Financial Steps to Consider When Widowed

Losing the person closest to you is one of the most painful experiences. In addition to the grieving process, you will need to address your partner’s financials after their passing. While looking into financial documents can understandably feel burdensome during this time, it is critical to avoid mishaps such as ending up in tax court. The following tips can help you with financial planning after becoming widowed.

Initial Steps

The emotional stress of losing your life partner makes it difficult to think about financial decisions. You can take a few actions right after your spouse passes away:

  • Request twelve copies of the death certificate.
  • Gather all of their financial records.
  • Search their wallet and any filing cabinets to locate their credit and debit cards.

If your loved one was actively collecting Social Security Benefits, remember to call the Social Security Office (800-772-1213) to notify them of the death. When you call to tell the Social Security office, it may also be a good idea to inquire about the one-time $255 death benefit. Also, make sure to inquire about any potential returns of the last social security payments if you don’t get around to making this phone call in the days/weeks following the passing.

The Social Security Office will inform Medicare, but additional Medicare Prescription Coverage (Part D), Medicare Advantage plan, or Medigap policy must be contacted individually. You should be able to find the phone numbers on the membership card.

Contemplating Financial Needs

When you are ready, you can begin thinking about your financial concerns in widowhood. You may need to move into a more affordable home, modify your retirement withdrawal strategy, or go back to work part-time to maintain a reliable income. Some people find that writing down their concerns helps them differentiate between the most challenging issues and those easier to conquer.

It will benefit you during this stage to become more educated on different investment options. Various investment products exist, and each serves a distinct purpose. Therefore, you should consider what matters most to you in widowhood. For instance, you may decide whether you want your portfolio to yield more growth or feature greater diversification.

Income Changes

Losing a spouse also means losing wages. If your partner earned more money, you may face a significant reduction in income. The amount of money you lose can depend on your spouse’s retirement status. If they passed away before retirement, their salary is gone, but if they died after retirement, you may potentially obtain income from their workplace pension. You should contact the spouse’s previous employer(s) to determine what you are entitled to receive.

Another source of income widows and widowers may access are Social Security survivor benefits. A widowed person may qualify for these benefits if their spouse was earning or receiving Social Security benefits and other requirements are met. However, the catch is that you cannot receive both a survivor benefit and personal retirement benefit simultaneously. Usually, Social Security offers the higher of both amounts.

If you will be eligible to receive both benefits, you can collect the survivor’s benefit during the early years of retirement and let your retirement benefit accumulate credits from the delay. Then, you could switch to your retirement benefits around age 70 and attain a raise in income.

Tax Adjustments

Becoming a widow or widower means changing your marital status and altering your tax situation as well. Depending on your situation, this may result in a higher tax rate or losing the privilege of some tax breaks.

The Internal Revenue Service offers some tax relief for the recently widowed. You may be allowed to file jointly with your spouse in the year they passed away, provided you were previously eligible for this status and did not get remarried. Additionally, for the next two years after death, you may be permitted to use qualifying widow or widower as your filing status if you have a qualifying dependent. This filing status enables you to use joint return tax rates and obtain the highest standard deduction amount, but you will not be allowed to file a joint return.

Seek Financial Guidance from the Hadary Team

Financial planning for widows can be challenging, but there is no need to do it alone. You can trust the Hadary team of Moneta Group to help you navigate the various financial aspects of widowhood. As a fee-only and fiduciary Registered Investment Advisory (RIA) firm, we put our clients’ needs and goals above our interests and do not receive commissions or other incentives for the products we recommend.

We deliver the boutique service of an independent firm coupled with the extensive resources of a large-scale partnership to help you accomplish your goals.

Contact our team to learn more about financial planning for the recently widowed or our other offerings.

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