Helping Your Elderly Loved One With Finances After the Loss of a Spouse
Marriage is a partnership. When one person passes away, the other is left making important decisions on their own. Financial issues, in particular, can appear daunting: Research has shown that a sudden need to manage money matters can add stress during this already difficult time. Unique issues like figuring out life insurance and re-configuring formerly shared accounts exacerbate the situation. If your elderly loved one has experienced the loss of their spouse, help them master their money management using the guidelines below.
Figure Out the Day-to-Day Finances
Money management after a spouse’s death isn’t just about major assets. There are also smaller daily financial needs that need to be addressed first and foremost. Review living expenses like rent and utilities on a monthly basis. If their spouse was handling these points, get their name on all accounts as soon as possible. You don’t want them sitting in the dark, literally, because the power bill didn’t get paid. This handy list comprehensively covers such “small” details, from magazine subscriptions to phone contracts.
Create a List of All Financial Assets
The deceased’s will should contain a list of assets, from stocks and bonds to bank statements. With this in hand, you know exactly what money matters to tackle. There should also be a letter of instruction detailing their wishes on what should happen to these assets. If there is no will, United States law generally decrees that a spouse is the first in line for inheritance. Consult a local attorney to confirm that this applies.
Determine the Transfer of Bank Accounts
If your parent or grandparent shared accounts with their deceased spouse, these should be transferred to their name only. You will need a formal certificate of death to do this. Usually the funeral home files for this documentation. Ask for multiple copies — just how many depends on how long the list of financial assets to deal with is. A simple estate could require as few as ten while a more complicated one might need 20 or more.
Decide What to Do with Retirement Funds
If the deceased was still employed, ask their company about potential pay, company-sponsored life insurance policies, and death benefits. The employer can also inform you whether they had a 401(k) and who the designated beneficiaries are. When it comes to tax-protected funds like a 401(k), the best strategy is usually to simply roll over the account into a new one that carries only the beneficiary's name. The ages of the deceased and the beneficiary play a role in determining the most advantageous strategy, however, as this article from the Balance explains. No matter what, you should consult an accountant, since there are potential tax consequences to whatever option you choose.
Find Out if Life Insurance Is Available
Help your elderly loved one find out if their spouse had life insurance coverage — more than half of Americans do. If so, a formal claim must be filed to collect this. When your parent or grandparent receive this lump sum, they may be tempted to spend it. Encourage them to hold off on tapping into this or any other significant financial payouts following their spouse’s death. Overspending is one of the biggest mistakes people make after a partner’s passing. They first need to assess how much taxes and administrative fees will eat into this money.
Hire a Financial Planner
A financial advisor can help your loved one figure out how much money they really have following their spouse’s death as well as how much money they need going forward. Drafting a plan that includes monthly expenses as well as retirement needs ensures they won’t get stuck with less than they need. A planner can also advise on some of the points listed above, like what to do with a 401(k).
Take a look at this HomeAdvisor article for tips on choosing a financial advisor, as finding the right professional to handle these important practical matters will bring both you and your loved one peace of mind. You can rest easy knowing that they have a confident and knowledgeable individual to guide their money management.
There’s a lot to consider following the loss of a spouse. Although it might feel daunting and overwhelming, it’s important to take steps to secure your loved one’s financial future.
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Written By: Lucille Rosetti