Securing Your Financial Future After the Loss of a Spouse
September 23, 2015 | Your Finances
The death of a spouse is a devastating experience often filled with uncertainty about the future. The thought of living life without a loved one can send you reeling.
Adding to the stress is the realization that you must address key financial matters to help secure your future. Having a financial plan that anticipated the death of a spouse provides some peace of mind. But you will need to craft a new plan as you enter this new stage in life.
“Dealing with the loss of a loved one is unimaginable,” said Scott Sernett, a wealth management advisor with Northwestern Mutual who has helped several surviving spouses navigate the challenges that arise during this difficult time.
“Ultimately, people want to know if they are going to be okay. Can they live in the same home and send their kids to the same school? Will their older children be able to finish college? Do they need to find a second job or come out of retirement? There’s a lot of anxiety around whether they will be financially secure. We stand by them every step of the way,” he said.
Here are some important factors to consider:
1. Take your time. Avoid making any rushed decisions. Instead, step back and take the time to consider all of your options before taking any action that impacts your financial future.
“Emotions are always very high, and that’s not the best time to make long-range financial decisions,” said Sernett. “We advise people to take things at their own pace. Sometimes our conversations have nothing to do with dollars and cents and everything to do with listening and reassuring folks that we’re here to assist them when they’re ready.”
2. Assemble a team. There’s no need to figure out your financial future on your own. “Working with a trusted advisor who can guide you through the process can help alleviate some of the stress people experience as they go through the stages of grieving,” said Sernett. “An advisor can be helpful in assembling a team of financial, legal and tax experts who can collaborate and offer advice.”
3. Gather pertinent documents. Sernett often helps spouses handle initial tasks, such as gathering documents, notifying insurance carriers and financial institutions and getting the death certificate.
You may need 10 to 20 copies of the death certificate to file for insurance and benefit claims and manage your spouse’s bank, credit card, retirement and investment accounts. Other key documents include your spouse’s will and birth certificate, marriage certificate, military service papers, real estate deeds, birth certificates of dependent children, insurance policies (life, health, home mortgage, accident, disability), along with tax, investment, pension and retirement information.
Depending on your age and circumstances, you may be eligible for Social Security survivors benefits for a spouse or children. Social Security also pays a one-time death benefit toward burial expenses.
4. Conduct an inventory. Take an inventory of your financial situation to identify potential sources of income and any gaps that need to be addressed. “We create a financial statement that lists all your assets, liabilities and income from investments, retirement plans, work benefits, life insurance policies and Social Security benefits,” explained Sernett.
5. Build a new financial plan. Once you have gathered all the pertinent information, it’s time to develop a budget and craft a new financial plan based on your current circumstances.
“The next critical ingredient is determining your goals and needs,” said Sernett. “How much income do you need to pay the bills and maintain a suitable standard of living? If you’re getting a death benefit, should you pay off the mortgage, invest the money or do some of both? What are your sources of income? Do you need to re-evaluate your insurance and investment needs? These are the pieces of the puzzle that we can help with.”
It’s also important to review beneficiary information on all insurance policies, investment accounts and retirement plans. For jointly owned assets, retitle or transfer ownership of real estate, motor vehicles and bank accounts. You’ll also need to draft a new will, estate plan and health care proxy document.
The most successful cases involve people who had the foresight to plan for the future. “The death of a spouse doesn’t have to be financially devastating if you planned ahead,” said Sernett.
Coming to terms with the death of a spouse may be one of the toughest challenges you face in life. The magnitude of the loss can seem insurmountable. Decisions about your long-term future can wait until the shock has subsided. In time, you may discover that taking charge of your financial affairs can provide a measure of strength and security as you take the initial steps to build a new life.