What to Do When Your Spouse Dies: A Financial Checklist & Expert Advice

When your spouse passes away, you’re understandably in a bad place emotionally. This makes it a bad time to make major long-term decisions. However, there are things you need to do to make the best of a bad situation. A trusted financial advisor can be very helpful here.

When my dad died at age 91, my mom’s income dropped by nearly 40%, while her expenses were just 20% lower (at least until she sold their house).

If a divorce has a huge emotional impact, the impact of your spouse dying is far more devastating.

Financially, as with a divorce, becoming a widow(er) will most often see your income drop, potentially by a lot, yet your expenses will drop by much less.

Add to that the direct costs of a funeral and everything that entails.

Financial Checklist: 10 Things to Do When a Spouse Passes Away

Before we share the specific advice provided by financial professionals, here is a summary of the 10 things our pros recommend doing first:

1. Once you obtain certified copies of the death certificate, notify insurance companies, banks, creditors, legal advisors, and any heirs mentioned in your spouse’s will. Don’t forget to notify your spouse’s current and/or former employers’ HR departments, who can help with any benefits you may be entitled to. If your spouse was a veteran, notify the VA and check what benefits you may be entitled to through them.

2. Claim life insurance death benefits, if any.

3. Implement your spouse’s will. If there isn’t a will, follow your state’s process for intestate deaths.

4. Consider claiming applicable Social Security, Medicare, and/or Medicaid benefits.

5. Consider rolling IRAs and other retirement accounts into your IRAs and possibly converting traditional IRAs to Roth IRAs. You’ll also need to close all accounts held solely in your spouse’s name. Remember that you aren’t responsible for your spouse’s individual debts, though his or her estate will need to pay them if there are available funds. You’ll still be on the hook for any debts on which you were a co-signer, such as your mortgage.

6. Assess your new income situation, including especially any pensions or other benefits that may be lower or gone altogether.

7. Revise your budget, including the expected changes in taxes. Stop unneeded expenses such as life insurance you had to provide for your now-deceased spouse, as well as any subscriptions you aren’t likely to need. If you own two cars, pick which one you’d rather keep and sell the other. This will give you a helpful short-term boost in available cash and will reduce your long-term costs. Don’t forget to take over any bill-paying and similar tasks previously handled by your spouse. Automating these as much as possible will help. Consider also paying down your remaining debts faster if and as possible.

8. Reevaluate your financial goals.

9. Revisit your investment allocations.

10. Update your will, deeds, account ownership, and other legal documents as needed.

What the Financial Professionals Say:

Angel G. Escobedo, Partner & Senior Wealth Advisor, Capasso Planning Partners, says, “Navigating the financial aspects after losing a spouse can be overwhelming, but it’s essential to take measured steps to secure your financial future. I advise clients to take time to grieve and process the loss without feeling rushed into major decisions. Understand that your financial situation may have changed significantly, and it’s crucial to reassess your goals and priorities in light of these changes.”

Then, Escobedo adds, “Notify the relevant parties about the loss, including insurance companies, banks, creditors, and legal advisors, as soon as the death certificate is available. 

“Review and update important documents such as wills, trusts, and beneficiary designations to reflect the new circumstances. Evaluate any insurance policies and initiate the claims process as necessary to access benefits. Assess your revised income situation, including any changes in pension, Social Security, or other benefits, and adjust your budget accordingly.”

Omar Morillo, Founder & Sr Wealth Advisor at Imperio Wealth Advisors, agrees, “In the wake of losing a spouse, it’s vital to allow time for grief while also managing the immediate financial implications. Critical steps include claiming life insurance benefits, updating wills and other legal documents, and evaluating the new economic situation to ensure stability. These actions help clarify the financial picture and secure your future. Additionally, adjusting your budget to reflect your current income and expenses is crucial. Doing so may involve revisiting financial goals, such as retirement planning and emergency funds, to align with your new circumstances.”

Michael Rosenberg, Founder and Managing Director of Diversified Investment Strategies, LLC, has similar advice, “First, meet with your financial advisor to implement a new budget for expenses and assess sources of income. Next, review qualified retirement plans and consider rolling the retirement assets of the deceased over to your IRAs. Then, claim any death benefits and decide what to do with the funds.”

