No one wants to think about what would happen if their spouse passed away. Death is a difficult topic to discuss, but it is an inevitable reality for all couples. It’s important that you and your spouse have peace of mind that if either of you dies, the other has a plan in place that allows them to live the best life possible.
We’re going to help you think through the ideas and questions that will be helpful if your spouse dies.
If or when your spouse dies, your mind will be in a million places at once. Grief, fear and anxiety will overwhelm you. Having a general idea or checklist that can help you through this challenging time can really make it easier for you to overcome a spouse’s death.
You can’t be 100% prepared for death no matter how hard you try, but a checklist and guidelines can certainly help make the impact a little less intense.
A few of the things to consider are:
6 Things to Consider If Your Spouse Passes Away
1. Cash Flow: From Two Incomes to One
Income is a primary concern for most people, even if you’re both retired. We see many cases where one person is still working and passes away, and even times when both spouses are retired and one dies.
The main issue is cash flow because:
- Maybe the deceased was collecting a pension with no survivorship attached.
- Perhaps one spouse was still working and generating income and passes away.
- You’ll lose one source of Social Security income if you’re both collecting. Instead, an adjustment is made where you’ll receive the higher person’s benefits.
Your standard of living can drastically change if your spouse dies and you lose some of these sources of income.
2. Expenses: The Key to Life Without a Spouse
When couples think of retirement planning, they think of retiring together. Most people will plan for:
- Two sources of income
- Two sources of expenses
However, even if you’re losing one or more sources of income, expenses will also be less. It’s vital for you to fully understand your expenses when retirement planning as a married individual and a couple.
For example, when your spouse passes on, you may no longer need to pay for:
- Country club fees
- Two vehicle payments/insurance
- Certain medical bills
Once you know your cash flow and expenses, it will be a lot easier to breathe if the worst happens.
It’s crucial for you to also know where all of the bills are coming from. You have to continue living, and it’s vital to keep these bills current.
3. Estate Settlement Issues
You’ll need to do a few things to your estate if your spouse dies. One thing that comes to mind is an IRA in your spouse’s name. The IRA will need to be retitled when your spouse passes. You may be able to:
- Become an inherited IRA
- Be taken over if you’re a spouse
When you take over a spouse’s IRA, you’re effectively rolling your spouse’s IRA into your own. You have to go through the steps to:
- Change joint accounts to single accounts
- Take certain accounts and change them to your name
Many accounts may need to be properly transferred to a surviving spouse.
In terms of estate tax, there are fewer issues today than in the past, but with larger estates, it can be challenging to keep track of all property. You might need to:
- Look through credit card statements
- Identify certain accounts
- Locate assets
Because your spouse passed away, you’ll also need to look through your estate plan. Perhaps you wanted certain assets to pass to your spouse, but now that they’re gone, you’ll need to consider what happens to these assets.
4. Insurance Accounts and Benefits
Insurance is a major concern because your spouse and you can have a variety of accounts. You need to be able to:
- Name accounts
- Know where accounts are
- Know how much is in these accounts
You need to identify and know where all of these accounts are when your spouse passes. It’s essential to keep a running list of these accounts and how to access them. Ideally, when your spouse is alive, you should begin making a list of these accounts so that the surviving spouse can access them.
Insurance and death benefits may come from:
- Employers that offer group life insurance if they’re a larger company.
- Veteran benefits for death and burial.
- Pension survival benefits with certain clauses.
- If you have a dependent or child under the age of 18 at the time of your spouse’s death, Social Security may have certain benefits available to them.
- Life insurance policies that may be open.
Insurance is a significant asset when retirement planning because it allows you to have an influx of cash that your spouse will need upon your demise.
The IRS wants their money no matter the circumstances that you’re personally facing. You may have filed your taxes a certain way when your spouse was alive, but this can abruptly change when they die.
Your house may generate a gain if you sell it.
Provisions need to be thought through thoroughly. This is a major consideration, and we recommend going to a CPA. A CPA will cost a few hundred dollars, but they’ll help you understand your tax obligations and how your tax situation might have changed.
6. Assets and Investments
When you secure your retirement, you’ll notice that you’ve acquired a lot of assets and made numerous investments throughout your marriage. These investments need to transition to you as a survivor.
There may be tax concerns with these assets being transferred to you, so a CPA can help here, too.
A few of the accounts and investments that people may have questions about are:
- IRAs: If they’re set up properly, the IRA can often be transferred to the surviving spouse without an issue.
- Stocks: A step up in basis may be leveraged to save you money in taxes.
- Businesses: Will you continue the business, or is there a succession plan in place? How about the sale of the company and the tax implications that follow?
You may have annuities and other investments that need to be considered. We recommend speaking to a financial adviser or planner to discuss your risk tolerance without your spouse.
Often, your retirement plan will have more risk with two spouses, but now that one spouse is gone, it may be time to reduce these risks.
Thinking of life without your spouse is something no one wants to do, and we’ve made a checklist to help you walk through these things to consider.
The checklist is completely free, but we need to know how to send it to you.
We can send the list either through email or regular mail – it’s up to you.
Call us today to request your own checklist to help you understand what to do when your spouse dies.