Ep. 106 – What Should You Consider If Your Spouse Passes Away
You may not be going through the situation of losing a spouse, but it is always wise to stay prepared.
We understand how the situation can be and that is why we have prepared this episode as a resource for you when that time arrives.
In this episode of the Secure Your Retirement podcast, we talk about the different things you should think about when your spouse passes away. We cover topics from assets to investments to insurance and share where you might require professional help to make things easier.
In this episode, find out:
- The things to think about from a cash flow perspective.
- The different things you need to think about concerning estate settlement issues.
- Why you should compile everything from investments to insurance when you’re still together.
- The different types of insurance you should be aware of.
- Why you should use a CPA to help you look through the different tax elements.
- Be knowledgeable about how taxes on joint assets and investments are going to transition.
Tweetable Quotes:
- “Once you have a good picture of where everything is, then you can start to work within all the nuances that every little investment or asset account is going to have.”– Murs Tariq
- “These are things that might take months to get through, but you want to make sure you’re stepping through these things in an organized way.”– Radon Stancil
Resources:
If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!
To access the course, simply visit POMWealth.net/podcast.
Here is the complete transcript:
Radon Stancil :
Welcome to Retirement in Action. We certainly are happy to have you with us today. We’re going to talk about a topic today that is a difficult one, if you’re having to live through it and you’re having to deal with it. But it’s certainly one that unfortunately, Murs and I have had to help individuals through. And it’s a time where you kind of need something to get your mind right, make sure everything’s in order. And many times people have asked us when it comes to this idea of they lost a spouse and I really could put this down, I’ve lost a parent in death, what do I do? And so Murs and I have made sure that we’ve put together a checklist. It’s kind of a yes no checklist. And then once you get a yes no there, you’re able to kind of go through and say, well, what do I do? How do I deal with this?
Radon Stancil :
And we’re going to talk about how to get that checklist and all that kind of stuff at the end of the show. So make sure you listen all the way through, but what we’re going to do now is just hit a couple of key points, kind of get your mind right about what these things are. Now you may say, well, I’ve obviously not lost my spouse right now. We’re both here and that’s good, but it’s at least got it in your mind so that you know if something happens, you’ve got a resource, that’s first. Or you know someone who might be living through this situation and you say, hey, I’ve got a resource or make sure you listen to this podcast because they help us to think through these ideas. And then we can get the checklists out to you. So we hope that this gives you just, again, a little bit of a foundation.
Murs Tariq:
Right, yeah. And obviously this is always going to be a very tough time in someone’s life or a family’s life. But there are things that need to be thought through. And that’s the whole reason behind putting this checklist together. And the first one that, and this is really in no particular order, when you’re going through this type of situation, you’ve got thoughts coming and going and all kinds of different directions when it comes to money, when it comes to the estate, the wills, the beneficiaries. It’s all coming at you all at once. And so we want to try to just put it in sections so that we can, when whenever that does happen, where we can be … You can never be prepared, but you can have something in front of you that lays it out. And one big topic, one big issue is when it comes to cashflow, just think you’ve got two people, maybe that were earning money, maybe one was working, maybe one was retired or maybe you’re both collecting social security benefits. Maybe there was a pension involved.
Murs Tariq:
And there’s things to think about there if the spouse that has passed away had a pension, but there’s no survivorship on that pension. Well, all of a sudden, a chunk of income is going to disappear. When it comes to social security, there’s things to be thinking about there. You’re not going to continue to receive both of the social security benefits. Usually it’s just the higher of the two. So an adjustment is going to be made there. And a big thing when it comes to cashflow is understanding your spending. Rade, and I, we talk about your spending all the time when it comes to retirement planning. And essentially you’re kind of starting over from a retirement planning perspective in the sense that it’s just one now and not two. And what were the spending habits of that one person that’s no longer there. And so we need to make adjustments there because in most situations, the income is going to decrease. And so we need to know if those expenses now are going to decrease the same way, or what type of situation are we in from a cashflow perspective?
Murs Tariq:
A couple of other things to think about is, did it happen at the time after the person was already receiving what’s called required minimum distributions. So even for a spouse, you have to start continuing those. So a lot of different things coming at you, that’s just a cashflow perspective. Ultimately, knowing what’s going to continue coming in the door and what’s going to continue going out the door is really the easiest way to sum it up. And also what’s going to be required to come out of accounts.
