The loss of a spouse can be your most challenging transition in a lifetime. Not only are you grieving the loss of your loved one, but you may also be facing financial responsibilities independently for the first time. Accounts may need to be updated, budgets likely need to be reworked and estate documents often require adjustments. The process can be overwhelming, but we are here to help. Working with an experienced advisor can alleviate much of the stress that comes along with a loss. As a starting point, I’ve put together a list of tips that can start you down the right path.
1. Determine your assets and liabilities.
You may have bank accounts, investment accounts, retirement accounts, property and so on. You’ll also want to determine what kinds of debts (mortgage, student loans, credit cards, etc.) you’re responsible for. With this information, we can prepare a personal net worth statement. Account titling of these assets and liabilities will need to be updated, and some accounts may need to be paid out to their beneficiaries. Because non-retirement and retirement accounts are handled differently when it comes to updating account titling and for taxation purposes, it’s important to know the types of accounts you and your spouse hold. Again, this is where a financial advisor can provide guidance.
2. Determine your income streams.
Certain income streams will be reduced or eliminated after the loss of your spouse. He or she may have prepared for this by implementing some other tools (See tip number four). A salary, social security and pension income are the three most common types of income streams, though there may be others you will need to consider. It’s crucial that you have a thorough understanding of the income you can rely on going forward.
3. Have a thorough understanding of your expenses.
Given that many expenses will remain the same after the loss of your spouse (your mortgage payment, car payment, subscriptions, etc.), your overall living expenses probably won’t decrease by half, but they could be reduced somewhat going forward. If you haven’t had one before, it’s a good idea to put a specific budget in place. It may be a couple of months before you feel confident about your expense figure, so give yourself some time to adjust.
Understanding your expenses will help you identify if your current income is sufficient to cover those expenses, or if additional withdrawals from your assets will be required. Once you have established an expense figure, you can work with your financial advisor in determining an appropriate withdrawal plan.
If you’re looking for a starting point for preparing a budget, ask your financial advisor for help. He or she can provide you with some tools outlining this somewhat daunting task.
4. Collect proceeds from your life insurance policies.
Like I previously mentioned, life insurance policies can be purchased as a tool to prepare a surviving spouse in the event of an early loss. The proceeds of these policies can be used to pay off liabilities (your mortgage, credit card debt, etc.), fund anticipated children’s college expenses and to make up for lost income streams like we talked about in tip number two. These policies can be extremely helpful in offsetting some of the financial burden that comes with this transition, allowing the surviving spouse to focus on their adjustment. If your spouse had life insurance policies, initiate the claim process so you can rely on the proceeds.
5. Update estate plans and beneficiary information.
Finally, after losing your significant other, it’s important to update your estate plan documents. Depending on your circumstances, this may mean your will or trusts, if necessary. Just as important though, is updating both your medical and financial powers of attorney, as it is likely that your spouse was previously listed as your primary power of attorney. You’ll also want to ensure the beneficiaries you’ve listed on these documents and accounts are all updated.
After losing your spouse, your financial circumstances and lifetime goals tend to change. In getting a thorough understanding of your updated assets, income flows and expenses, we can help determine if you’re able to meet all your goals, or if some adjustments need to be made. As usual, I recommend including your estate attorney and accountant during this process, as well.
The most important step in this transition is giving yourself the time to process and grieve the loss of your spouse. Avoid making significant financial decisions when you’re still dealing with strong emotions from the loss of your loved one. As always, all of us at Fragasso are here to help.
For more valuable information from Mallory, register to watch our webinar recording.
When you are dealing with so many emotions, seek council from advisors who are here to help.
Losing a spouse/loved one or experiencing a divorce can be some of life’s most emotional and confusing times. It is completely normal to feel upset and overwhelmed, but it is so important to set your emotions aside in order to make the best financial and legal decisions for you and your family. Professionals like your financial advisor and attorney can assist you in this process and help take the emotion out of your decision making.
Join Fragasso Financial Advisors and Zacharia Brown as we provide necessary guidance during what can be a vulnerable time for you. We will outline the steps logically and provide clarification, leaving little room for emotional decision making.
This live webinar will cover:
- How to take control of your finances by determining assets/liabilities, your income and expenses and the importance of projecting these assets into the future
- The impact of taxes on a divorce or loss of a loved one
- Structuring wills, financial and healthcare power of attorneys
- What are probate vs. non-probate assets?