Financial Steps to Take After the Death of a Spouse


The stress and heartache of losing a spouse can make tasks like managing financial obligations seem almost impossible. But it is also a crucial time to take hold of your financial plan.

A strong team of professionals can take many of the burdens off your shoulders and set you on solid ground as you move forward.

Managing Financial Affairs After Loss
Losing a spouse or loved one is a difficult time. Yet this is also a period when many important financial decisions must be made. These decisions range from how you complete paperwork to change ownership of assets and collect survivorship benefits, to selling property, making tax elections and updating your estate plan.

The first step to accomplishing these tasks is to surround yourself with a team of professional advisors to take many of the burdens off your shoulders and provide guidance on the decisions only you can make.

Arranging Your Finances
Losing a spouse or loved one is a difficult time. Yet this is also a period when many important financial decisions must be made. These decisions range from how you complete paperwork to change ownership of assets and collect survivorship benefits, to selling property, making tax elections and updating your estate plan.

Locating documents and assets
While you always want to have a handle on what you own, after the loss of a loved one, it’s important to make sure you understand everything they may own too, as well as the documents that go along with those assets. While most people know it is important to obtain several certified copies of the death certificate, there are several other important documents that should be gathered at the same time. These include birth certificates, military discharge papers, marriage certificates, real estate titles and current statements for bank, brokerage and retirement accounts.

Traditionally, you would check your mail, safe deposit box and personal files for these documents. These days, you may also need to check email, computer files, cloud-based databases and financial or tax preparation applications to make sure you’re not missing anything.

Transferring Assets to Your Name
Once all documents and assets have been located and accounted for, the next step is to make sure you transfer assets into your name or otherwise update title to assets as appropriate. This involves some legwork, but the legwork increases the longer you delay.

Retirement accounts and life insurance
If you were listed as the beneficiary of your spouse’s IRA, 401(k) or other tax-advantaged retirement account, the custodian will need direction for distributing the assets. Depending on your needs and tax situation, your advisor may suggest leaving the retirement plan assets in your spouse’s 401(k) account, rolling them directly into your own IRA, or taking a lump sum distribution. Similarly, if your spouse had any life insurance policy, you should contact the life insurance company to ensure benefits are paid out or ownership of the policy is transferred as appropriate. 

Investment and bank accounts
If you had joint investment or bank accounts with your spouse, these often will automatically pass to you. You will need to change the title on these accounts into your name. If your spouse had accounts held only in his or her name, those assets may need to go through the probate process depending on the amount and the laws of your state.

Safe deposit box
In most states, if the box was rented only in the name of your spouse, it will require a court order to open the box. Only the will or any other materials pertaining to the death can be removed before the will has been probated.

Claiming Benefits
You also want to make sure you claim any benefits or compensation you may be entitled from the government or your spouse’s employer.

Contact your spouse’s employer
If your spouse was employed, the employer will need instructions on where to send final paychecks and other compensation. This is also an opportunity to inquire about any assets or benefits you may be entitled to.

Apply for Social Security benefits
If your spouse was receiving Social Security benefits, you should contact the Social Security Administration to determine if you qualify to receive a portion of those benefits. Survivor benefits are typically available after a surviving spouse reaches the age of 60.

Call Veterans Affairs
If your spouse was a US war veteran, you may be entitled to survivor benefits from the Veterans Affairs Administration. You will typically need your spouse’s VA number and dates of active service.

Settling Outstanding Debts
While you gather your spouse’s assets, you also need to determine how to handle any debts. Debts owed by your spouse will be the responsibility of their estate and payment is generally coordinated as part of the estate settlement process. However, you should be mindful to ensure payments are current on any joint debt, particularly mortgage payments and utility or phone bills, to keep a good credit rating.

Credit cards held exclusively in the name of your spouse should be canceled. Any payments due on these credit cards should be paid by the estate. If you have credit cards that were issued in both your names, continue to make payments due on these cards to keep your good credit rating. Notify the credit card companies that your spouse is deceased and that the card should list your name only.

Preserving Personal Property
It is important to preserve your spouse’s personal property, including any personal items or mementos that were promised to a child or another relative. This may include items such as furniture, antiques, artwork, clothing, photographs, jewelry and written documents like journals, diaries and personal correspondence. It is usually best to be proactive about delivering any gifts of specific items of personal property, as sentimental attachments often can lead to tension over even the smallest of things.

Considering Tax-Reduction Strategies
Your professionals should be able to guide you in preparing the necessary tax returns as part of the estate settlement process and implementing the different tax strategies that may be available, including:

Disclaiming assets
In some cases, your tax advisor may recommend “disclaiming” assets by diverting them into a tax- advantaged trust or down to children or lower generations. The deadline for disclaiming assets varies by state, but is usually within nine months of your spouse’s death.

Portability elections
If your spouse’s estate does not claim the entire federal estate tax exemption, it may be possible to apply the unused portion of the exemption to your own estate. But first your spouse’s estate will need to make a “portability election” on its estate tax return, which is generally required within nine months. This strategy can be beneficial for spouses who inherit real estate, business interests or other assets that appreciate over time.

Income tax deductions
If you have a dependent child or step-child, your tax advisor may recommend retaining the benefits of the “married filing jointly” status for the two years following the death of your spouse.

Developing a Financial Plan for Your Future
Although it is sometimes tempting, it’s generally best not to make permanent significant financial decisions, such as selling your home, moving or changing jobs, immediately after the death of a spouse. You will need some time and guidance to review your situation before you can make these decisions clearly.

The key after you’ve taken stock of your financial affairs is to develop a long-term financial plan for yourself that reflects your new situation. This includes understanding where funds will come from to pay your living expenses, being tax efficient in your decision-making, reviewing your estate plan as well as your powers of attorney and healthcare directives to make sure they are accurate and up-to-date, and evaluating your overall asset allocation to ensure it is appropriate for your plan.

At Fiduciary Trust, we can help make sure you have all these bases covered, and have the understanding and direction to help you reach your next set of financial goals.

This communication is intended solely to provide general information. The information and opinions stated may change without notice. The information and opinions do not represent a complete analysis of every material fact. Statements of fact have been obtained from sources deemed reliable, but no representation is made as to their completeness or accuracy. The opinions expressed are not intended as individual investment, tax or estate planning advice or as a recommendation of any particular security, strategy or investment product. Please consult your personal advisor to determine whether this information may be appropriate for you. This information is provided solely for insight into our general management philosophy and process. Historical performance does not guarantee future results and results may differ over future time periods.

IRS Circular 230 Notice: Pursuant to relevant U.S. Treasury regulations, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. You should seek advice based on your particular circumstances from your tax advisor.

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