Women Wealth & Wisdom |
Living on Your Own - Picking up the Financial Pieces after Widowhood
As they age, women face a greater risk to their financial independence than men. According to U.S. Census reports1, women will live, on average, 5 to 7 years longer than men. Women are also are much more likely to be widowed and to live alone. More than 44 percent of women over age 65 are widowed2, compared to just 14 percent of men. While the average age of widowhood for a woman is 553, tragedy can strike at any time – more than 14 percent of women between the ages of 20 and 64 are widows2, compared to just 4 percent of men in the same age group. Whatever age and whatever the reason, being widowed is likely to have a serious impact on a woman’s finances.
If you are a new widow, finances may not be the first thing on your mind. Whether your loss is sudden or expected, the death of a spouse is agonizing and the grief can be all-consuming. You may feel disoriented and lonely, and it is usually not advisable to make major decisions during such a vulnerable time. However, there are certain things you should do right away to begin getting your financial house in order.
Things to Do Immediately
The days and weeks immediately following your loss may seem like a blur. Concentrating for long may be difficult and you may feel disconnected from the tasks you set out to perform. Be patient with yourself. Until you feel more composed, focus on these 10 high priority tasks:
1. Find the will. If your husband’s death was expected, perhaps you were able to discuss his final wishes in depth. However, the death of a spouse is often unexpected. Regardless, the first step is to find a will if there is one. This properly drawn document should make clear his wishes for transfers of property and custody of dependent children. Also, the will should name an executor to be responsible for ensuring the deceased’s wishes are carried out. If your husband died intestate (without a will), your state’s laws will determine how his assets are distributed. If this is your situation, you would be well-advised to seek legal council.
2. Funeral arrangements. Begin making arrangements for your husband’s funeral and burial wishes or memorial service. If he did not specify his wishes in his will, you may want to ask your children or a friend to join you to help make often difficult decisions of how best to honor him.
3. Call your insurance representative. If your husband owned life insurance, you should begin the process of claiming death benefits as soon as possible.
4. Contact advisors. You should notify your financial and legal advisors of your husband’s passing. They will help you make necessary decisions and legal changes.
5. Organize all of your important papers and order death certificates. You will need:
- Your marriage certificate
- Your husband’s military discharge papers if your husband was in the military
- A copy of your most recent tax return if you filed jointly
- Birth certificates of minor children, as well as your husband’s social security number.
- Your husband’s death certificate to claim life insurance proceeds and other benefits. Order at least a dozen.
6. Contact all the financial institutions where you and your husband have accounts.
7. Clip your husband’s obituary notice: you may need it to claim certain benefits.
8. Contact your health insurer to verify the status of your coverage.
9. Contact the Social Security Administration and, if your husband served in the military, Veterans Administration to learn what benefits may be available to you.
10. If applicable, contact your child’s college financial aid office. More assistance may now be available to help pay for school.
The Probate Process
If you and your husband had a living trust in place, you will avoid the legal process called probate and the transfer of your husband’s assets will remain private. If, however, you do have to go through the probate process, it may take a while depending on the complexity of the estate. During the process, the court establishes the validity of your husband’s will, settles debts, and transfers legal ownership of assets. Probate is a matter of public record, and all assets brought into probate are frozen until the court completes its procedures.
Employee Benefits
If your husband was employed at the time of his death, be sure to contact the Human Resources department of his employer to inquire about life insurance and other benefits that may be available to you. Ask about the proceeds from his 401(k) plan, profit sharing plans, pension distribution and any other benefits to which you may be entitled as his widow and beneficiary.
Life Insurance Proceeds
If your husband had life insurance in force at the time of his death, your family may receive a financial windfall from the policy’s death benefit proceeds. The benefit may be substantial, and though it may seem an inexhaustible sum at first, if it is meant to stretch over many years, it is critical that you spend and invest it carefully.
For young widows in the midst of raising dependent children, you may consider allocating a portion of the insurance proceeds toward college savings, such as a 529 Plan or Coverdell Education Savings Account.
Young widows especially must take time into consideration when deciding how to invest death benefit proceeds: the money needs to last for you and your dependents. Though earmarking a portion of the money toward the kids’ education is smart, be sure not to over-fund at the expense of your own future, including your retirement. Remember, the kids can always get loans to help pay for college, but there are no loans available to pay for retirement.
For financially established widows who either do not have children or whose children are grown, your focus should be on your retirement. Are you on track to preserve your lifestyle in your later years? Perhaps you should consider a strategy to create a life-long income stream for yourself. There are a variety of insurance and annuity products available that do just that. Additionally, you may want to learn more about how long-term care insurance or some life insurance products can be used to help defray the costs associated with around-the-clock daily living assistance, if you should ever need it.
For older widows, now may be a good time to consider establishing or revising your estate plan for familial and charitable bequests. If you plan to leave money to heirs, there are several family trust variations available to help ease the transfer of assets to beneficiaries, minimize estate taxes, and avoid probate proceedings. If you intend to leave assets to a charity or non-profit organization, there are options, such as charitable annuity trusts, which can work to the benefit both of the charity and donor. It is best to seek the advice of tax, insurance, and estate planning professionals to determine what arrangements may be best for your situation.
Now and in the Future
In the months following the death of your husband, you will need to update or change policies and accounts, including insurance policies, cars, your home, your will, bank accounts, investments, retirement plans, safe deposit boxes and credit cards.
Insurance policies may include your homeowners and auto insurance. When it comes to your car, remember to change the registration with the state, not just the name on the title. If your home was jointly owned, you will need to change the title. You will need to do the same for any other real estate property such as a vacation home. There may be a myriad of accounts, investments or credit cards that you will need to consider maintaining, changing ownership of or perhaps, closing.
When revising your financial situation, consider your goals not just for the distant future, but for the short term as well. You need to incorporate your costs of daily living as well as the long-term costs of retirement funding into your overall strategy.
A qualified financial professional can be an invaluable guide during this time of emotional and financial upheaval. Together, you can assess your personal situation and chart a course for your future.
Useful Resources & Links:
1. U.S Census Bureau, 2008
2. U.S. Census Bureau, 2005-2007 American Community Survey
3. Society of Actuaries, “Request for Proposal — Financial Shock of Widowhood,” 2008.
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