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A Checklist for Surviving Spouses

These nine steps can help ease a very painful transition.

The death of a spouse is one of the most traumatic events people can face in their lifetimes. Unfortunately, the pain is often compounded by the plethora of financial and administrative tasks that typically face surviving spouses. If the surviving spouse has taken a hands-off approach to the family's financial affairs prior to this point, this transition period can be even more stressful and drawn-out.

In a previous column, I wrote about what your spouse must know about the household finances, even if he or she isn't the main financial decision-maker. I've also written about how to widow-proof (or widower-proof) your portfolio so it can run itself for a period of time if need be.

The nine steps outlined below can help surviving spouses prioritize the many financial tasks and decisions that might confront them after losing their partners.

1. Do no harm.
It's understandable that many surviving spouses want to rush through the estate- and financial-planning process in an effort to move on with their lives as quickly as possible. But it's usually a mistake to make major, binding financial decisions in the days, weeks, and even months following a spouse's passing. Yes, you'll need to attend to details such as ensuring continuity in your insurance coverage, retitling assets, and beginning to settle the estate. (More on these must-do steps below.) Once you've taken care of the necessities, though, take your time before hiring financial advisors or entering into binding financial transactions, such as purchasing an annuity, making dramatic changes to your portfolio, or selling your home and buying another one. You don't want to risk making decisions that could be difficult or costly to undo at a later time.

2. Gather essential documents.
Needless to say, new widows and widowers would rather not spend hours shuffling through file cabinets and safety deposit boxes at this time. But gathering the following essential documents and information early on in the process--and keeping them handy and in a safe place as your plans proceed--will greatly save on aggravation because there's a good chance you'll refer to them often. An adult child or other trusted loved one might be able to help retrieve at least some of the following documents.

  • Will and any trust documents
  • Insurance policies
  • Death certificate: Get 10 to 25 copies
  • Social Security numbers
  • Marriage license
  • Birth certificates for your children
  • Company benefits booklet
  • Military discharge papers
  • Financial statements for company retirement plans, IRAs, and brokerage accounts (a master directory, such as this one, is an ideal go-to document)

3. Put the estate plan in motion.
If someone other than you is the executor of your spouse's estate, you'll need to contact that person as soon as possible. If you and your spouse have estate plans, contact the estate-planning attorney to help you settle the estate, including filing an estate tax return and a final income tax return. The estate tax return must be filed within nine months from the date of death. You can value the assets in the estate as of the date of death or six months after death (if you haven't disposed of the assets).

4. Assess liquidity needs and cash reserves.
Although it's important to hold off on any major financial decisions for the first several months after a spouse's passing, the key to being able to do so is to make sure you have enough cash on hand to cover funeral expenses as well as your own living costs for the foreseeable future. If you're still working and your income covers your household's cash needs, this might not be a concern (though building an emergency fund is more important than ever if you're relying on a single income). But if you're looking to your savings and investments to cover your household costs, aim to build a reserve of at least six to 12 months' worth of living expenses in highly liquid accounts, such as certificates of deposit, money market vehicles, and checking and savings accounts.

 

5. Collect life insurance and other benefits.
If you don't have enough cash to meet your near-term expenses, life insurance policies should be your first line of defense because you should be able to receive a check fairly quickly after the death of a loved one. If you know your spouse had a life insurance policy, but you can't find it, contact the American Council of Life Insurers, which offers guidance in tracing missing policies.

If your life insurance proceeds are more than enough to cover your near-term expenses, take your time in getting additional assets invested (see Step 1 above). Most insurance companies will let you keep the proceeds from a life insurance policy in a cash account until you have a plan for investing it. 

If your spouse was employed, his or her employer might also be able to help with additional cash needs. The company might cut you a check right away for wages owed, vacation pay, sick pay, and life insurance benefits; you might also be entitled to benefits if your spouse died while on the job. If your spouse was retired and receiving a pension, you might be able to continue receiving at least a portion of that amount, as well; check with the human resources department at his or her company for details.

6. Notify Social Security.
Regardless of whether your spouse was already collecting Social Security benefits or not, it's important to notify the Social Security Administration of your spouse's death by calling 1-800-772-1213. In so doing, you'll be able to stop any Medicare and Social Security benefits your spouse was receiving and determine whether you're eligible for survivor's benefits. (If the benefits were being paid directly into a bank account, also notify the bank.) As a widow or widower, you might be eligible for reduced Social Security retirement benefits as early as age 60, and full benefits when you reach full retirement age. Surviving families with children younger than age 18 might be eligible for Social Security benefits. The Social Security administration's website has a useful section geared toward survivors.

7. Ensure continuity in health insurance coverage.
If you received health insurance through your spouse's employer, contact the company to terminate coverage for the deceased and determine whether--and how--your spouse's passing will affect your own health-care coverage. Company policies differ on what benefits might be available, but most people will be eligible for COBRA coverage--essentially, an extension of the employee's health insurance policy. COBRA can be costly, but it can also be a valuable safety net for those who need it.

8. Take stock of your retirement and other investment assets.
Although there's no need to act immediately, surviving spouses will eventually have to decide how to handle any retirement assets owned by the decedent. A surviving spouse will be able to roll over money from the deceased spouse's retirement plan into his or her own IRA. In most cases that will make sense, but if you are considerably younger than your spouse, you may want to keep the assets in your spouse's retirement plan. That might allow you to tap into those assets at a younger age without penalty.

You'll also have some decisions to make if you inherit IRA assets from your spouse. As with company retirement-plan assets, rolling over the assets into your own account will allow for the most flexibility. But the best course of action will depend on several variables, including the type of IRA, whether the deceased had begun taking distributions from the account, and your age. This article details some of the key considerations to bear in mind.

9. Retitle assets.
Eventually, you'll need to take care of other issues, such as retitling ownership of your house, car, safe-deposit box, brokerage accounts, credit cards, bank accounts, and other assets. You will need to write a letter to each entity to request a change in ownership, and you will need to enclose a death certificate.

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