Financial Planning: When a Spouse Passes – How to Stay Out of the Dark

Well you knew I would be broaching this topic at some point.  In many years of financial planning I have seen numerous situations which made me sad, and which inevitably led to me becoming a financial educator.  Some of the most searing memories, and sad to say happened all too frequently, were of widows who were in the dark as to what their financial condition was.

One of my goals as an educator is to provide guidance so that people can feel more confident in their financial lives.  This includes knowing that you have all your financial “ducks in a row” when a spouse/partner passes away.  So with that in mind, here is a quick checklist of things to get in order now:

1. Wills and Trusts

  • Both my spouse and I have updated wills and/or trusts (the documents have been reviewed within the last 3 years) AND we know where both the original and a copy are kept.
  • We have provided a person we trust with a copy of our individual documents.

2. Life insurance

  • My spouse has enough life insurance in place to provide for me in case of their death (good rule of thumb is: 10 x their annual income) and I am the primary beneficiary on the policy.  I also have the contact information for the insurance company.
  • I know if I will/will not be covered under my spouse’s health insurance coverage upon their death.
  • I have checked to see what life insurance is available through both of our employers as well as any ancillary insurance that may be part of a credit card/loan benefit.

3. Review retirement accounts

  • I know what types of retirement accounts my spouse has (i.e. pension, deferred compensation such as a 401(k), IRA) and I am the beneficiary on each one.
  • I understand any potential penalties and tax implications for each type of account.

4. Emergency savings account

  • I/We have a safe and an immediately available account that could allow us to cover between 3-6  (ideally 12)  months worth of necessary living expenses, such as the mortgage payment and food.  Note: This does not include the “emergency” vacation!

5. What debts do you have

  • This is where knowing what’s on the credit report will come in handy! (You can go to www.annualcreditreport.com to get one free copy every 12 months from each of the three bureaus; TransUnion, Experian and Equifax.) Make an inventory of all your debts including amount owed, minimum payments, interest rate and address to send payments.  Make it easy on yourself and use this Debt Inventory worksheet to get started.

6. Know your net worth

  • I know how much I/we have in net assets (what we own minus our liabilities) and we have a written inventory that we can update as needed.  Again, to help you get a snapshot of your net worth, enter your assets and liabilities in this Financial Organizer and update annually.

Of course this is just a starting point of the steps you should be taking now to ensure that you will not be caught in the dark but keep in mind the old adage that the longest journey begins with the first step.

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