woman grieving with paperwork

I realize thinking about your spouse or partner dying isn’t anyone’s idea of a fun time. But what should make you even more uncomfortable is not doing the advance planning today to make the transition for the surviving spouse as easy as possible. Ignoring this inevitability is sure to leave the surviving spouse with a lot of questions, stress, and potentially vulnerable to bad advice and scams.

As far as I am concerned, taking a deep breath and tackling how to make the financial transition easy for a surviving spouse is a sign of true love.

Planning as a Couple

With both of you alive, I want to make sure you have everything in place so when the time comes, the survivor doesn’t have to stress out over a lot of financial decisions.

  • Get Your Must Have Documents Set Up. Each of you needs to draw up four essential documents that not only protect you while you are alive, but will make life so much easier for the surviving spouse. A will, a living revocable trust with an incapacity clause, an advance directive & durable power of attorney for healthcare, and a durable power of attorney for finances are essential. I explain why each is vital in this video.

The MUST HAVE® Documents online program is my #1 recommended way to quickly and easily create these documents at a fraction of the cost of what lawyers typically charge.

  • Both of You Must Be Financially Fluent. I understand that in many relationships one spouse tends to handle a lot of the financial decisions and management. But you need to listen to me: As you head into retirement, or if you are retired, that is 100% not okay. I don’t care how great this arrangement has been for you in the past. The prospect of the surviving spouse having no clue about where accounts are and why certain decisions were made is setting up that person for so much stress and leaving them vulnerable to financial scammers.

There is no blame here in how things have worked in your relationship in the past. And there is no judgment about the choices that were made. This is all about planning for the future: the surviving spouse will have enough to deal with in the weeks and months after a death, please don’t add the burden of financial worry on top of it.

  • Check Every Account Beneficiary. Together, I want you to check that every account, from bank checking to insurance policies and retirement accounts, has the right beneficiary named.
  • Social Security: Focus on the Best Outcome for the Surviving Spouse. If you anticipate that Social Security will be a significant piece of your retirement income, it becomes even more important to strategize on getting the biggest possible benefit for the surviving spouse. It’s important to understand that when one spouse dies, the other spouse is entitled to just one benefit: either their earned payout, or the payout of the deceased spouse. The surviving spouse doesn’t get both payouts, just one.  That makes it very smart to consider ways to make sure that one benefit is as high as possible. This comes down to planning today so the highest earner delays when they start to claim Social Security. Every month between the age of 62 and 70 means your eventual benefit will be higher. Taking Social Security early is rarely the right move. Having the higher earner delay as long as possible is the best possible strategy to leave the surviving spouse with the highest benefit.

The First Year After a Death

The one crucial piece of advice I have for the surviving spouse is to move slowly and make as few financial decisions as possible. If you have done the planning ahead of a death, you will not need to make any big decisions. And that’s going to be such a gift. The last thing you need is the stress of making big money decisions when grieving is most fierce.

This is especially important if you receive a large insurance death benefit. This makes you a target for unsavory people who will tell you they have your best interests at heart, and have all sorts of great ideas for how you should invest (or spend) that money. Hopefully you and your partner have already discussed how the insurance benefit can be used to ensure your financial security. If there’s a plan in place, that’s great. But if you just get a big lump of cash and aren’t sure how to use it, slow down.

Please, be on high alert for this sort of person and pitch. Again, doing nothing can be a smart choice. Keeping the money in a safe bank or credit union account for a year or so is just fine.  Then, when you are feeling a bit more settled in your new life, you can make clear-eyed decisions.

 

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    Categories: Estate Planning, Must Have Documents, Wills & Trusts