Dealing with Grief and Your Finances at the Same Time

Episode 313 – It’s probably the last thing you want to think about if you’ve just lost your spouse. But no matter who you are, no matter what your situation, financial issues are always there, and no matter how difficult, you’re going to have to address them.

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Transcript of Podcast Episode 313

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, dealing with grief and your finances at the same time.

It’s probably the last thing you want to think about if you’ve just lost your spouse. But no matter who you are, no matter what your situation, financial issues are always there. You simply can’t get away from it, even during the worst times of your life. With that in mind, here are a few financial things that you need think about when you lose a loved one.

Review your accounts and account balances. It’s surprising to see how many people really don’t know exactly what or how much they have. You’ll need to take a close look at what you’ve already got, what you’re going to inherit, and what your revised sources of income are going to be. Also, services such as MissingMoney.com can help you track down assets that you might have lost along the way.

Retitle your assets. A joint bank account is relatively easy. It will generally allow the surviving account holder to take ownership of the entire account balance.

Other assets can be more of a challenge. They will generally go into probate, which is the legal process of distributing the assets according to the decedent’s will or state law. A court will oversee the distribution of assets, and some accounts may be frozen until the probate process is complete.[1]

Take a look at your estate planning documents. You need to know where your late spouse’s assets are going to end up. Some may go to you, some may go to a trust, some may go to other people. You will also eventually need to review, and likely redo, your own will and trust arrangements. [2]

Review your life insurance. Someone needs to make sure that all required death claims are properly submitted. If you’re unsure if you’ve located every policy, many states, as well as many life insurance companies, can provide policy locator services.[3]

Once you’ve got all that figured out, you’ll also need to take a fresh look at your own life insurance coverage. You may need to designate a new beneficiary. You may not have expected to be your family’s sole breadwinner, and you may need to supplement the coverage you have. Consider consulting your professional life insurance advisor to assist you.

Review your retirement accounts. Unlike many other assets, retirement accounts generally pass to a named beneficiary at death, very often a surviving spouse. The options for a surviving spouse have expanded—and become more complicated—since the Secure Act and the Secure Act 2.0.[4] You will likely find it helpful to talk to a qualified professional to figure out your best option going forward.

Social Security survivor benefits. Social Security can be surprisingly complicated, but survivor benefits may be the exception. If both spouses are past Full Retirement Age (age 67 for most of us), the survivor benefit is simply the higher of the two. You also have the ability to “switch” from one benefit to the other. But switching is not something you can do online. You’ll probably have to visit your local Social Security office to complete the paperwork.

Final tax return and planning for next year. You are allowed to file a joint tax return in the year your spouse dies. The following year though, unless you have remarried, you will likely be filing as a single person. The tax system is designed to give married couples a bit of an advantage, so if you’re single, you’ll find that tax brackets accelerate more quickly. Depending on your circumstances, one potential way to deal with this might be to accelerate some of your income into the year of death.[5]

If you’re someone who is facing this type of grief, you may have well-meaning people telling you that it’s time to “pick up the pieces” or “move on.” But everybody deals with this differently, and only you can decide how to handle such an awful situation. For some people, grief counseling may be beneficial. Just be aware that your finances simply can’t wait. As awful as it may be, you need to deal with them, even in the worst of times. A trusted financial professional can help you as you work through these difficult times.

[1] Wohlner, Roger. “Financial Planning in the First Year of Widowhood.” ThinkAdvisor.com. https://www.thinkadvisor.com/2024/05/17/financial-planning-in-the-first-year-of-widowhood/ (accessed Nov. 27, 2024).

[2] Wohlner, Roger. “Financial Planning in the First Year of Widowhood.” ThinkAdvisor.com. https://www.thinkadvisor.com/2024/05/17/financial-planning-in-the-first-year-of-widowhood/ (accessed Nov. 27, 2024).

[3] Megna, Michelle. “How To Find Unclaimed Life Insurance Policies.” Forbes.com. https://www.forbes.com/advisor/life-insurance/find-lost-life-insurance/ (accessed Nov. 27, 2024).

[4] Wohlner, Roger. “Financial Planning in the First Year of Widowhood.” ThinkAdvisor.com. https://www.thinkadvisor.com/2024/05/17/financial-planning-in-the-first-year-of-widowhood/ (accessed Nov. 27, 2024).

[5] Wohlner, Roger. “Financial Planning in the First Year of Widowhood.” ThinkAdvisor.com. https://www.thinkadvisor.com/2024/05/17/financial-planning-in-the-first-year-of-widowhood/ (accessed Nov. 27, 2024).

 

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