By Bryan Lee, CFP®, MBA
While it’s impossible to prepare for the emotional loss of a life partner, widowhood is an unfortunate possibility that requires preparation. All too often we hear stories about a loved one suddenly passing, and it was they who handled the finances—and the partner left behind doesn’t know where to start.
Even though it may be tough to plan for the death of a spouse or life partner, financial preparation is important for all involved. Surely your loved one wouldn’t want you to feel lost or helpless without them. While dealing with the emotional turmoil that accompanies the loss of a loved one, having your finances in order can be a weight lifted off your shoulders.
Here are five questions you and your partner should ask yourselves to see if you’re financially prepared for widowhood.
1. Where Is the Financial Account Information Kept?
One of the hardest parts of widowhood is moving forward without the support of your spouse. Was your partner the one who handled investments or other day-to-day financial matters? Stepping into this role for the first time in your life can be overwhelming.
The best way to prepare for this possibility is to make sure both spouses have access to important financial account information including checking and savings accounts, retirement plans, and other investments. At a minimum, both spouses should have access to the account numbers and any login information. Also keep in mind that in some cases, settling an estate may require a birth certificate and/or marriage certificate (even if you are divorced), so it’s important to keep these in a safe and accessible location.
Additionally, understanding how these accounts are titled (joint or individual), as well as who is listed as the beneficiary, are crucial aspects of estate planning. Having joint ownership on all accounts, retitling assets in the name of a trust, or listing each other as beneficiaries can help the assets transfer smoothly by avoiding probate.
2. Should We Have a Trust?
If you and your spouse don’t have a trust, consider discussing the appropriateness of such a strategy with a qualified estate planning attorney. If drafted properly, a trust can provide additional creditor protection for the surviving spouse and other beneficiaries named in the trust. Unlike a will, which just primarily lists how assets should be disbursed, trusts can include additional language specifying how the funds should be used and can encourage behaviors like going to college, avoiding substances, etc.
In addition, trusts are more private and don’t need to go through the long and complicated process of probate that wills do. Depending on your state, it may take a lot longer to get closure about how assets should be distributed if you have a will instead of a trust. If you do have a trust, make sure it’s up to date and properly funded by working with a qualified estate attorney to get all the legalities in place.
3. How Would My Benefits Change?
Understanding your benefits is another important aspect of preparing for the possibility of widowhood. Social Security, life insurance, pensions, and annuities are some examples of planning considerations that should be assessed ahead of time so that you're not burdened with making difficult financial decisions immediately after loss.
If your spouse is still working, there may be other employer-sponsored benefits available as well. Work together with your loved one to make a list of all the benefits either of you will receive in the event of widowhood as well as the information needed to access these resources. Talking about these benefits ahead of time can help you both feel prepared when something happens to either of you.
4. Would My Spending Plan Change?
Life during widowhood will be challenging, but a detailed spending plan can help ease the transition by alleviating the stress of making day-to-day financial decisions. Start by creating a current budget if you don’t have one already. Together, you and your spouse can discuss the types of expenses that will either be added or removed from the budget when one of you passes. It may seem strange at the moment but could be beneficial to have a spending plan in place now rather than in the midst of chaos.
Special attention should be paid to debts like mortgage payments, monthly utilities, car payments, and credit card debt. Understanding how these debts will be managed in the event of widowhood is crucial to creating a sound financial future for the surviving spouse. The last thing either spouse wants to do is leave behind debt that their loved ones can’t manage. Planning ahead can help alleviate this burden and provide comfort to both spouses knowing that their partner is going to be okay on their own.
5. Do We Have a Trusted Advisor?
A strong support system will carry you through widowhood and give you the strength to move forward. Part of that support system should be a trusted financial professional. Whether you are already working with a financial advisor or you’re currently looking, take your time getting to know them and make sure you like working together.
If there is one spouse who tends to handle all financial matters, make it a point to find a financial advisor that will be able to manage the investments for the surviving spouse, and introduce the other spouse to the financial team. Widowhood is a vulnerable time and it’s vital that both spouses feel comfortable reaching out for help with important financial matters. If one or both spouses don’t trust the advisor, consider reevaluating the relationship.
Your well-being is of the utmost importance during this process, so don’t be afraid to interview several financial professionals before choosing the one you trust the most and whose services fit your needs.
You’re Not Alone
Having a financial plan in place to prepare for the unexpected can help bring some peace of mind when dealing with the loss of your partner. After all, the last thing you need in a time of grief is to worry about legal and financial issues. As financial advisors in Plano, TX, we specialize in comprehensive financial planning, wealth management, and estate planning. We can help you and your spouse navigate the difficult decisions associated with the possibility of widowhood. Call (972) 403-1234 or contact us online to set up a complimentary get-acquainted meeting so we can see if we are a good fit!
Bryan Lee is the founder and president of Strategic Financial Planning, Inc., an independent, fee-only financial advisory firm. With more than 27 years of industry experience, Bryan uses a unique client-first financial life planning approach and process to help his clients get the most out of life. Bryan earned his Bachelor of Business Administration in finance and his MBA in international finance from the University of North Texas. He is also a CERTIFIED FINANCIAL PLANNER™ professional.Bryan is actively involved in his community and industry and has served on the boards of several associations and charities, including the Dallas/Fort Worth chapter of the Financial Planning Association, the National Association of Personal Financial Advisors, Family Services of Plano, the CITY House, and the Journal of Financial Planning. Bryan has been featured in local and national media, including The Wall Street Journal, Investors Business Daily, CNNfn, USA Today, SmartMoney, Kiplinger’s Personal Finance, Financial Planning Magazine, The Dallas Morning News, and Dow Jones Newswires. And, he has been recognized as a Five Star Wealth Manager and one of Dallas’s Best Financial Planners in D Magazine every year since its inception and recently as a Top Wealth Manager. To learn more about Bryan, connect with him on LinkedIn.