Organizing Your Finances When Your Spouse Dies

Organizing Your Finances When Your Spouse Dies
Dealing with personal finances can be extremely difficult following the death of a spouse, especially if your spouse handled the family’s financial matters. While organizing your finances won’t ease the pain of losing a loved one, it’s an important step in rebuilding your life. Here are some guidelines from the California Society of CPAs (www.calcpa.org).

Locate Important Documents and Update Financial Records

Before you can file a life insurance claim, update your financial accounts or settle your spouse’s estate, you’ll need to locate several important financial documents. For starters, you’ll need your spouse’s will, birth certificates for your spouse and any dependent children, your marriage certificate, copies of the death certificate, bank, investment, and retirement records, and discharge papers if your spouse was in the military.

Avoid Making Drastic Moves

Don’t rush or be pressured into paying off the mortgage, selling the house, revamping your investment portfolio or withdrawing from retirement plans. Postpone major decisions until you have developed a long-term financial plan. In the interim, beware of con artists who prey on the bereaved.

Create a Budget

Often the loss of a spouse means less household income. If your spouse worked, his or her paycheck will stop. If he or she was retired, the pension income you receive may be reduced or eliminated. And if you both collected Social Security, you’ll be receiving only one check, although it will be for the higher benefit amount.

Determine how much money you need in order to meet routine living expenses and how much you have available each month. If you don’t think you’ll be able to cover your expenses, you’ll need to put in place a cost-cutting strategy and look for additional sources of income.

Review Benefit Options

As a surviving spouse, you may be entitled to government or employment benefits. Start by contacting the Social Security Administration to check on your eligibility for survivor benefits. If your spouse was employed at the time of death, call his or her former employer to ask about survivor benefits and to find out whether your spouse is due payment for unpaid salary or for unused vacation or sick time.

In the event your spouse was already retired and receiving a pension, find out whether you will continue to receive a pension payment, and in what amount.

Under the federal COBRA law, you and any dependent children may be entitled to medical coverage for up to 36 months under your spouse's employer health insurance plan. You’ll be responsible for paying the premiums, but the group rate is likely to be lower than buying a plan on your own. A work-related death may entitle the surviving spouse to worker's compensation benefits as well.

The surviving spouse and children of veterans may be able to claim benefits from the Armed Services.

Decide How You’ll Handle Life Insurance Proceeds

When you file claims for life insurance, typically you will be asked to choose between one lump-sum payment or fixed payments over a certain period. The best option for you depends on your circumstances. A CPA can help you make this important decision.

It’s a good idea to evaluate your existing insurance coverage, particularly life insurance. You may not need the same coverage if you do not have dependents. For policies you decide to maintain, update your beneficiaries if necessary.

Seek Qualified and Trusted Advice

A CPA can be a valued resource to help surviving spouses get their finances in order and plan for the future.

In accordance with IRS Circular 230, the information on this website is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.