By Tom Rasmussen, CFP®
Although the death of your spouse is not something you want to think about, it is still important for couples to plan for. We all like to think we have 20, 30, 40-plus years with our spouse one of us passes away. Most of the time, this is true; however, there are unfortunate situations when a spouse dies unexpectedly.
Regardless if you are newlyweds or coming up on your 40th anniversary, having a plan in place is always important. Here are important areas for you and your partner to include in your planning.
Long before a spouse passes away, it is important to have an estate plan in place. These do not always need to be complicated and will save your loved ones an immense amount of energy, time, and money. Having a well-organized estate plan in place will help the probate process go much smoother.
The primary estate planning documents that we recommend our clients have include:
- Will: A will is important for many reasons, but a few of the top reasons include:
- Being able to decide how your estate and possessions will be distributed once you have passed away
- Helping avoid a lengthy probate process
- Deciding who will be the legal guardian for any minor children
- Durable power of attorney: Should you become incapacitated, a durable power of attorney allows the attorney-in-fact to act in your best interest and make financial decisions on your behalf. This does not go beyond death, only up to death.
- Health care power of attorney: This is similar to the durable power of attorney. The difference is that this is used to make health care rather than financial decisions on your behalf. You can explicitly give your attorney-in-fact guidance about the treatment you desire.
- Living will: This is often referred to as an “advance health care directive.” This document allows you to express the treatment you would like to receive at the end of your life.
- A POLST: POLST stands for “Physician’s Order for Life-Sustaining Treatment.” A POLST complements the advance directive. The POLST is a medical order that instructs emergency professionals what to do during a medical crisis or if one is terminally ill. This document should be very easy for your family to find; some people post it on their refrigerator. A copy should be in your medical record as well as the state registry, if applicable.
It is always a good idea to keep hard copies of these documents both with your estate attorney and in a fireproof safe in your house. You will also want to keep an electronic copy with a secure document storage service. The key or code to the safe should be provided to a very trusted individual, typically the executor of your will or a trusted family member.
It is important to ensure that you have beneficiaries listed on all your investment and retirement accounts. Having beneficiaries listed allows these accounts to pass outside of probate. It is a good idea to occasionally review your listed beneficiaries and update as needed.
What to Do When They Pass Away
The obvious thing to do first is to grieve and notify your family and loved ones of the passing. This is clearly a difficult time. Individuals react differently to the passing of a loved one. Some compartmentalize and start taking care of things immediately, while others require time to grieve before moving forward.
Because of this, we have found it is very helpful to have a checklist available to know what to do immediately following the death of a spouse. It is recommended that you request the assistance of a family member or close friend.
There are essentially three tiers of steps that need to be taken:
- Preparing to Deal with Finances
- Gather all important documents in a safe and central location for ease of access. A large accordion-style folder or flash drive are both good options.
- Documents to gather (this is not a comprehensive list) include:
- Copy of the will
- Life insurance policy
- Birth and marriage certificates
- Death certificate once you receive it
- Funeral arrangements
- Both of your Social Security cards
- Tax return
- Bank and investment account statements
- Retirement account statements
- Loan and mortgage statements
- Completing First Action Items
Many of the first action items can be done simultaneously with the “preparing” steps above:
- Contact the funeral home to coordinate funeral arrangements.
- Request 10-20 copies of the death certificate. Both the funeral director and County Clerk’s Office can assist with this.
- If your spouse worked, contact their employer.
- Contact the estate attorney to notify and review the will and probate process.
- Completing Next Action Items
- Contact all financial institutions where accounts were held.
- Notify your financial advisor to assist with the transfer of assets to listed beneficiaries.
- Contact providers for life, auto, homeowner’s, and any other insurance policies.
- Re-assign beneficiaries on your accounts if your spouse was the primary beneficiary.
- Contact any creditors to remove your spouse’s name.
- Send a letter to the three major credit bureaus to get copies of your spouse’s credit reports.
- Contact the Social Security Administration and apply for spousal benefits, if applicable.
In conclusion, the loss of a spouse is difficult and can feel daunting financially. Because of this, it is important to have a plan in place for when the day does come that your spouse or you pass away.
It is equally important that both spouses are on the same page and know the estate plan while you’re both still alive. The last thing that you want to be worrying about during this already difficult time is what to do and where to find the will. Although overwhelming, having a plan in place can help relieve significant amounts of stress.
Schedule a complimentary meeting with a wealth advisor to discuss your personal situation.