The death of a spouse can be one of the hardest things a person ever has to go through. It can be extremely difficult to process how we feel during such a difficult time. In addition, losing a spouse can also cause financial strain.
Depending on the circumstances, it could mean a loss of income or a bigger tax bill. Fortunately, there are certain steps you can take to help avoid the worst impacts of an already precarious situation.
Here are 11 key financial steps to take after a spouse’s death. This insight can help as you move through a deeply challenging time.
Key Points
• Consider a support network — personal and/or professional — that can help you navigate your emotional and financial care.
• Gather and organize essential documents like birth, death, and marriage certificates and any life insurance policies.
• Update all financial accounts, including checking, savings, investments, and credit cards.
• Review estate plans, beneficiary accounts, and Social Security survivor benefits with a financial advisor, where needed, to understand options and tax implications.
• Revise your budget to account for income changes and consider downsizing to manage expenses and reduce financial stress.
The Difficulty of Losing a Spouse
As you navigate this difficult and uncertain time, it’s important to surround yourself with the right people. A spouse can be someone’s biggest source of emotional support, and you may need someone to provide that support where your spouse would have in the past.
Who that person might be won’t be the same for everyone. Perhaps you have a relative or a close friend who will be there for you. If necessary and if you have the means, you could also consider working with a professional therapist. For many people, the best solution will be to talk to a few people.
During this time of tremendous grief and stress, it can be wise to remember to take care of yourself. While there will be a lot to manage during this time, it’s important to get the rest, good nutrition, and the other forms of self-care that you need.
11 Financial Steps to Take After Losing a Spouse
Taking the right steps after losing a spouse can help you avoid financial stress later. You should ensure you have documents in order, update records, and submit applications as necessary.
Here are 11 steps that will help with this endeavor and can provide a form of financial self-care as you get these matters under control.
1. Organize Documents
One of your first steps should be to gather and organize documents. You may need several documents, such as a birth certificate, death certificate, and marriage license. You will likely want to order or make several copies of each, as you might need them multiple times as you work through the steps ahead.
2. Update Financial Accounts
You may have several financial accounts that need updating, especially if you and your spouse had joint finances. For example, you might have personal banking and investment accounts with both names. You might also have credit cards in both names. Contact the financial institution for each account and let them know it needs updating.
3. Review Your Spouse’s Estate and Will
Review your spouse’s estate and will to see how their assets should be handled. Their planning documents, such as a will, are usually filed with an attorney or may be held in a safety deposit box. Contact the attorney with whom your spouse filed the documents to find the paperwork if necessary.
If they didn’t already have a will or estate plan, you can work with an attorney to determine next steps. State law will likely play a role in determining how assets are managed. Working with a lawyer skilled in this area can be an important aspect of financial planning after the death of a spouse.
4. Review Retirement Accounts
Your spouse may have left retirement accounts, such as a 401(k) or individual retirement account (IRA). Check whether you are the beneficiary of your spouse’s retirement accounts. If you are the beneficiary of any of them, you will need to establish that with the institution holding the account. When that’s settled, it will likely be up to you to determine how to handle the funds.
While it is possible to transfer all of the money to your accounts, that isn’t always the best move. For instance, if you roll a 401(k) into your IRA and need the money before age 59½, there will be a 10% penalty on the withdrawal. There may be tax consequences, too.
In some cases, the best choice may be to leave the money where it is until you reach retirement age, if you haven’t already.
5. Consider Your Tax Situation
A spouse’s death can also create tax complications. For example, the tax brackets for individual filers have lower income thresholds than those for married couples filing jointly. A surviving spouse may still file jointly in the year their spouse dies (assuming they don’t remarry in that timeframe), and, in certain circumstances, may also be able to claim the qualifying surviving spouse filing status in the two years following in order to receive the lower tax rate.
Otherwise, if you are still working and filing as a single, you might find yourself in a higher tax bracket, especially if you were the breadwinner. As a result, you might decide to reduce your taxable income by putting more money in a traditional IRA or 401(k).
6. Review Social Security Benefits
Another financial step to take after a spouse’s death: Review Social Security benefits if your partner was already receiving them. If you’re working with a funeral director, check if they notified the Social Security Administration of your spouse’s passing; if not, you may take steps to do so by calling 800-772-1213.
If you were both receiving benefits, you might be able to receive a higher benefit in the future. Which option makes the most sense depends on each of your incomes.
For instance, if your spouse made significantly more, you might opt for a survivor benefit.
Recommended: 9 Common Social Security Myths
7. Apply for Survivor Benefits
Survivor benefits let you claim an amount as much as 100% of your spouse’s Social Security benefit. For instance, if you are a widow or widower and are at your full retirement age, you can claim 100% of the deceased worker’s benefit. Another option is to apply for survivor benefits now and receive the other, higher benefit later.
You can learn more about survivors benefits on the Social Security website.
8. Review Your Budget
If you had joint finances with your spouse, you should revise your budget. Chances are, both your expenses and your income have changed. While you may have lost the income your spouse earned, your Social Security benefits may have increased.
Your revised budget should reflect all these changes and reflect how to make ends meet in your new situation. This kind of financial planning after the death of the spouse can be invaluable as you move forward.
9. Downsize if Necessary
As you review your budget, you may realize your living expenses will be too much to cover without your spouse’s income. Maybe you want a fresh start, or maybe you decide the big house you owned together is too much space these days. You might move into a smaller house and sell a car you no longer need.
Whatever the case, downsizing your life can be a way to not only lower costs but also simplify things as you enter this new phase. Financial planning for widows
10. File a Life Insurance Claim
If your spouse had a life insurance policy with you as the beneficiary, now is the time to file a claim. It might include a life insurance death benefit. You can start by contacting your insurance agent or company. Life insurance claims can sometimes take time to process, so it’s best to submit the claim as soon as possible.
Your spouse might have had multiple policies as well, such as an individual policy and a group policy through work. You might have to do some research and file multiple claims as a result. And, once you receive a life insurance benefit, you will need to make a decision about the best place for that money.
11. Meet With a Financial Advisor
These steps might be a lot to process, and you might feel overwhelmed thinking about everything you must do. And you may not know the best way to handle the myriad decisions — benefits, retirement accounts, investments, etc. You likely don’t want to make an unwise decision, nor wind up raising your taxes.
Fortunately, some financial advisors specialize in this very situation. It can be worth meeting with one at this moment in your life, at least for a consultation. They can help you decide how to handle your assets as you move forward and help you do some financial planning for widows. That can help to both reduce your money stress and set you up for a more secure future.
The Takeaway
For many people, there is nothing more emotionally challenging than losing a spouse. It can also be a financially challenging time as well. As you navigate this difficult time, there is no shame in seeking a helping hand. By taking steps like reviewing estate plans, filing a life insurance claim, and applying for survivor benefits, you can take control of your finances as you move into this new stage of life.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
Which is the most important financial step to take after a spouse’s death?
There isn’t one single step that is most important. However, filing insurance claims, reviewing your spouse’s will, applying for any survivor benefits, and updating financial accounts are among some of the important moves to make.
How can I help a widow(er) financially?
How you can help a widow depends on your expertise and how long it has been since the widow lost their spouse. If the death happened recently, they might still need help submitting documents and updating accounts. However, they might need emotional support long after that process is done.
Are there any tax breaks for widow(er)s?
Widow(er)s may qualify for certain tax breaks, such as state property tax credits. Check with your state’s department of revenue to find out what tax breaks are available, if any.
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