Death of a Spouse — Managing Finances during This Difficult Time

The death of a spouse is a devastating time in a person’s life — and can be complicated by money worries. Not only are you dealing with the emotional impact and grief, you must also deal with the immediate financial ramifications. However, with proper planning and the guidance of an experienced wealth advisor, you can avoid feeling completely overwhelmed or disoriented during this difficult time.

Plan Early — With Professional Help

It’s important to have a professional advisor who can be your advocate and ally during the planning stages. Your advisor and loved ones should be aware of all of your current wishes, including your desires about a funeral service, final resting place, and obituary content. Often when left to our own devices we never get around to these things, so it’s helpful to have an advisor who can drive decisions and keep you on task. Pre-planning feels important but not urgent, but once it becomes urgent it’s often too late.

Adjust Your Life Insurance Needs Periodically

During your proactive planning stage, it’s important to review your will, ensure you have sufficient resources on hand to pay for funeral expenses, and get proper life insurance. Your insurance requirements will be dependent on the stage of your life. For example, if you’re a young person whose spouse unexpectedly dies, insurance may help you stay in your house and cover childcare expenses, despite losing your partner’s income. However, life insurance needs change when you’re older and your children are out of the house. At that stage, the loss of your spouse could also mean the loss of your potential caregiver, so you must tailor your life insurance to cover that possibility.

Know What You Have to Do Immediately

There is a lot of administrative work to do surrounding money when your spouse dies, and it all happens at a very sad time when you’re not always equipped with the wherewithal to get it done. When your loved one dies, you must immediately address funeral planning, make sure you have access to all bank accounts, provide a death certificate for insurance claims, and apply for government benefits and a widower’s pension. A good advisor, whether it’s an estate lawyer or a holistic financial advisor, can steer you through this process.

Don’t Make Knee-Jerk Decisions

While the administrative issues mentioned above need to be dealt with quickly, it’s best not to make any major financial decisions when you’re dealing with the immediate grief of losing a spouse. For example, you may worry that you can no longer stay in a big house by yourself, but moving is not a decision to be taken lightly. Leaving your community and friends could mean losing your support network, and could lead to even more upheaval in your life during this difficult time. Also, older people who’ve lost a spouse need to remain vigilant, as they may be more vulnerable to predatory people.

There is also a high turnover of financial advisors when someone passes away, likely because the advisor only had a relationship with one member of the couple. But it’s best practice not to change advisors during this time, because it’s difficult for a new advisor to grasp all the complexities of the family situation. A good advisor will ensure they have a relationship with both parties in a couple from the start. With my clients, I always try to at least meet their spouses and ensure they have my contact information in case they ever need to get in touch with me in an emergency.

Prepare for Income Changes

If the deceased was receiving Canada Pension Plan benefits, their spouse will get the survivor’s benefit (a one-time payment of $2,500) but no more monthly payments. Also, the deceased person’s RRIF will go to the surviving spouse and the mandatory withdrawals will continue, whether they need the money or not. And when a person with a private pension passes away, their widow will get somewhere between 40-60% of the full amount. So if your spouse’s pension was the primary source of your retirement income, prepare for it to be cut by approximately half.

Revamp Your Financial Plan

Once the dust settles, it’s very important to work with your wealth advisor and develop a whole new financial plan to reflect your new life situation. You’ll need to run financial projections again, restate any beneficiary designations, reconsider your retirement goals, and will likely need a new will. If you were not the primary financial decision maker, there may be an education component as well.

The death of a spouse can be an incredibly emotional and disorienting experience. I can help you through this difficult transition. 416.969.3026.