Death of a spouse
How to achieve and maintain stability after your partner passes away.
Losing a spouse is undoubtedly a stressful event, especially if it’s a sudden or unexpected passing. Often the last thing on a grieving person’s mind is getting their finances organized and rightfully so. Unfortunately there are many financial decisions that have to be made and matters to be settled. You want to make these decisions thoughtfully, which can be difficult when your emotions are so high. Having a plan in place to help you through this time of personal and financial adjustment will make the process of moving forward a little lighter.
Ask for help so you’re not handling everything alone
Identify a few family members that you trust to help you with this daunting task. Make a list of every financial element and source of debt.
List the common sources of debt in death such as:
- Funeral service and burial costs
- Estate, will and trust matters
- Income and employment matters (such as pensions, or social security benefits)
- Investments (IRAs, mutual funds, CDs)
- Tax documents (income or property tax related)
- Current bills (rent, mortgage, credit cards, etc.)
- Miscellaneous expenses
Then, next to each element, identify the professional(s) you need to contact attorneys, tax accountants, investment advisors, credit counselors, etc. If you foresee paying off debts with only your own income will be difficult, enlist the help of a credit counseling service to help you manage your debt, pay your creditors, and teach you how to create a budget.
Some tips to help you avert a financial crisis
If you haven’t already, establish a strong credit record in your own name. In addition to building up your purchasing power, you’ll be helping yourself to avoid potential problems in the future caused by bad credit and high interest on sub-prime lines of credit.
You may also consider creating an emergency budget to help with debt management issues as they come at you. A credit counseling agency can help you build a budget that fits your financial situation.
Also remember to call family, friends, and relatives; church and funeral home; executor named in spouse’s will and/or trustee of spouse’s trust there may be funeral or other special instructions after the death.
Make a list of who to call after the funeral to check on retirement or other funds:
- Spouse’s employer to check on wages, accrued and unpaid vacation time, sick pay, death and retirement benefits
- Social Security office for benefits
- Insurance agents on policies and claim forms
- Banks, brokerage houses, and other financial firms for account status and ownership
- Trustee of any trust
- Department of Veterans Affairs if applicable
- Lawyer to determine if a probate is needed. (Probate is the legal process where a court determines if a will is valid or that no will exists and provides distribution of assets to beneficiaries as designated in the will or by law if no will exists).
- Credit card companies. Contact all credit card companies and cancel all cards unless you’re named on the account and wish to retain the card. Creditors may write off the debt acquired by a deceased customer but only if there isn’t a co-applicant on the account.
Assemble and have documents and copies handy
To finalize your spouse’s financial affairs you may need the following documents. Make copies and don’t forget to notarize those that may require it such as marriage and death certificates. The check list below can help you stay organized:
- Social Security cards
- Life insurance policies
- Retirement Plans and IRA information
- Birth Certificates
- Military Discharge papers
- Marriage License
- Recent tax returns
- Vehicle registrations; Trailers
- Letters of instruction
- Recreational vehicles
- Recent bank and financial account statements
- Deeds on property owned by spouse
- Loan documents: mortgages and other loans
- List all outstanding debts, as of date of death, such as credit card bills and utilities
- Copy the most recent bill received right after date of death
- Financial statement or list of assets as of date of death
Pay only the bills you must pay
You should continue paying your bills but, first determine if it’s your debt, your spouse’s debt, or a joint debt. You are responsible for paying the debts in your name and those held jointly with your spouse.
If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, those are community property states, so you may be responsible for paying your deceased spouse’s debt. Married couples in these states are considered to own their property, assets, and income jointly. This could impact what you will have to pay back to your creditors, especially if your spouse incurred massive amounts of credit card debt.
Don’t forget about the taxes
Generally, property you receive through inheritance comes free of income and estate taxes. A major exception is retirement funds in qualified plans, such as MBA accounts, 401 (K), 403(b) or IRA’s. To avoid paying an immediate income tax on retirement funds, be sure to review your options to roll over or receive periodic payments.
A federal estate tax return may need to be filed if the estate (including probate and non-probate assets) exceeds $600,000. Check with an accountant on the income, estate, or inheritance taxes and/or returns that must be filed. If there are trusts, separate income tax returns may need to be filed.
Be sure to report the death to Social Security 1-800-772-1213
You may receive a one-time death benefit of $225 from Social Security. If you are short of income or assets because they are tied up in probate, once the probate begins you may be entitled to a monthly “widow’s allowance” from the probate estate. You are not permitted to cash your deceased spouse’s checks and must return them to the Social Security office.
Develop a solid plan for the future
It is difficult to move on when the death of a spouse occurs, but it is in your best interest and your family’s to plan for the future. Update insurance policies, wills, trusts and your own estate and investment plans.
Decide whether you will take a lump-sum distribution of retirement funds or installment payments. Be aware of any undesirable income tax consequences, excess estate and probate expenses, litigation, poor investments, and rip off artists.
To protect your finances, enlist the help of family, friends and professionals to assist you in making a sound plan.
Has the death of a spouse left you buried in debt? Don’t despair.
Dealing with the death of a spouse and money matters at the same time can be daunting. If you’re currently experiencing financial difficulties due to the death of a loved one, our certified credit counselors can guide you during this most difficult time. The call is free, the consultation is free. Call Consolidated Credit at or request a free Debt & Budget Analysis online.