Managing finances after the loss of a loved one

Losing a spouse or a loved one is a trying time. While the next steps may seem overwhelming, you can prepare for the future with the right plan.

Start with the most pressing matters, and then move on to the bigger financial responsibilities. The following actions can help ease the stress during this time.

Take the first step

To start, locate important documents, including:

  • Social Security numbers
  • Birth and marriage certificates
  • Military discharge papers
  • Insurance policies
  • Deeds
  • Bank and brokerage statements
  • Online accounts and passwords

Once these initial documents are in order, you’ll want to obtain multiple copies of the death certificate, which is required to close out accounts, obtain veteran’s benefits, re-title property and transfer assets. A funeral home can help with this task.

Notify Social Security

If a spouse was receiving Social Security, report the death as soon as possible. Widows and widowers are eligible to apply for survivor’s benefits— the Social Security income provided to families of the deceased. The full benefits can be received at full retirement (between 66 and 67, depending on the surviving spouse’s birth year), or a reduced benefit income as early as age 60. Depending on the date of death, you may be required to return the last Social Security payment. Surviving spouses can also receive benefits on behalf of any children of the deceased.1

If the spouse is already receiving individual Social Security benefits, they can “step up” to a spouse’s higher benefit if it is larger.

File a life insurance claim

If a late spouse had life insurance, a claim should be filed as soon as possible. Depending on the cause of death (or if the death occurred within two years of starting the policy), you may be required to provide additional documentation beyond the death certificate.

In most cases, beneficiaries should receive a payout within 30 days, often either as a lump sum or in installments over a number of years.2 This can be helpful with immediate cash needs like funeral arrangements and debt payments.

Map out retirement

If the deceased held retirement accounts, find out what options are available to you. You may be able to roll these accounts into your own or continue as the beneficiary on the IRA or 401(k). By rolling them over (an option only available to spouses), you may be able to delay required distribution, thereby allowing the money to grow tax-deferred for a longer period of time.

It’s also worth knowing that the 10 percent penalty for withdrawals will not be incurred as it normally would with one’s own IRA or 401(k).3

Consider speaking with a financial advisor to help evaluate options.

Make a budget for one

Expenses may decrease following the death of a spouse, but you’ll still need to cover the basic costs of food and housing. Additionally, some income such as Social Security, veteran’s benefits and pensions may fall off. Given these changes, a new budget can be helpful.

Hold off on big decisions

There’s no need to make big, irreversible decisions following the death of a spouse. Financial experts suggest waiting at least six months to a year before putting homes on the market, moving in with adult children or making wholesale changes to their investment portfolios.

While tending to emotional and family needs takes precedence during this difficult time, the steps above can help ease the stress of these financial responsibilities. Don’t be afraid to get help from a financial advisor if needed.
 

1“Survivor’s Planner: If You Are The Worker’s Widow or Widower.” SSA.gov. https://www.ssa.gov/planners/survivors/ifyou2.html
2Robert-Grey, Gina. “Life Insurance Policies: How Payouts Work.” Investopedia. December 19, 2014. http://www.investopedia.com/articles/personal-finance/121914/life-insurance-policies-how-payouts-work.asp
3Parker, Tim. “What Happens to Retirement Accounts if a Spouse Dies?” Investopedia. July 7, 2016. http://www.investopedia.com/articles/personal-finance/120715/what-happens-retirement-accounts-if-spouse-dies.asp