Financial Planning for Loss of a Spouse

The loss of a spouse is one of the the hardest things most people will ever face. You’ve seen it firsthand with someone you love. Maybe you’ve even been through it yourself. Even before reality has fully hit, the spouse is busy making final arrangements. Being surrounded by family and friends helps provide comfort, but after the crowd is gone, the weeks and months following are often like a haze.

And yet you still deal with life decisions, even as you’ve boarded the emotional roller coaster of grief. Of course, one of the important pieces to take care of is getting your financial house in order. Depending on how prepared you were, this can be very difficult and costly when you are most vulnerable, or it can be an easier, comforting process. The difference comes down to WHEN you face the inevitable.

Even as a financial planner, I understand why some would procrastinate planning for the loss of a spouse. But I’ve also seen what happens when planning is delayed, the shattered widow/widower in tears, facing the aftermath alone. In my expert opinion, there are three points in life for dealing with such an event.

Eventual Loss of a Spouse – Planning in Advance for the Unexpected or Inevitable Loss of Either Spouse.

I believe that long-term planning in advance of an immediate need is the best process, for four main reasons:

1) Financial planning is more objective when you manage your assets together. At this stage, when both parties are healthy, the process is much more logical and less emotional, with less risk of making poor financial moves.

2) At this point, you are in the best position to make financial moves that can better protect the surviving spouse. In addition to the advantage of having time on your side, you also are more likely to have more financial options available. This includes using life insurance as a tool for protecting a surviving spouse if needed, but also as part of a greater tax strategy for passing wealth to survivors if desired.

3) Most people would agree it’s important for their surviving spouse to have sufficient financial resources after they are gone. A financial planner can analyze the financial impact of a loss and help plan for any shortfalls due to reductions in pension or Social Security.

4) Both of you can have peace of mind because you have a financial planner as a resource and sounding board. Advanced financial planning helps you organize your affairs and set them up appropriately for a seamless transition.

Obviously, I highly recommend seeking guidance at this phase. It’s a thorough process that can help navigate and guide during one of the worst times in your life. This planning phase addresses the unknowns and helps you avoid financial pitfalls.

Impending Loss of a Spouse – Planning for a Looming Calamity

When a spouse’s death becomes imminent because of mental or physical incapacity, people typically want to get their financial house in order. I often see this as a last chance for the spouse that has traditionally controlled the finances to seek help to turn them over to the surviving spouse.

For people that have followed the previous scenario, a financial checkup with the financial advisor is important. This is largely a review of accounts and beneficiaries, making any changes if desired. In a review, I refresh or establish income options to best prepare for this change in life. You’ll have the reassurance that the time devoted to careful planning will pay off.

For others that may be facing the loss of a spouse and beginning planning for the first time, recognize that it is a thorough process and takes some time. Hopefully, knowing there is a third party available to manage the assets and guide the survivor, the couple will have greater peace of mind. Although it is best to begin this process before a loss, sometimes this can’t be avoided.

After the Loss of a Spouse – Managing Affairs and Adjusting

If the previous scenarios haven’t happened, financial planning after a partner’s death might better be described as “financial recovery.” It’s particularly burdensome when grieving and sorting out finances happen together. The unfortunate part is, statistically, it’s the woman left to figure things out because the husband previously managed all financial matters. She’s lost her financial planner, in a sense.

You’d be surprised at the number of people with considerable assets that have not prepared for the inevitable. Many have life insurance and other assets, but they lack a plan for how it all works together to minimize financial risk and taxes. Sometimes, there is a plan, but it is a poor financial strategy. Both can negatively affect the assets the couple has worked a lifetime to accumulate.

A financial planner can still be invaluable to help those caught unprepared for the loss of a spouse. There are numerous financial affairs necessary to get a survivor’s financial house in order and a professional will know how to guide and manage these affairs with minimal effort and the greatest asset protection. There will be a mountain of paperwork that an advisor can assist with, explain and coordinate. Many times, it requires a professional to sort out the pieces and help the survivor get on their feet again.

On the other hand, people that have planned in advance find this transition period much easier. The financial planner makes sure all assets are accounted for and copies of statements are on file. A big part of the process is navigating all the paperwork required for insurance and account transitions, and this is where you’ll depend on your financial planner. It’s such peace of mind to have a familiar and sympathetic professional like a counselor at this time.

Benjamin Franklin wrote in a letter after the drafting of the Constitution, “In this world nothing can be said to be certain, except death and taxes.” But financial planning may help ease the pain of both and help you and your spouse face that challenge with greater confidence.

RELATED READING: Creating an Estate Plan , Cost and Benefit of a Financial Plan