One of the hardest parts of our job as financial advisors is helping clients whose spouse has recently passed away. Few things compare to the difficulty of losing one’s spouse, and that difficulty is often compounded by the immense pressure to make decisions at precisely the hardest possible moment. Many of these tasks seem to require immediate attention, so it is important to take precautions to guard against making decisions while emotionally vulnerable. There’s no easy way to get through this time of loss, but following a few simple guidelines may help to avoid costly mistakes.
Despite the pressure to do so, this is precisely the wrong time to make major financial decisions. Don't put your house on the market. Don't give away money to your children or charity, or sell stocks or bonds or agree to move in with an adult child. Eventually, any of these steps may make perfect sense but in the overwhelming weeks and months after a spouse dies, your emotions may cloud your judgement.
First, gather the documents you’ll need. It’s a great idea to do as much of this ahead of time as possible, as part of your estate planning process. You could set up a file with Social Security numbers, birth and marriage certificates, adoption paperwork, and military discharge papers and keep it along with a copy of your will, trust documents and life insurance policies. At the very least, leave a document listing the location of these documents. Next, get the death certificates. Order a few more than you think you’ll need. Most accounts, policies, pensions, etc. will require a certified copy. Keep a joint checking account open for at least a year. This way, if any stray checks come if for the deceased, you’ll have a place to deposit them.
Next, and this one is critical, get some help. Find someone you trust to be with you when you meet with people. This could be an adult child, relative, or just a trusted friend. This is particularly important if you’ve made financial decisions jointly during your married life – even more so if your deceased spouse made the financial decisions. Also, don’t be afraid to ask questions, even if you think they are too basic. You are now responsible for your financial life, and asking questions will help you to learn and feel more confident in making your own decisions.
You’ll need to assess your cash flow. Start this process by making a list of your necessary expenses like mortgage payments or rent, taxes, utilities, food and clothing and a separate list of your discretionary expenses. Next, make a list of your income sources. If your spouse was receiving a pension benefit, it might be reduced or discontinued depending on the election your spouse made when the benefits began. If you were both receiving Social Security you will need to plan for losing one of the benefits. Collect life insurance benefits, if you have any. These may help to make up for the decrease in income from other sources. The insurance company may want to send you a checkbook instead of a check. This is fine. You can just write yourself a check for the entire amount. The insurance company may offer you lifetime income instead of a lumpsum settlement. Before you agree to doing that, make sure to have the offer evaluated by advisors your trust. These are tactics the insurance company uses to hold on to the money for as long as they can.
If your spouse was employed at the time of her death, be sure to check with the employer to collect any unpaid salary and bonuses that have been earned as well as any sick days or medical savings. If you were covered by your spouse’s health insurance at the time of his death, you may want to continue that coverage temporarily. Ask about group life and retirement accounts to which you may have been named beneficiary. Even if your spouse was retired, you may be entitled to benefits, so be sure to check with the former employer.
The stress of the death of a loved one is difficult, especially your spouse. Hopefully, a little preparation will make the financial aspects a bit less stressful.
To hear the podcast of the Smart Money Management radio show on this topic, or others, go to our website at www.alderferbergen.com.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities and financial planning offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC