If your spouse should suddenly pass away, you could find yourself overwhelmed—not just emotionally, but also by a host of financial decisions. Your financial situation is probably about the last thing you’d want to be thinking about, and many things could wait, at least for a little while. Indeed, after such a dramatic event in life, it’s probably best not to rush into anything. However, time isn’t always on your side, and some decisions may be required immediately—especially if you have not planned properly. And sooner or later, you’ll need to address certain financial issues. Here are some practical suggestions that may be helpful:
Deadlines. After losing a loved one, it can be easy to neglect deadlines. You’ll generally need to file an estate tax return for your spouse within nine months of death, for example, and you still must file a federal income tax return for the year of death by April 15. Don’t let letters from places like the IRS and financial institutions fall to the bottom of a pile. Missing deadlines can cost you dearly.
Retirement Accounts. Review benefit options for 401(k)s, pensions, and other retirement accounts. You’ll likely need to decide between taking a lump sum or a partial distribution, rolling the funds into an IRA, or leaving the plan assets where they are. Each option has pros and cons.
Cash-Flow. Estimate your expenses for the next five to 10 years. Will you be paying for one or more children to attend college? When do you expect to retire, and what sort of lifestyle do you envision? This requires a thorough analysis of your finances and also might entail adjusting your investment strategy.
Insurance. Don’t ignore insurance concerns. Typically, a surviving spouse inherits most, if not all, of the other spouse’s assets and will be the primary or sole beneficiary of life insurance death benefits. This is a time to consider what you can do to protect your children’s future. Meanwhile, in light of your changed situation, review all of your insurance policies. Be sure your health, disability, long-term care, umbrella and other polices still meet your needs.
Retirement. After losing a spouse, your retirement goals may change. You may want to consider retiring earlier or later. How much in Social Security benefits will you receive based on your earnings history? Social Security is complicated, and you’ll need to gather all of the facts to make good decisions.
Investments. Pull together all of the relevant records for your spouse’s investments and any assets you held jointly. Once you know where you stand, be sure you understand all of the investments you own and are comfortable with the risk they entail. Set a long-term course for the future, but realize that adjustments may be needed now.
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