Investor Education | Seven issues when suddenly widowed

It is difficult enough to plan ahead when a spouse faces a life threatening illness, but it is even tougher when your loved one unexpectedly passes away. Besides the emotional turmoil, there are numerous financial decisions for a surviving spouse to make and obligations and deadlines to meet.

Unfortunately, time is rarely on your side, but you do not want to make any knee-jerk reactions either. Here are seven important areas to be addressed:

1  Notifications:  For starters, you will need to notify a wide range of parties, including any employer, life insurance companies, credit card companies, the Social Security Administration (SSA), the state office for inheritance tax (when applicable), and your legal, tax and financial advisers.

Retirement accounts: Examine employer-sponsored accounts like 401(k) plans and pension plans, as well as traditional and Roth IRAs. You may face options such as taking a lump-sum or partial distribution, rolling funds over into another tax sheltered account or leaving the plan assets where they are, at least for the time being. Seek professional guidance for the hard choices.

Insurance:  Do not assume that all your insurance policies can simply continue as before. This is a good time to review coverage—including life, health, disability income, homeowner's, automobile, long-term care and umbrella insurance—to determine if they meet your changing needs. Also, amend your life insurance policy if your spouse was a named beneficiary.

Social Security benefits: Figure out how much you will receive in Social Security retirement benefits.  Frequently, the maximum  benefit  will  change  due  to  the  death  of  a  higher-earning spouse.  The information you need is readily available from the SSA.  Factor this into the equation for retirement planning.

5  Investments:  Assemble records of investments held by your spouse and those you owned jointly. Assess your current portfolio with an eye toward the future. This will likely require some adjustments relating to your personal objectives, time horizon for retirement and risk tolerance. Rely on your financial advisers to provide any assistance you need.

Living expenses: Once emotions have calmed down, take stock of your current situation and try to project into the future. What do you need to pay now, and how much money will you need for the next five to 10 years? Much depends on the stage of life you are in. For example, if you will be paying to send one or more children to college, more provisions will be required than if you have already retired.

Tax filings: Generally, if the estate is significant, a federal estate-tax  return  for  your  spouse  must  be  filed  within  nine months of death.  In addition, you have to file a federal income tax return by April 15 of the following year, plus make timely filings of any applicable state-tax returns.

Remember, you do not have to do it all alone. Your professional advisers can provide assistance when needed.

This newsletter/advertisement is produced for our clients, friends and associates through an arrangement with WPI Communications, Inc. for the representatives’ use. Although the editorial content is professionally researched, written and edited, neither our firm nor any of its agents, representatives or associates make any representations regarding the accuracy of the content or its applicability to your situation. The information in this communication is not intended as tax or legal advice. In accordance with IRS Circular 230, the information provided herein may not be relied on for purposes of avoiding any federal tax penalties. Any tax advice contained in the body of this material was not intended or written to be used, and cannot be used, by the recipient for the purpose of 1) avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, or 2) promoting, marketing or recommending to another party any transaction or matter addressed herein. You are encouraged to seek tax or legal advice from an independent advisor.

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