Jacob Rothman, Wealth Manager, Rothman Investment Management, mentions tax considerations, “If your spouse was alive for any part of the year, you can file taxes as ‘Married Filing Joint.’ In the following years, you’ll have to file as ‘Single’ (unless you have dependent children, in which case you could use ‘Head of household’), which could push you into a higher tax bracket. This is why you should consider doing a Roth conversion during that first year, moving funds from a traditional IRA to a Roth IRA while your rates are lower. 

“Also, consider selling investments with unrealized gains. If you live in a community property state, you can get a partial step-up in basis, so if there are assets you didn’t want to sell for tax reasons, this may be an opportunity to adjust your portfolio. Your financial advisor can help you review your plan and your portfolio in light of the changes that come with losing a spouse.”

Escobedo adds, “Beyond these immediate steps, consider consolidating accounts or simplifying your financial affairs to make management easier during this transition period. Having one large broker and bank handling matters is better than making multiple calls to different institutions. Explore potential tax implications of the loss and consider consulting with a tax advisor for guidance. 

“Finally, don’t hesitate to ask for help from family, friends, or professionals during this challenging time. Prioritize self-care and seek emotional support to cope with the loss effectively. Remember that your financial situation is just one aspect of your life, and it’s essential to take care of your overall well-being as you navigate this transition. Above all, remember that you’re not alone, and there are resources and professionals available to help you navigate the financial complexities of losing a spouse. Take things one step at a time and be patient with yourself as you adjust to your new normal.”

Rosenberg cautions about advice from family and friends; however, “A lot of planning is determined by your age and unique financial circumstances. While you may receive a lot of well-intentioned advice from friends or relatives, such advice may be misinformed. For example, many people may suggest paying off the mortgage using an insurance payout. However, if it’s a 3% fixed mortgage, that isn’t usually the best use of those funds. Understand that your situation is unique and there isn’t a one-size-fits-all approach. That’s where a financial professional can help.”

A couple of bonus tips:

• Don’t forget to plan for short-term expenses such as the funeral, estate attorneys, executors, accountants, etc.
• Take steps to reduce identity theft risks. This includes notifying one of the three major credit reporting bureaus (Experian, Equifax, or Trans Union – once you notify one they’ll notify the other two), as well as your state’s Motor Vehicle Administration or Department of Motor Vehicles.

Professionals Can Help When Your Spouse Dies

When you lose a spouse, you’re likely in a bad place emotionally. This makes it a bad time to make major long-term decisions. However, there are things you need to do to make the best of a bad situation. A trusted financial advisor can be very helpful here.

Jon McCardle, President, Summit Financial Group of Indiana, relates, “Our experience has been varied, from spouses of terminally ill clients who had time to prepare and plan, to cases where a spouse passes suddenly leaving the widow(er) unprepared and shocked. With those spouses who call in with news of an unexpected death, their psychological state is usually fragile, clouded, and possibly overwhelmed. Here, it’s crucial to help with their grieving process, identifying steps they need to take, and accompanying them throughout the paperwork and formality of the transition of assets and estate. 

“Once you’re past the denial and anger phases and regain some clarity, we can offer advice on what to think about, what actions to take, and how you may feel about your new status and life. Our experience shows that people often play different roles in their relationships. One may be involved with bills and the care and maintenance of the home and family unit, while the other focuses on investments and future planning of the family. 

“When one passes, the other is left with a void emotionally as well as a partner in all those decisions, knowledge, and experience, leaving them vulnerable. Grief clouds judgment, and without the help of an advisor, a surviving spouse may often make decisions that may be contrary or detrimental to their plans.”

The above provides a checklist of the top 10 things to do first when you become a widow(er). 

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This article was originally published on Wealthtender and is intended for informational purposes only and should not be considered financial advice. You should consult a financial professional before making any major financial decisions. Wealthtender earns money from financial professionals, which creates a conflict of interest when these professionals are featured in articles over others. Read the Wealthtender editorial policy and terms of service to learn more. Wealthtender is not a client of these financial services providers.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.