Managing Money After Death of a Spouse

Author's note: I wrote the article below hoping to provide a resource for families experiencing the loss of one spouse.  If you see omissions or errors, please let me know via e-mail or in the comments section.  I'd like the article to be as helpful as possible.

As background, I've never experienced the loss of a spouse.  In fact, Charity and I have been knowing each other since we were sixteen and eighteen respectively, and have always said that ideally we'd like to Notebook it.  But since we know we're not in the place of God, we have a robust estate plan in place.

The items below are not exhaustive, but I hope they provide at least a partial checklist that may be helpful to someone.

Make 2018 a year of good planning.  Happy New Year from Design Independence in Raleigh, N.C.

Matt Miner

January 1st, 2018

Managing Money After Death of a Spouse

The death of one spouse is a devastating event in so many ways, and leaves the surviving partner grieving and feeling overwhelmed.  If you’ve experienced the death of your husband or wife, let me lead with this: I am so sorry for your loss.

Also, if you’re married and reading this, you and your spouse can be loving to each other by leaving clear instructions on what to do in the event of the death of one spouse.  Having up-to-date wills and trusts, to-do checklists, automatic bill pay, and your team of advisers already assembled will reduce the burden on the surviving spouse.  In most cases, one spouse will predecease the other.  It is a sad fact, but we’re all going to die.  Since you’re going to die anyway, do it in style and make it easier (or at least no harder than necessary) on the loved ones left behind.

In the immediate aftermath of a loss of this kind, the first thing to do is have the most important people around you – often your adult children, a sibling, clergy, or your closest friends.  Financially speaking, there are really only two things you need to do in the first month or two after the death of a spouse.  

First, make sure you have adequate liquid funds in your checking and savings account to cover not only your normal expenses, but the unusual expenses that come up at this time.  If this means liquidating some investments or transferring money from an emergency fund account into your checking account, this will need to be done.  A fairly normal-sized emergency fund of $20,000 to $40,000 should be able to accommodate funeral expenses, medical expenses up to your deductible, and other incidentals that occur at this time.  Said differently, $5000 in checking is probably not enough, but you should not need to sell $100,000 in investments either.

Second, make sure you pay the regular bills that come due, whether you do it yourself or someone helps you with this chore.  Ideally most or all of these bills are already set up on automatic payments such that as long as you have sufficient funds in your checking account this need is “automatically” addressed.  But if you mostly pay your bills the old fashioned way by mailing checks, you will do yourself a favor to stay on top of this item.  Although doing anything besides getting through each day feels difficult at this time, it is much easier to keep up with your bills than it will be to deal with cleaning up a mess of late charges or interrupted service.

After the funeral is concluded and you have allowed yourself some time simply to process your loss, it is important to begin to address your finances thoroughly.

Just because this step is important, though, doesn’t mean you should undertake the process hurriedly or without advice from both your informal and formal advisers.

Two words for pacing on this task: Go Slow.

You might set up a joint meeting that includes you, your closest informal adviser, your attorney, accountant, and if applicable, your financial planner.  Your accountant can help you understand your tax situation.  Your attorney can provide advice about probate, and your planner can provide counsel about your personal finances.  All of these professionals are able to draw on experiences of having walked with others through this difficult time.
Tasks you will want to do at this time may include:
•    Obtain multiple certified copies of the death certificate
•    Re-title accounts, property, automobiles, insurance policies like homeowners’ & auto, etc.  It is important to remove your deceased spouse and to make sure that if you become incapacitated someone trusted is able to access funds on your behalf, for example to pay for nursing care.
•    Work with your family attorney to begin to probate the will.
•    Contact all life insurance companies to begin the claims process.  If you receive a windfall in the form of life insurance proceeds, take your time to decide how to handle these funds.  You and your spouse put life insurance in place to take care of each other, and caring for your most important needs should be the first priority for any payout of this type. Any gifts or splurges definitely come second to making sure you have what you need to be financially secure.  Your spouse would not have wanted it any other way!
•    Get in touch with Social Security to inform them of the death of your spouse and to apply for survivor benefits.
•    If your spouse was working, contact Human Resources to claim any benefits to which you may be entitled including employer-based life insurance, vacation payouts, or any other benefit.
•    Contact past employers about any pension or 401(K) plans that may still exist with that company.
•    Understand any military benefits to which you may be entitled.
•    Report the death to Social Security by calling +1 (800) 772-1213.
•    Contact all credit card companies or other lenders and follow their process to remove your spouse from these accounts.
•    Begin the task of re-evaluating your budget, working with a competent and caring planner or CPA on this important task.

Collected Resources:
http://www.360financialliteracy.org/Topics/In-Crisis/Loss-of-a-Spouse/Organizing-Your-Finances-After-Your-Spouse-Has-Died

http://www.marketwatch.com/story/managing-finances-after-death-of-a-spouse-2014-06-26?mg=prod/accounts-wsj

http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2014/06/12/what-to-do-with-your-finances-once-you-lose-a-spouse
https://www.balancepro.net/education/pdf/survivingspouse.pdf