Radon Stancil :
Yeah. And then we’ve got estate settlement issues. Now this can go all over the place, but there’s just things that you need to think about. For example, let’s say that the spouse that passed away has an IRA. Well, that IRA has to be retitled, and it’s going to be re-entitled and there’s a couple of different ways you can do it. You can do it as an inherited IRA. Or you could just take over the IRA if you’re the spouse and put it in your own IRA, but that has to get retitled, it has to be submitted. You kind of have to go through that. So what we’re trying to do is say, we have to start thinking about all these different things. What if it was a joint account? Well, if it’s a joint account, now it’s going to become an individual account.
Radon Stancil :
What if there were accounts in your spouse’s name alone, but you’re the beneficiary, not the beneficiary, so to speak, but you’re going to take over, because of the will, you’re going to take the account over. Well, there’s going to be some filing and some work that needs to be done there in order to make sure that you get those accounts over into your name. Now, there are things like estate tax and that kind of stuff. That’s not as big of an issue today as it used to be. But here’s one that I think is really important. What if you don’t know all the property that’s out there? I’m going through a situation like this right now with a client where we don’t know all of the information. There’s accounts out there that we didn’t know about, they didn’t know about. And so there’s some things you might think through.
Radon Stancil :
Looking at credit card statements, looking at points statements like, oh, wait a minute. I didn’t know they had 100,000 points. I must have an account there or something there that’s giving them this benefit. And so it’s a little bit of a search and rescue, you might say event, because we’re looking through stuff, we’re looking for things that maybe came in the mail and trying to identify all these different types of things that could be out there.
Radon Stancil :
Now, this is another one. If your spouse passed away, do you now need to update your own estate plan? See, because things might change now, things that were going to go one way might go a different way now. And so we want to make sure that we’ve gotten through all of those things. So while it might feel like a lot, again, we’re trying to make sure that we trigger these thoughts. And so as we go through this, don’t get overwhelmed and don’t start getting sweaty palms and all that kind of stuff. Let’s just keep ourselves calm here as we move through these things.
Murs Tariq:
Right, the next major category is going to be in the world of insurance. So think about all the different types of insurance that you have out there, and really being able to name them and know what they are and where they are and how much they’re worth. That’s pretty difficult to do. So the first big step here is compiling everything while you’re all together, compiling everything and knowing exactly where everything is. Not just the insurance policies, but also the investment accounts. Also, the bank accounts, different passwords that are out there, everything that you can think of that maybe one knows and the other doesn’t, if it’s all in one place that can be tremendously helpful when this time does come. But on the insurance side, there’s a lot of different ways that you may have insurance or essentially a death benefit payable to you as the surviving spouse.
Murs Tariq:
One could be were they still employed when they passed? A lot of times, if you’re working for a company and it’s typically a larger company, they have group insurance, group life insurance. And without even realizing it, you’re usually signed up for it automatically. And it may be a small amount, but it’s still an amount out there to help out with some of these expenses when the situation does happen. So be aware of any type of group life insurance policies with the company. Was your spouse of veteran? There’s some benefits there when it comes to death and burial benefits and also survivorship on pensions. Was it an accidental death or work-related? There could be some benefits there as well.
Murs Tariq:
On the side of the … If there’s any kids that are dependents or under the age of 18, social security actually has a provision or some benefits for them as well if you lose a spouse. And then also, did you ever purchase any life insurance on your own through any companies? Was it a term life insurance? Was it a whole life insurance? Was it a universal life insurance? All these different types are out there. They’re typically bought for this reason, a lot of times is if something happens, I’m going to need this influx of cash. And so the only way to know is to have that policy and also to know how to act upon it. So just a couple of different things on insurance, once again, just to kind of put it all together and just get you thinking about it a little bit and where everything may be.
Radon Stancil :
Another major issue is going to be around taxes. Obviously for years, you may have been filing a certain way and now that’s going to need to be updated, or maybe you held a house and that’s going to generate some kind of a gain to one of the spouses, especially if it gets sold, if you’re going to do a downsize or anything like that. If you have dependent children, there’s a whole separate set of things there that you need to think through when it comes to this, but there are provisions and I bring up taxes just to let you know that there are things that would need to be thought through. So I’m just going to leave taxes at this point.
