Surviving a spouse is never easy. Here are 8 tax, estate and financial planning tips to prepare

Co-authored by Tami McCann, CPA, Partner at Wipfli LLP.

The following article was prepared in collaboration with our affiliate, Wipfli LLP. Wipfli ranks among the top accounting and business consulting firms in the nation.

According to the U.S. Census Bureau, 51% of women 70 years and older have been disproportionately widowed, compared to 23% of men.1 The Bureau largely attributes this to women’s longer life expectancy.

But regardless of who outlives whom, it’s necessary to figure out what life after the death of a spouse will look like from a financial perspective. What are the financial and tax consequences? Will the surviving spouse be able to maintain the couple’s current lifestyle after the other’s death? What actions can the couple take now to mitigate risk?

We’ve put together eight tips to plan for the possibility of becoming a widow:

1. Review your estate documents

This is critical for all couples no matter their age. If you haven’t reviewed your estate documents in a while, now is the time to do so. We’ve seen clients where the husband has deferred compensation options that will not continue paying out to his wife after his death, eliminating an entire income stream for her. Other clients have found they need to update their wills, beneficiary designations and even gifting strategies. Reviewing documents now can identify risks you’re inadvertently taking and allow you to work with your professional advisors (tax, legal, financial, etc.) to mitigate them.

2. Review your current financial plan

As part of this process, your financial planner will review your investment strategy and asset allocation and recommend necessary adjustments based on your updated financial goals. They’ll also review your spending with you and determine what you might need to start doing differently now to maintain funds into widowhood.

3. Perform scenario planning

When working with a financial planner, one of the most beneficial things you can do is scenario planning. Your advisor will factor in the assets you have and the plans you have in place and then model out what would happen after the death of either spouse. This can identify potential concerns to solve (such as the model results indicating the surviving spouse will likely need to adjust their lifestyle after their partner’s death) or opportunities to pursue (such as buying more insurance coverage or updating estate planning documents).

4. Identify tax planning strategies

Your financial planner, CPA, and other professional advisors should be collaborating to understand your tax opportunities and impacts on your overall wealth trajectory. Widowhood comes with a big change in income and filing status, so your CPA can help you take advantage of strategies such as Roth conversions now to help prepare. They can also review trust documents and other estate planning documents to identify opportunities for adjustments.

5. Review your insurance coverage

Whether it’s cash-value or term, one important area commonly overlooked by couples is reviewing their insurance coverage. Insurance can cover everything from estate taxes to long-term care to funeral costs, so making sure you have the right coverage for your family’s unique needs can really help you prepare.

6. Review your gifting strategies

The COVID-19 pandemic and the U.S.’s political climate have spurred many couples to reconsider their gifting strategies. Many couples are rethinking transferring wealth upon their death and instead doing it while they’re alive and able to see their loved ones enjoy that wealth. There are also potential upcoming tax changes (such as the reduction in the lifetime estate tax exemption or increasing income tax rates) that could make right now a great time to gift versus in the future after such changes may take effect.

7. Consider creating a SLAT

In a spousal lifetime access trust (SLAT), one spouse gifts assets into a trust to the benefit of the other spouse. This removes the assets from their estate while allowing them to keep control over the assets, and all asset appreciation occurs within the trust. Note that gifting assets into the trust counts against the spouse’s estate tax exemption allotment (in 2021, that’s $11.7 million per person,2 aka $23.4 million for a married couple).

8. Create a record of vital information

A significant part of the discussion around what happens when one spouse predeceases the other is knowing where everything is. What assets exist, what documents are in place, what are the account passwords, who should you contact for assistance — these are all common questions widows and widowers have. It’s critical to create a record now of what exists, where and how to access it.

And know who your trusted advisors are. The biggest thing they can do to help is educate the surviving spouse about what they have, how things work and how assets will flow. They can give them options for how involved or uninvolved they want to be in managing the estate. And they can be a valuable guide in helping widows and widowers navigate life after the death of their spouse, especially during the intense grief and stress that immediately follows the passing.

As much as both spouses can get involved in the planning process now, the more prepared they’ll be for what comes in the future.

We can help

The best time to start reviewing and planning is right now. To put any of the above strategies into place, consider working with Wipfli Financial Advisors, LLC and affiliate Wipfli LLP. Financial advisors and CPAs collaborate to provide holistic tax, estate and financial planning to clients, including scenario planning. Put you and your spouse on track to achieve your financial goals while considering all the possible scenarios, including widowhood.


Related content:

Empowering women for life transitions: 5 ways to prepare
Smart estate planning strategies for women
8 questions to ask yourself before you retire

Preparing to become a widow

Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Amy Libertoski

CPA, PFS | Principal, Senior Financial Advisor

Amy Libertoski, CPA, PFS, is a Principal and Senior Financial Advisor with Wipfli Financial Advisors in Wausau, WI. Bringing 20 years of experience in the financial services industry, Amy specializes in financial, estate and retirement planning for families, as well as tax planning and preparation for high-net-worth investors.

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Surviving a spouse is never easy. Here are 8 tax, estate and financial planning tips to prepare

time to read: 4 min