Financial To-Dos in the Aftermath of Losing a Loved One

Losing a spouse or partner is a dramatic and emotional experience that can have a serious impact on the financial health of the surviving spouse. Financial planning and investment management needs vary dramatically depending on what stage of life the surviving spouse is in.

In our 41 years in business at Parsec, we have worked with many clients who have unfortunately lost spouses at all stages of life. Death is not universal, nor are the financial steps to take in its wake.

Below is a summary of financial things to do when someone dies that we review with recently widowed clients. Every financial decision is personal and determined in close partnership between the advisor and client.

The Young Widow or Widower:

This stage of life will typically require the most financial planning, so it’s important to consult your advisor as soon as reasonably feasible.

Budget: If there is a loss of income, then reviewing your budget is critical. Household needs don’t cease, and often at this stage there are young children who have ongoing expenses.

Financial plan: Given the drastic change in your life, you should revisit your financial plan. How does this change your education savings plan? Does this change your envisioned retirement and thus your necessary savings rate? If you receive proceeds from a life insurance policy, it’s important to manage those funds properly and strategically to incorporate them into your day-to-day budget and longer-term financial plan. Moreover, if you are now the sole provider of young children, you should consider additional life insurance policies to protect them in case something should ever happen to you.

Estate plan: After the passing of a spouse, it is incredibly important for you to review your old and new assets and your overall estate. You will likely need to change the titling of assets to your name. Then take some time to determine what you would like your estate plan to be moving forward. Consult with your trusted estate attorney to update your estate planning documents as necessary. Since it is likely your spouse was going to be the guardian of any minor children and the beneficiary of your assets, you will need to update your plan to name a new guardian and beneficiaries. Finally, consult with your advisor to update any beneficiary designations on retirement accounts, life insurance, etc., to complete your new estate plan.

The Middle-Aged Widow or Widower:

By this stage of life, hopefully the surviving spouse will be in a more secure financial position with some previous financial and estate planning.

Budget: There may be a substantial loss of income. That risk may be mitigated with life insurance, and the household income could shift from earned income to portfolio income. Your advisor can review your options to determine the best method to ensure you have enough cash to meet your short-term needs.

Financial plan: Let’s review your financial plan to determine necessary changes to keep you and your loved ones on track for the long run. If you have children, there may be ongoing education costs to review. Either your envisioned retirement age and/or savings plan will likely need to shift.

Estate plan: Take time to review your old and new assets and your overall estate. You may need to change the titling of assets to your name. Then take some time to determine what you would like your estate plan to be moving forward. Consult with your trusted estate attorney to update your estate planning documents as necessary. By now, you may no longer have minor children but potentially children in their own relationships and marriages. You will need to update your plan documents (and beneficiary designations) and have new beneficiaries chosen. Finally, you may even need to think about appointing children or other trusted individuals as attorney-in-fact within your power of attorney documents to potentially make decisions on your behalf.

The Elderly Widow or Widower:

An elderly surviving spouse or partner may be in retirement and financially secure. However, Social Security income will be less, and pension income could be less or stop all together.

Budget: This will take some planning to determine where to draw the needed income from in the most tax-efficient method.

Financial plan: At this stage you may be looking to downsize, move to a retirement community, or move close to family or children. Any move requires planning and has unique tax consequences. We also need to work with the current estate attorney to be sure the proper types of accounts are being used to limit federal estate tax.

Estate plan: Consult with your trusted estate attorney to update your estate planning documents as necessary. You may have already planned appropriately for the passing of a spouse, but it is important to understand the effects of such a passing on your plan. Make sure your beneficiaries still match your plan and update them if necessary. By now your generational family may be in good financial positions of their own, so this may be an appropriate time to consider adding charitable/philanthropic organizations and causes that you (and your late spouse) value to your estate plan.

If you are mourning the recent loss of your spouse or loved one, please let us help you through this difficult time. We are so sorry for your loss.

Greg James, CFP®


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