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Settling a spouse’s financial affairs

Financial Planning

Because the days or weeks immediately following the death of a partner are an emotionally charged time, new widows and widowers usually should avoid making any major financial decisions during that period. Eventually, however, the surviving spouse will need to get on with the job of settling the other spouse’s financial affairs.

Get your paperwork in order

The first step is to access records that cover every aspect of your spouse’s finances. The records you’ll need include your spouse’s Social Security number; will and, if applicable, trust documents; beneficiary designations for retirement accounts; life insurance policies; real estate deeds; military records; and statements for investment, bank, credit card and other accounts. After you’ve collected these materials, create an organized filing system to help you keep track of everything as you move through the process of settling your spouse’s financial affairs.

You’ll also need to determine whether you or another individual is the executor or personal representative of the will and the trustee of any trusts. (If there is no will or trust, you’ll need to petition the courts to be named as personal representative or executor.) You may need to hire professionals to assist in the probate process or administration of any trusts and in the preparation of tax returns.

Another important step is to obtain certified copies of your spouse’s death certificate from your funeral director or your county or state government. You may need to provide copies to many organizations, so be sure to request an adequate number to cover all of your accounts and property titles.

Claim insurance benefits and update policies

If you’re unsure about what life insurance policies your spouse may have owned, check bank statements for evidence of premium payments. (Note, however, that premium payments may not have been required in recent years for some policies.)

If you’re the beneficiary of a life insurance policy, you’ll need to provide a certified copy of the death certificate to claim your benefits, which will typically pass to you income-tax-free. You may first want to consult with your tax advisor to determine whether, from an estate planning perspective, you should consider disclaiming any benefits so that they’ll pass to the secondary beneficiary.

Claim and update employee and government benefits

If your spouse’s employer provided a pension, you may be entitled to benefits, as long as you’re named as the beneficiary. Your spouse’s employer may also have provided group or individual life insurance and accidental death and dismemberment policies, so you’ll need to file a claim for these benefits to the extent applicable.

You may be entitled to any back pay or bonuses your spouse was due, plus the rights to company stock purchased through an employee stock purchase plan. If your spouse earned stock options or restricted stock, you may be entitled to those assets too.

If your spouse was receiving government benefits, such as Social Security, Medicare or veterans benefits, you’ll also need to contact those agencies to update their records and, where applicable, get your benefits adjusted.

Update account registrations and property titles

To update account registrations for assets held at banks, brokerage firms, credit card companies and titles for other property (such as cars and boats), you’ll need to provide a certified copy of the death certificate.

If the account in question was registered to you and your spouse, these changes should be relatively easy to complete. However, accounts that were registered in your spouse’s name only will require additional paperwork: You’ll need to provide proof that you’re the rightful heir to the asset or are acting as the personal representative or executor of your spouse’s estate. This will require a court-certified copy of your spouse’s will. For assets that were held in a trust, only the trustee can direct (based on the trust’s terms) what happens to those assets.

For retirement accounts, such as IRAs or 401(k) plans, the beneficiary designation form, not the will, determines who inherits the assets, which in most cases is the deceased’s spouse. (Most 401(k) plans require a signed waiver to name someone other than a spouse.) The IRS has rules that govern how these assets can pass from one person to another, and any decisions you make are irrevocable. If you make the wrong choice, you could incur unnecessary taxes and penalties. So work closely with your tax advisor.

Take one day at a time

It’s difficult to focus on financial affairs while you’re grieving. However, by taking a gradual approach, you’ll be able to make steady progress toward settling your spouse’s financial affairs while protecting your own financial interests. Consult your legal counsel and tax advisor regarding the legal and tax consequences of a particular strategy or investment, including any estate planning strategies, before implementing any course of action.

Update your own financial plans

After you’ve settled your spouse’s financial affairs, don’t overlook the need to reexamine your own plans. This includes your investment portfolio, retirement plan, estate plan and insurance coverage, such as health, disability and auto policies. If your spouse’s employer provided your health insurance, you may be able to remain on this plan for up to 36 months under COBRA. But eventually you’ll need to get your own coverage.

You should also update the beneficiaries listed on your retirement accounts and insurance policies, because it’s likely that your spouse was listed as your primary beneficiary. If you have minor children, consider naming a trust as beneficiary. It’s wise to speak with an advisor in this area before making any changes.