5 Things to Consider When Your Spouse Dies

We all face a difficult reality in our lives.   At some point, either you or your spouse will pass away.  This event creates an emotional wave.  In addition, those feelings can be complicated by financial issues.  Today we are going to talk about 5 things you need to consider when your spouse dies

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Losing a spouse is a major event. It is a very emotional time.  It also changes your financial situation.  Planning in advance for this reality can help you avoid mistakes in the future.  So we compiled a list of 5 things you need to consider when your spouse dies.

1:  Your cash flow will change

This starts with Social Security.  If you are both receiving benefits, the smaller benefit will stop when the first spouse passes away.  This may also be true if you are receiving a pension or an annuity payment.  Depending on the option chosen at retirement, that monthly income stream could stop completely or be reduced significantly.  You may have to rely on other assets to generate the same amount of income. 

On the other side of the ledger, you may see your expenses change.  You may not buy as many groceries.  You may spend more on other things.  Chances are it won't remain the same as it was. 

You may also need a larger sum for medical or funeral expenses.  Knowing where you can access funds for those is also important.

2.  Your tax situation will change

The year following your spouse's death you will no longer be able to file a joint return.  You will use, in most cases, the single tax tables.  The tax rates are the same,  The standard deduction is half as much and the brackets move to the higher rates at much lower income levels.  In some cases we see the surviving spouse paying more in taxes for the same amount of income.  You may need to adjust how you plan for the tax bill in upcoming years.

3. Update Your Legal Documents

This would be a good time to review and update legal documents.  Update your executor or their successors.  Update your trust, if you have one.  Also do not neglect to review and change your power of attorney or health care directives. 

Also, update beneficiary designations.  Check your IRA, insurance policies or any other types of accounts.  You can also consider adding beneficiary designations to some accounts.

4.  Check  Your Health Insurance

Depending on how old you are when your spouse dies, this could be a challenge.  If you are younger than 65 and are not eligible for Medicare, buying health insurance could have a significant impact on your cash flow.  

If you and your spouse were using an employer-sponsored retiree health plan, make sure you can continue the coverage.  If you can't there are some important deadlines to find new coverage.  

5.  Look ahead

Start thinking about your home.  Can you take care of the yard and other maintenance?   Are you close to the people who will help you?  Does it now make sense to downsize?

Start thinking about how your assets will pass to the next generation.  Do you need to consider a trust or other legal strategy?

What happens if you are faced with going into an assisted living facility or nursing home?  How will that impact you and your family?

There are a lot of important considerations, and we could probably add a few more to the list.  Many of those will be discovered when you go through this list.  Don't hesitate to ask for help.  It is a new challenge and talking with experts who have helped people go through these events before can be useful.