When you lose your spouse, evaluating your financial strategies may take a back seat to other more pressing concerns. But even amid the grief and emotional turmoil that come with the death of a loved one, it is important to take stock of your financial and legal situation to avoid making any serious mistakes in the days and months following your loss, and to ensure that you and your family have the necessary resources in the years to come.
If you have been involved in organizing your family’s finances, the task of making plans for the future will be easier than if your spouse primarily handled all aspects of money management. If you do not have detailed knowledge of your family’s assets and legal arrangements, now is the time to inform yourself.
Start by assembling all documents relevant to your financial situation, including insurance policies, bank statements, mortgage documents, credit card statements, investment statements, tax returns, government retirement benefits, and information relating to pensions and other employer-provided benefits. If the paperwork is substantial, you may want to create filing system to help you keep track of various types of documents.
Read the documents closely, taking notes and writing down questions that may arise in the course of your examination. You may want to create a balance sheet listing assets and liabilities, as well as a cash flow statement detailing your income and expenditures over the course of a year. Your financial professional can be a valuable resource during this process.
Immediate action will be required on some matters. Apply for any life insurance, public benefits, or veteran’s benefits to which you are entitled as soon as possible after the death of your spouse. If your family received health insurance coverage through your spouse’s employer, you may be able to retain those benefits for a period of time. If your health coverage has been discontinued or has become too expensive, explore alternatives to avoid becoming uninsured. Some group health plans allow surviving spouses and their dependents to convert to an individual policy without undergoing medical exams.
If you have inherited money or received substantial proceeds from an insurance policy, there are important long-range decisions to be made. Avoid the temptation to spend or give away this money until you have carefully considered your future needs and the tax implications of your gifts. Even if you are already retired, you may want to manage funds so that they generate income to support you over time. If you have minor children, you may want to consider ways to fund their education.
A decision older widows and widowers are often faced with is whether or not to keep the family home. Particularly if you are going to be alone in a home that is larger than you require, selling is an option worth considering. Buying a smaller home or condo in a retirement community may not only be a smart financial move—it could also give you a fresh start and the opportunity to make new social contacts.
If you have not already done so, this may also be the time to delve more deeply into the estate planning process. Review your will to ensure it reflects the current state of your assets and your desired distribution to heirs. Your attorney may recommend a trust as a means of accomplishing your estate planning goals. While they can be complex, trusts are powerful tools that can help you handle a variety of family and tax-related issues. Consider, too, the role of life insurance in your estate. You may find you need additional life insurance coverage not only to provide for your beneficiaries, but also to help cover federal and state estate taxes.
While it is necessary to make certain financial decisions in the wake of a death, give yourself time to heal before you make any major moves—possibly as long as a year or more. Until you are certain of your choices, it may be best to leave inherited assets in savings or money market accounts. Then, with the help of financial, tax, and legal advisors, you will be in a better position to craft a plan that will provide you and your loved ones with a secure future.