Key Financial Moves for the Recently Widowed

Women tend to outlive men, thrusting many of them into key financial roles.

By
LAURA MATTIA, <a href="http://www.baron-financial.com/">Baron Financial Group</a>
October 21, 2014, 6:22 AM ET
5 min read

— -- Most married women whose marriages stay intact become widows. Women on average live longer than men, and most marry older men. The statistical result of these factors is that the median age of widowhood is around 60.

When a spouse dies, it’s not a good time to make major decisions about your financial future, especially for women who haven’t been closely involved with family financial matters.

Irreversible decisions made at times of great emotional stress are often regretted. Except in cases of extreme economic necessity, women who are still in mourning should put off decisions about such matters as selling their house or trading cars.

But it’s important for financially uninvolved women in this situation to realize that they now must become financially engaged. Their days of sitting back and letting someone else drive are over. And now that they’re behind the wheel, there are some key things that they should take care of immediately.

Of course, the first of these is funeral arrangements. The best way to find a reputable funeral home quickly is to get referrals from friends. Before you leave the meeting with the funeral director, be sure to have in hand an itemized list of everything that you’ve committed to with a total price at the bottom. Amid the confusion that typically overcomes the bereft, it’s easy to misunderstand what things can cost. And costs that you may agree to orally sometimes have a way of growing, much to relatives’ chagrin when they get the bill weeks later.

As soon as possible after the funeral, various things may need attention right away. These include:

  • Obtaining multiple copies of the death certificate from the funeral home (many provide them) or from the clerk of court in your county or city. These aren’t photocopies of the original. They’re official copies carrying the clerk’s seal, and as such, they’re legally valid for submission regarding estate matters and the transfer of assets.
  • Understanding current expenses and existing cash. If you haven’t been involved in paying the bills, go through the check register or the account online (after getting the password by visiting the bank with an official copy of the death certificate).
  • Getting a handle on assets, including liquid assets—such as stocks and money market accounts—that you may need to draw from to pay living expenses. If you do need to take money out of these accounts, be mindful of possible tax consequences.

    • Also, you should immediately identify and pursue all available survivor benefits, including:

  • Life insurance policy proceeds. Notify the insurance company to make a claim, submitting an official copy of the death certificate. If you can't find the policy or don't know what company it is with, Consumer Reports has some advice on what to do.
  • Employer benefits. Contact the HR department of your late spouse’s employer to determine the status of potential pension and other accumulated retirement benefits, their accessibility and what’s involved in transferring them to you. Be sure to ask the HR department about health insurance. If you’ve been a subscriber on your late spouse’s policy, you’ll be eligible for continued coverage for 36 months for little more than the group premium rate (which is often substantially lower than market rates because of employer subsidies). Also, many companies provide employees with small life insurance policies, so check on this.
  • Veterans’ benefits. Some survivorship benefits are available to spouses of veterans, including a one-time payment of $255 upon the veteran’s death.

    • After you attend to these items, you’ll have some breathing room to make decisions on long-term financial issues. To do this correctly—especially if you haven’t been financially engaged during your marriage—you’ll probably need expert advice.

    Your initial advisor should probably be an attorney, perhaps the one who drafted your late spouse’s will (if your spouse found him or her satisfactory). Estate settlement requires some legal work and a lot of legwork, particularly if the estate is substantial.

    After meeting with an attorney, you may also need to engage a financial advisor. This is highly preferable to taking advice from friends who lack professional credentials and objectivity about your situation or from the various acquaintances and vendors who tend to come out of the woodwork after you’re widowed, possibly offering self-interested advice, products or services.

    A good credential to look for in an advisor is the Certified Financial Planner (CFP), indicating an extensive course of study, work experience and successful passage of examinations. Helpful resources for finding advisors include the advisor-locator function of the website of the National Association of Personal Financial Advisors (www.findanadvisor.napfa.org) and the site of the Financial Planning Association (www.financialplanning.com).

    In your initial meetings with advisors, look for someone with whom you can communicate and who is clear about fees and how they’re assessed.

    Consulting qualified estate attorneys and financial advisors as soon as possible is especially critical for widows who have inherited large estates. Even if you’re the sole heir and the only executor, moving assets around or removing cash from accounts before you’re aware of all of the legal, tax and strategic investing implications can cause irreversible problems down the road. So ask questions first and act afterwards.

    Beyond just settling the estate, you may want to contact a qualified advisor to manage your inheritance for the long term. If your late husband had a financial advisor who you know, like and respect, you may want to stay with that person. But regardless of whether you use the same advisor or find a new one, you should be aware that your optimal financial planning scenario may be a lot different than your late husband’s. He may have had different goals than yours (you now must think about what these are), and his investing risk tolerance may have been different. And, if your late spouse was still working, there will be less income. Accounting for these elements is crucial to determining what kind of investment portfolio you should have and how it should be managed.

    A skilled financial advisor can help you determine your goals and assess your risk tolerance. Even if you decide your goals and risk tolerance are similar to your late husband’s, there’s still a key difference: Now, you’ll be doing financial planning for one person instead of two.

    After you take care of pressing initial financial matters such as determining income, assets and expenses, it’s best to take a step back and think about your short- and long-term goals to develop an achievable vision of your future. Then you can begin work on a feasible plan to realize that vision.

    Any opinions expressed here are solely those of the author.

    Laura Mattia is a partner with Baron Financial Group, and a fee-only financial advisor. She's a Certified Financial Planner professional (CFP®), a Chartered Retirement Plan Specialist (CRPS®) and a Certified Divorce Financial Analyst (CDFA™) and holds an M.B.A. in accounting/finance. Her Internet radio show is Financially Empowering Women™ with Laura Mattia. A former professor at the Rutgers University Business School, Mattia is completing a Ph.D. in financial planning from Texas Tech University; her dissertation is on how to help women plan for retirement.