Baby boomers who experience the loss of their spouse – sometimes suddenly – are often faced with two significant challenges. First and foremost: grieving. They must deal with the devastating loss of a spouse. Second: financial decisions, some of which can be put off and others not.
One harsh reality of the death of a spouse is that it places many financial and legal decisions in the surviving family member’s lap. And for the boomer generation, the timing couldn’t be worse.
It is one thing when your spouse dies when you are both old – say, in your 80s or older. It is quite another thing when your spouse “dies young” – and few boomers that we know see themselves as (or feel) “old.” While our kids may see us as geezers, we know “old” is our parents. Dealing with the financial issues that arise after a loss can be especially stressful for baby boomers who find themselves “suddenly single” at the time in life when financial responsibilities may be the most complicated.
Many boomers are also members of the so-called “sandwich generation” – still supporting adult children and assisting elderly parents. Others have either just retired or were planning to stop working. The issues following the death of a spouse or partner can be overwhelming for anyone, but it is even more so for many women, because even for boomers, men were often still the family decision-makers.
Widows and widowers should consider the following steps when addressing financial matters after the death of their spouse:
1. Organize your family finances.
The path is easiest when couples have planned in advance for the disability or death of the other. During that process, each spouse typically gains an overview of the family finances and how to manage the bills in the event of the sudden incapacity of the other.
If it has not been done in advance, organizing the family finances needs to be done very soon – and may be urgent if the deceased spouse was the one who managed the family’s finances. “Organizing the finances” means determining not only what do we own and what do we owe, but also, what are the mechanics for paying the monthly bills? Is it done online or via paper check? Where is the checkbook? Where are the bills to be paid and those that have been paid?
2. Contact your attorney and financial professionals.
Hopefully, the family will have already selected their trusted advisers. In most cases, there are at least two: an attorney and a financial professional. Often, but not always, the attorney is the one who prepared the wills or trusts. The financial professional can be a financial planner, an investment adviser, an insurance professional or trust officer. Depending on the complexities of the family finances, an accountant or tax adviser may also be an important member of the advisory “team.” Usually, however, this team member is not needed immediately after a death.
If the survivor does not know an attorney or a financial professional, one of the first steps is to find one. Almost immediately after a spouse dies, the need to make financial decisions becomes a reality. While the best advice to the suddenly single is to defer making any important decisions, not all decisions can be deferred.
3. Prioritize short-term and long-term tasks.
Boomers who have experienced sudden loss – usually the death of their spouse, but a divorce often has the same impact – often find financial decision-making to be overwhelming. Sometimes even just keeping up with the monthly expenses and paying bills feels like more than they can handle. Delaying major financial decisions is usually a smart move.
However, as noted above, not all financial decisions can be put on hold. The surviving spouse often needs advice about how to prioritize financial decisions. They need help to figure out what has to be done immediately after a loss and what can wait. In our experience, the two most critical things that can’t wait are cash flow and liquidity. “Cash flow” means making sure there is sufficient money coming in to meet regular living expenses. “Liquidity” means having enough immediately available resources to fund any income shortfall and to meet unanticipated expenses.
Once the immediate issues have been handled (the funeral, cash flow, liquidity), the short-term tasks include:
• Gather documents
• Apply for insurance and Social Security benefits
• Check on medical insurance
• Begin the estate settlement process
Long term – really just longer term – tasks include:
• Meet with or find your trusted financial adviser
• Re-title financial and other assets; update beneficiary designations
• Develop a roadmap for your financial future (often this a retirement plan previously created that now needs to be adjusted due to the change in circumstances).
• Revise your portfolio. (Ditto.)
4. Put major financial decisions on the back burner.
On the “What Not To Do” side of the ledger – and we cannot emphasize this too strongly – is not to make any financial decision that can be deferred, especially those that cannot be easily undone. For example, until there is a plan, don’t decide to sell the house or the family camp, don’t make large gifts to children or others, don’t make investment decisions or invest in financial vehicles where there is a penalty for early withdrawal or canceling the investment (such as certificates of deposit and certain annuities).
Many boomers living in Maine are contemplating decisions they had planned to make a bit later in life, such as wintering in Florida, selling the house and downsizing into a condo, or gifting the family summer house to the children. All of these decisions become extremely complicated after the loss of a spouse, and even more so where the loss was unexpected. Suddenly single, the surviving spouse is left to make decisions in a very different financial context. These major decisions have to be right the first time – there is no “do over.” And each of these major decisions can have a permanent impact not only for the decision maker, but also for the entire family.
Financial planning is a process, whether you decide to do it or life pushes you into it. You do it one step at a time. The key for almost everyone, however, is not to try to do it alone. Choose a professional you trust – one who has helped clients travel this path before. A guide can almost always make even the most difficult journey a bit easier.
Mary Leavitt is senior vice president and managing trust officer at Androscoggin Trust and Wealth Management with more than 28 years of experience in trust operation and administration. Barry Kohler is a bank senior vice president and director of Trust and Wealth Management. He is a Certified Financial Planner as well as a member of the Maine bar. Learn more at www.androscoggintrust.com.