Losing a spouse is one of the hardest things anyone can experience. It’s a distressing, overwhelming, and uncertain chapter of life. Widows are frequently at a loss about what to do next — especially when their deceased spouse was the one who managed all of their finances. In times like these, seeking financial advice for widows can be particularly helpful. But with so much personal finance information out there, how are you supposed to know where to start?
At Team Hewins, we’ve been serving as financial advisors for widows for more than two decades — always on a fee-only, fiduciary basis so that we can best serve our clients. Throughout that time, our CERTIFIED FINANCIAL PLANNER® professionals have helped many widows understand their financial situation and take control of their financial future.
Below, we’ll break down a few of the most important aspects of financial planning for widows, from urgent action items to strategies for long-term success and how you should prioritize them.
1. Immediate Financial Steps
If you’re a widow, financial planning is probably not at the top of your to-do list right now. But immediately after losing your spouse, there are a couple of tasks you should take care of as soon as possible: notifying the appropriate institutions of your spouse’s passing, and gathering the essential documents and information you need to secure your financial accounts.
If your spouse was proactive in managing your personal finances, they have almost certainly made plans to take care of you and your family in the event of their death. Before you can receive that help, however, you’ll need to alert the relevant parties to your spouse’s passing. For example, you may need to reach out to your spouse’s:
- Financial or investment advisors
- Bank
- Life insurance provider
- Estate attorney
- CPA
For some of these parties, a simple call might suffice; for others, you may need to send over a death certificate or other documents/information. In turn, they’ll let you know what to expect and what to do next.
2. Review and Update Beneficiaries
Our next piece of financial advice for widows is to review and update your own beneficiary designations. These often appear in:
- 401(k) accounts
- IRAs
- Life insurance policies
- Trusts
With the passing of the spouse, review who the beneficiaries are and whether they need to change. The birth of a grandchild or a child’s divorce, for example, may affect who you want to add or remove as a beneficiary.
To do this, speak with the advisors or administrators of these accounts to get those updated.
3. Create a Budget and Emergency Fund
After your spouse’s passing, you may not have the same income and expenses as you did before. That’s why it’s so important to revisit your budget — or create one from scratch if you haven’t already. The first step to creating a budget is to simply understand your cash flow: Compare how much you’re earning with how much you’re spending.
For earnings, tally any active income from work (if you’re employed) as well as passive income, such as income from renting out a property or payments from a retirement account. Don’t forget to factor in any new income you’ll be receiving after your spouse’s death, such as payouts from a life insurance policy or Social Security survivor benefits.
For spending, review your recent expenses. Tracking down this information manually in account statements might be tedious, but you can always turn to apps or finance/accounting professionals to assist you. Again, don’t forget to factor in how your spouse’s death may change your spending habits — you’ll likely spend less on groceries and may be able to cancel recurring subscriptions of your spouse’s that you won’t use.
With that information, you can work with your financial advisor to come up with a budget that is comfortable yet sustainable. If you don’t already have one, it’s a good idea to set aside some savings each month for an emergency fund you can draw on in the event of the unexpected, such as losing your job or having to replace your furnace.
4. Understand and Manage Debt
While you generally aren’t responsible for your spouse’s personal debts after they die, you’ll still need to pay off any shared debts (for example, a mortgage on the home you and your spouse jointly owned) or debts you’ve accumulated on your own (such as student debts).
It’s best to pay off debts either a) as soon as you can or b) according to the pre-determined payment schedule, so factor that into your monthly budget. If you have multiple debts, you may need to prioritize which ones to pay off first. Generally, it’s advisable to tackle debts with the highest interest rates first, as paying them off sooner will save you money.
In some cases, it may be beneficial to refinance your debt to secure a lower interest rate or monthly payment — check with your personal financial advisor to see whether that’s a good option for you.
5. Insurance Coverage
Another important part of financial planning for widows is looking into insurance coverage (such as health insurance, life insurance, or property insurance). Look into whether your current coverage is adequate, or if it needs to be adjusted. If you had been covered by your spouse’s work-based health insurance plan , for example, you may need to purchase a new plan.
A financial planner will be able to help you determine whether you need to increase or scale back coverage or purchase or drop a particular policy. If you do need to purchase a new policy, your financial planner may be able to recommend some options to you. You can also consult an impartial insurance broker for advice.
One type of insurance you may want to look into in particular is long-term care insurance. If you were previously counting on your spouse to serve as a caregiver in the event that you became incapacitated, purchasing a long-term care insurance plan could be particularly valuable.
6. Invest for Your Future
No list of financial advice for widows would be complete without mentioning investments. Investments are key to long-term financial security, so make sure you have a solid strategy in place. The many types of investments include:
- Stocks
- Bonds
- Mutual Funds
- ETFs
- Real estate
These investments may be held in retirement accounts such as 401(k)s and IRAs, brokerage accounts, or even as physical property. Work with your financial advisor to see what your current investment portfolio looks like, and whether it needs to change in order to help you reach your goals.
The right investment strategy for someone is largely determined by their individual circumstances, and devising one is best left to a professional — trying to play the market as an individual almost never works out. No matter your specific strategy, however, your portfolio should be diversified among different assets with different levels of risk, and centered around proven, long-term returns rather than susceptible to market fads.
Read More: How Financial Advisors Choose Investment Strategies
7. Estate Planning
After your spouse’s passing, revisit your estate plan. Having a solid estate plan provides reassurance to both you and your loved ones that you’ll be able to take care of them even after you’re gone.
A few of the key estate planning documents to include:
- A healthcare proxy: Names a representative to make medical decisions on your behalf if you become incapacitated
- HIPAA authorization: Grants individuals access to your medical information
- Durable financial power of attorney: Names a representative to make financial decisions on your behalf if you become incapacitated or pass away
- A living will: Specifies preferences around healthcare, disability, and end-of-life care
- A preneed guardian: Names a representative (or representatives) to serve as a guardian to you and/or your children/dependents if you become incapacitated or pass away
- A last will and testament: Specifies how you will distribute your property and names a guardian for your children/dependents
- A trust document: Specifies how you will distribute your property, which does not go through the court system, allowing for additional discretion
- A letter of intent: Specifies how you want your personal affairs to be handled if you become incapacitated or pass away
- List of accounts/passwords: Nowadays, it seems that everything is sent or stored electronically, including account statements and bills. It’s important to have a place to securely store your account numbers and passwords, including your email in the event that this information is needed by your loved ones after you have passed.
Even if you already have these documents, it’s a good idea to revisit them from time to time — especially after a major event such as the death of a spouse. If you’ve listed your spouse as your healthcare proxy, for example, you’ll need to choose another person (or other people) to serve in that role. Other times, it’s simply good practice to update these documents to make sure they still represent your current wishes.
8. Seek Support and Advice
There’s no way around it — losing a spouse is difficult. Beyond dealing with your grief, you also must notify others, organize your spouse’s funeral, plan your financial future, and more. At a certain point, it can all begin to feel like too much.
In that case, don’t be afraid to lean on others for help, whether that means friends, family, or professionals including therapists, estate attorneys, and financial planners. Each individual can contribute in their own way to help you lighten the load just a little bit. Added up, that can make a big difference.
If you’re looking for a financial advisor for widows, we hope you reach out to Team Hewins. Our experienced, knowledgeable, and empathetic team has plenty of experience providing financial advice to widows, and can guide you through your finances at every step of the way. Schedule a free consultation today to get one step closer to true financial peace of mind.