Finance 101 for widows: What to do when a spouse dies

Open full sized image

Financial considerations for the newly widowed.

© AscentXmedia––iStock/Getty Images

Regardless of the extent of your financial and estate planning, the emotional impact of a spouse’s death is something few people are prepared for. Even so, during this difficult time, choices—including decisions about money—need to be made. It’s not easy, but there are things you can do to reduce your stress as you work through your finances as a new widow.

When a spouse dies, take time to grieve, get your bearings, and don’t worry about making any big financial decisions until you’ve had time to review your options. Your top priority likely will be making funeral arrangements and going through all the steps necessary to ensure the burial goes smoothly.

In addition, some bills may need immediate attention, several copies of the death certificate will be required as proof for closing or taking over accounts, and if your deceased spouse was receiving Social Security benefits, the Social Security Administration must be notified.

Among all that busy work, it’s important to care for yourself. Remember, grieving is a process—one that takes time.

If you typically used “married filing jointly” status when filing your income tax return before your partner’s death, you’ll continue to do so on the return for the year your spouse died, provided you didn’t remarry.

After that, you may be able to use qualifying widow status if you have a dependent child who lives in your home all year, and you pay for more than half the cost of maintaining the home for a year.

Qualifying widow(er) filing status can provide some tax relief for up to two years:

The two-year window to file as a qualifying widow(er) gives you time to adjust your tax strategy before you have to start preparing your taxes as a single filer. It pays to research and understand how to use qualified widow(er) status to your advantage.

Be sure to notify the Social Security Administration (SSA) promptly after your spouse dies. In most cases, the funeral director notifies the agency of the death. If Social Security benefits continue to be paid after the month your spouse died, the money will need to be reimbursed.

Then, it’s time to think about applying for survivor benefits to determine:

You may need to do some calculations to maximize your total Social Security benefit. The Social Security Administration wants you to get the maximum benefit depending on your specific situation, so it will help you through the calculations.

Look at the amount of the survivor benefit you could receive now (assuming you are age 60 or older) and the survivor benefit if you waited until your own full retirement age. Compare those amounts to your own benefits at age 62, full retirement age (66 or 67, depending on the year you were born), and 70, the age at which benefit increases stop.

If your own benefit is higher than the survivor benefit, you may want to begin survivor benefits as soon as you can and then convert to your own benefit later. If your survivor benefit is higher than you will earn on your own, and if your financial situation allows, you may want to hold off on starting survivor benefits until full retirement age to maximize your benefits.

After the death of a spouse, it’s a good idea to review your will and other estate planning documents and update your beneficiaries as needed. Often, spouses list each other as beneficiaries and grant each other privileges under powers of attorney and through living wills.

In the weeks after your spouse’s death, review and update the information in these items, which may include removing your deceased spouse’s name:

After a few months, you may feel it’s time to begin taking your next financial and life steps—although it’s smart to move at your own pace. Even though some time has passed, you may remain vulnerable to high-pressure sales tactics urging you to purchase expensive and complicated financial products you don’t need.

You might start thinking about how you want to change your life. This could include making decisions about:

You may wish to consider speaking with a financial advisor to review your current assets, your options, and how you can get the money you have to last as long as possible. Get a second opinion if you’re unsure about any recommended financial products and services. For example, although annuities and long-term care insurance might be appropriate in some situations, you may not need these products.

Life immediately following a spouse’s death is a tough time. You’re grieving while also making important decisions about burial or cremation and other pressing matters. If you have a good support network, ask for help as you organize your accounts and documents.

The key thing to remember is that you don’t need to make major changes to your life or finances right away. Once the pressing paperwork is taken care of, take a step back, give yourself space, and evaluate your next moves before committing your money and other resources to a course of action.