Radon Stancil :
If in fact something happens to a spouse, even if you’ve never used a CPA or a professional before, this might be the year that you want to get somebody involved, just to kind of make sure that you’re covering all your bases, making sure that you’re looking at all of the different things that you need to look at. And it might be simple, it might cost a few hundred bucks to have that done, but it could save you a lot of time and headache and money as well. So don’t forget to look at the taxes to understand all the different elements there.
Murs Tariq:
Yeah, and then what kind of ties into that are the investments and the assets that you have grown together or grown individually. But at some point you have to know how is that going to transition if you are the survivor? How is that going to transition to you? And also what type of tax implications there may be. There’s not always going to be someone in your corner to tell you this is how this should be done. So I think it’s good to just have a good understanding of how things transition. With IRAs, if you’re the spouse, it’s very simple. If you do it right, you can essentially make that IRA your very own and just continue it in your account.
Murs Tariq:
With stocks, with non-IRA type stocks or investments, there’s a thing called a step-up in basis. Currently in the tax law right now, that’s available. And that’s good to know about when it comes to the time where the assets may be transferring to you or a beneficiary. It’s a nice little piece of a tax law that allows you to reduce your tax liability on that side. If the spouse was a business owner, things to think about, the transfer or potentially the sell of the business and what that succession plan is. And then once again, kind of back to the life insurance or on the annuity side, or any other type of illiquid asset that wasn’t the spouse’s name, the deceased spouse name. How does that work as far as liquidation or a liquidation event? Is there going to be taxes there? Do we have to start taking minimum distributions on that type of account? Can you assume that account?
Murs Tariq:
So all of this kind of just comes back to knowing where everything is. And once you have a good picture of where everything is, then you can really start to work within all of the nuances of that every little investment, every little asset account is going to have when it comes to becoming the beneficiary of something.
Murs Tariq:
One thing I left out on the cashflow side, and it’s probably one of the immediate more important ones is knowing where all the bills are. So that, in the very immediacy, you can make sure that those are staying paid and the lights are staying on and everything is getting taken care of in the very, very short term so that you don’t have that type of stress coming on you as you’re just starting to deal with the whole grieving process.
Radon Stancil :
Yeah. And I’m going to going to hit one there on the investment when too, is that a lot of times when you’ve got two people involved, they might compromise on their risk tolerance. And one might be lower risk, one might be higher risk, and then they kind of compromise. But then maybe the one who passed away, they had the high risk and you’re thinking I can’t have that higher risk. I need to lower it. So it’s just something you need to think about, because maybe you need to talk to your financial advisor, or whoever’s helping you manage the money and you need to lower that, so that it’s comfortable for you. And so none of the things by the way that Murs and I have talked about today are things that have to be done like in a day. These are things that might take months to get through, but you want to make sure that you’re kind of stepping through these things in an organized way.
Radon Stancil :
So as I told you in the beginning, we have created a checklist that helps you kind of think through each of these categories. So here’s what it is. We’ll give this checklist to you. We’re not going to charge you anything for the checklist, but in order to get the checklist, we have to be able to have some kind of communication so we know how to send it to you, whether we mail it to you, or we email it to you. So call the office. If you call the office, you can speak with Laura, you can speak with Morgan and we’ll get this out to you. And so that you have this there as a resource, and you may not need it obviously right now. So at least you know, hey, I can reach out whenever I do need it.
Radon Stancil :
So I know this is not a topic nobody really wants to really think about. It’s a tough topic, but we think it’s such an important one because when we’ve lived through it and we didn’t have this checklist, it can be difficult. Because our minds are just overwhelmed with anxiety, but we do appreciate you listening today, we hope this has been beneficial, we’ll talk to you next week.
Radon Stancil :
We hope this video has given you some confidence and clarity as you plan for a worry-free life in retirement. But what else do you need? We have created a complimentary video course called 3 Keys to secure your retirement. This video walks you through, step by step, what you need to do to get ready for retirement. You can also check out our podcast called Secure Your Retirement. You can subscribe below.
Murs Tariq:
For more retirement tips, watch this video, create your retirement income plan. Also, click here to subscribe to our podcast, Secure Your Retirement. If you liked this video, hit the like button and be sure to subscribe and share it with your friends.