By Linda Donovan
Losing a spouse is hard. I know that firsthand. When I was in my 30s, I met a fellow financial advisor and fell in love. We married and made a decision to combine our lives and our practices. A few years later we found out we were expecting twins. I was just one month into my pregnancy when my husband passed away unexpectedly. The life I had imagined – raising our twin girls together, working as a team in a field we loved and supporting our young family – evaporated in the blink of an eye. I was thrust into a new reality, in which so many responsibilities I thought we’d share as a couple suddenly fell onto my shoulders alone.
In the 11 years since, I’ve grieved with many clients who have also lost their spouse. That first conversation can be very emotional, but there’s a comfort that comes with them knowing that I’ve personally experienced loss as well. Once we’ve achieved a certain level of comfort, we can then talk about what comes next.
As a first step, I advise my clients to meet with an attorney to review their late spouse’s will. This process can come with varying levels of complexity depending upon family structure, which might include former spouses and children from previous marriages. This is also a time to figure out if probate is necessary based on the amount of assets and how the estate was originally established.
Once the estate is settled, I advise my clients to do an inventory of both assets and liabilities, managing them side-by-side. It’s important to understand what kinds of assets may be coming to them now, such as life insurance proceeds or investment proceeds from an IRA. Some widows and widowers choose to use such proceeds to pay off debts, including mortgages, while others may choose to invest.
If they had assets that were owned jointly, like a house, bank or brokerage accounts, or an annuity policy, they will need to have those re-titled without their spouse’s name.
If their spouse was employed at the time of his or her death, my client will need to contact their spouse’s company to understand which employer-sponsored benefits they may have inherited. Spouses are automatically designated as beneficiaries on 401(k) plans, unless they had previously waived that right. Surviving spouses may also be entitled to certain equity compensation benefits. (If you’re working, this is also a reminder to update the beneficiary on your own workplace plans to a non-spouse, such as a child or other family member.) Depending on the occupation, there may be specialized benefits involved, such as veterans’ benefits for surviving spouses.
For couples in their 60s, there is also Social Security to consider. The surviving spouse should understand which benefits they may be entitled to and how these fit into their overall financial picture.
One thing that tends to be overlooked is the necessity of identifying any online financial accounts that late spouses had managed, and making sure passwords are obtained. You may need to work with the financial institutions to ensure you have access and that you are authorized to manage those accounts going forward.
This is also a time to grapple with tax implications. It’s wise to meet with an accountant to go over all the changes to your situation. Your filing status may change to filing Single, Head of Household, or Qualifying Widow(er) with dependent child.
This is also an opportunity to revisit charitable donations, which can impact your taxes. If you and your spouse made significant contributions to a favorite nonprofit or religious institution, you’ll have to decide whether you can and wish to continue, and whether it will be at the same level.
If you and your spouse were funding education for children or grandchildren, you’ll have to evaluate whether that will continue as well. You will also need to consider whether you’ll get a job if you weren’t
working, or get a second job if you were.
There is a lot of financial uncertainty in the immediate aftermath of losing a spouse. Your household now has half the income but the same amount of financial obligations, if not more. That’s why it’s so important to build a checklist of those obligations and set priorities. My experience taught me that this is a time when budgeting becomes very important. You need to ensure you’re still preparing for retirement while addressing current expenses both small and large.
This is a complicated process in which I am very familiar. During my first meeting with a widow or widower, there are a lot of tears and a lot of confusion. But by the end of our second meeting, he or she will have a better sense of control after completing a thorough financial inventory. They are now prepared with a checklist and more confident in what to do next.
I know all too well how hard it is to hear “It’s going to be OK” when you’ve just experienced a tragedy. In my situation, enough time has passed that I can say I really am OK now. My kids are thriving, and we’re enjoying life. What I tell my clients who have lost a spouse, and would tell anyone in this situation, is that you have to take things one day at a time. Allow yourself to grieve, but keep moving forward. Having supportive people around you, including professionals who can help you navigate your responsibilities, can make all the difference.
Linda Donovan is a Houston-based Senior Vice President, Financial Advisor and Senior Portfolio Manager with RBC Wealth Management – U.S. She has grown her career as a financial advisor while raising twin girls as a single mom.