A widow or widower requires special considerations when planning for her or his future. Generally most surviving spouses are women and the focus here will be on widows, though widowers may find value in the information as well.
When a husband dies, the widow dives head first into dealing with the murky waters of probate, tax, legal and financial issues. In many marriages, the husband had taken the lead in tax and financial issues and so, for the widow, understanding these new and confusing challenges can be quite daunting. It may be difficult to know what to do, what not to do and which direction to take. To make things worse, the emotional strain and heartache can make it feel as though she is swimming through treacherous waters.
In the midst of all the chaos, where can the widow go to get help? I did a Google search on financial planning after the death of a spouse and found approximately 53,000,000 results. That’s a lot of information! How does one know whom to go to and what is accurate?
Let’s take a step back and look at the process of learning how to swim. People typically hire certified, trained instructors to teach them how to swim. They don’t hire non-certified or inexperienced swim instructors for something so important. Why would anyone do any different in this situation with his or her financial future?
When learning to swim, a person doesn’t just dive into the water and hope for the best; he or she starts at the beginning level, learns, grows and progresses to the next level. By breaking it down into three levels, the same concept can be applied to handling the finances after the death of a spouse.
Level One – Partner
In the early stages of grief, a widow may make poor decisions out of fear or confusion; to help avoid this, she should partner with an advisor that utilizes a discovery process to gather the information necessary to determine her immediate needs and what needs can be prioritized until later. She should consider working with a financial advisor that is a Certified Financial Planner or Certified Public Accountant to help give her proper guidance.
The Certified Financial Planner or Financial Planning Association websites have great resources to help find an advisor to partner with.
Level Two – Prioritize
“Perhaps the best advice is what NOT to do right away. Don’t make any hasty major financial decisions, such as changing investments, moving, changing jobs, or retiring early, unless it’s absolutely necessary. Defer all but the most essential financial decisions.”
It may feel overwhelming and confusing for the widow, but realistically there are only a few items that need to be handled right after a spouse’s death. A financial advisor can help establish financial priorities and deadlines that should be focused on first, such as gathering all pertinent documents. These are, but are not limited to, the death certificate, will, social security card, life insurance policies, etc. It’s important to gather and review all monthly cash flow by reviewing household income, expenses and taxes. Also, gather and review benefits and what is available for income sources. The Financial Planning Association has a checklist that can also be helpful in prioritizing next steps.1
The widow should take small “strokes” at first to help understand the overall big picture and to move to the next level of making long-term planning decisions.
Level Three – Plan
After the widow has regained some focus in her life, she should assess planning from a risk management, estate, tax and investment perspective. A financial advisor could provide a financial assessment and identify other issues to address, such as overall diversification of the widow’s assets, investment risks and strategies, and tax efficiencies. This guidance can be especially critical if the widow has little to no experience with financial matters.
Finding someone you trust and who has your best interest in mind is important, especially when dealing with the loss of a spouse. Remember—best practice is to focus on what needs to be done first and to take one level at a time. Don’t dive into murky financial waters head first; instead, find the right advisor to help keep your financial situation afloat.