts with the National Association of Registered Social Security Analysts on our team who can explain your options and help you understand the consequences of each. It’s also important to assess how the loss of your spouse’s Social Security benefit will impact your future income. For more on how your Social Security benefits work, check out our new guide: Navigating Social Security.
- Life Insurance: Assuming your spouse had a life insurance policy that named you as the beneficiary, you’ll have to go through the claim process with the insurance company. From a planning point of view, you will need to decide how to accept the death benefit – as a lump sum, an annuity, or a combination of the two. Lean on your financial advisor to help advise you on the long-term implications of your decision, including any possible tax consequences. If you choose a lump-sum, at Global View, we can also help you make a plan for that money so it’s used to your fullest benefit. This blog post will help: Global View’s Tips for How to Handle an Inheritance.
- Retirement Accounts: You may inherit a 401(k) or 403(b) retirement account and/or an IRA. It’s important to understand your options, as they will affect how these assets will be distributed. Often, these accounts are simply rolled over into the survivor’s IRA, but there are other options. Your financial advisor can help you navigate factors such as Required Minimum Distributions (RMDs) and taxes.
- Pensions: Your spouse may have had a pension with a current or former employer. Understand your rights as a surviving spouse.
- A Business: If your spouse was a business owner, you’ll face a variety of complex decisions, with much depending on your degree of involvement with the business before your spouse’s passing. You may wish to sell the business, run it yourself, or perhaps bequeath it to your children. The Global View team can show you how each decision will impact your long-term financial plans as well as your lifestyle and responsibilities.
- Trusts: Your spouse may have set up one or more trust accounts that will need to be addressed. An estate planning attorney can help you go through the short- and long-term strategies for these trusts.
- Assets: You may have to make decisions on whether to keep or dispose of inherited or co-owned assets, such as second homes, boats, stock portfolios, and other valuable items. Make sure you understand the effects taxes have on your decisions.
Your goal with this process is to have a complete understanding of your assets and income. Only then can you intelligently develop a budget and make long-term financial plans.
3. Draft a New Budget
Your financial team can be a huge support as you draft a new budget based upon your assets, income, expenses, and debts. Your new budget should be responsive to all the big changes since the loss of your spouse, both to your daily routine and to your long-term finances. If you have yet to retire, the budget will help you evaluate how much you can contribute to your retirement accounts. Some expenses may go away, while other ones may appear. For example, you may want to drop your country club membership if your spouse was the predominant user. However, perhaps you’ll be increasing your travel or moving to a new home. The picture regarding medical costs can also change dramatically after your spouse’s death.
It wouldn’t be unusual for your budget to go through several drafts. For example, initially, your budget may include the costs of your present home, but in a few years, you may decide to downsize or move in with another family member.
4. Formulate Your Career Decisions
Depending on your age, you may face decisions regarding whether to continue in a current job, retire or seek out new career challenges. Don’t rush into a decision. Make sure you understand how any changes will affect your financial plans as well as your lifestyle. Does your career bring you an important sense of structure and stability? Or, if you feel your job is constraining and unappealing, can you retire earlier based on your new budget and lifestyle? Your options can be quite complex.
It’s also important to consider how lifestyle changes will affect your career and vice versa. Give yourself some time to adjust to your new circumstances before making a decision.
5. Adjust Your Estate Plan
As a couple, you and your spouse may have accumulated considerable wealth throughout your lives. After losing your spouse, it’s likely you’ll have to adjust your estate plans. You may need to assess items like wills, trusts, beneficiaries, gifting plans, charitable giving, and tax strategies. If you plan to move to another state, it’s important to understand any impact imposed by the state’s inheritance laws.
How Global View Can Help
The team at Global View is here to help you get through the trying months and years following the passing of your spouse. You don’t have to prepare for the next phase of your life alone.
Global View is a fee-only, fiduciary, full-service, financial advisory firm headquartered in Greenville, SC that serves clients nationwide. Our mission is to provide truly independent, conflict-free advice and complete wealth management services, so you can protect and maximize the wealth you’ve built. Contact us to see how we can help.