When a spouse dies, it can be devastating for their partner. Unfortunately, the surviving spouse will have urgent and important financial decisions and tasks, despite their grief. A strong estate plan can help make this process a little more bearable.
Preparation can start now
Estate planning should address the administration and financial duties that the surviving spouse typically performs. It is a good idea to address many of these financial decisions and tasks now. Simplify your finances by consolidating your accounts and eliminating unnecessary accounts. Both spouses should be fully engaged and knowledgeable about their finances to handle matters in case their spouse dies.
Each spouse must be aware of their partner’s wishes for their estate. Wills and other estate documents should contain this information.
The priority tasks
Spouses are usually the estate administrator or representative for their spouse’s estate. Their tasks can be divided into urgent and less time-sensitive categories after a spouse dies.
First, obtain 5 to 10 original death certificates. Financial institutions and other entities must review this document before they can do anything concerning the estate. Other important documents include bank and brokerage statements and veteran’s discharge documents. Tax returns may help find previously undisclosed accounts.
Certain entities need quick notification of your spouse’s death. These include financial institutions, the Internal Revenue Service, the Department of Motor Vehicles, the Social Security Administration and the spouse’s employer. Cancel accounts for services in your spouse’s name if you do not use the product or service.
A court may need to appoint you as the estate’s representative. As a fiduciary, you will have the duty to ensure that all of the estate’s assets are distributed.
Other duties include collecting any funds owed to your spouse and obtaining a tax ID for the estate from the IRS. Your estate plan may need to be reviewed and updated because your deceased spouse may have played a role in your estate, such as being executor and heir.
Less-urgent tasks
Social Security may be an important source of income after retirement. A spouse may be entitled to a higher benefit from their deceased spouse, but they will stop receiving their monthly benefit check. Other potential Social Security benefits may include a widower’s benefit or benefits for a disabled child.
Surviving spouses are probably beneficiaries of their deceased spouses’ IRA. These may be rolled into their existing IRA, kept as a separate inherited IRA or disclaimed so it can go to other family members.
A final tax return and an estate tax return must be filed. Spouses with a child living with them may be able to file their return for the next two years at a lower rate as a qualifying surviving spouse.
Finally, review your finances. Income and expenses may be lower. Consider your future expenses and your entire portfolio. Keep expenses low, and your investments diversified. Attorneys can assist you with developing an estate plan that meets your needs. They may also help you administer estates and deal with these issues.