“Don’t make any changes for a year” is the conventional wisdom given to widows and widowers after their spouse dies. However, it’s not always the best financial advice.
Jim Schwartz, CFP, DCFA, Senior Advisor with Strategic Wealth Advisors, has written an eBook titled Financial Challenges Facing a Bereaved Spouse or Partner that looks at specific financial problems to identify and avoid, especially in the first year.
Schwartz explained, “Some bereaved individuals interpret ‘Don’t make any changes for a year’ as ‘Don’t do a single thing for a year.’ Others, as a result of grieving, simply have no drive to deal with, and therefore avoid, the financial, tax, and legal issues. The reality is overlooking certain issues in the first year can be costly!”
If the spouse or partner who died managed the financial, tax, and legal issues for the household, it’s especially important to take steps to address those areas before too much time goes by.
Schwartz provides this checklist of potential issues to address during the first year (if they apply to you):
- Pay your health insurance premiums (among other important bills).
- Build a spending plan (know what you can or cannot spend).
- Diversify an overly aggressive investment portfolio.
- Monitor all three major credit reports for Identity Theft.
- Update life insurance, annuity, and retirement account beneficiaries.
- Update trust, will, and power of attorney documents.
- If your home is a financial burden, sell it (all else being equal).
- File required IRS tax forms such as the Form 706 estate tax return.
- Take required minimum distributions from IRAs (to avoid 50% penalty).
- Evaluate tax advantages such as Net Operating Losses and Capital Losses.
- Exercise spouse’s employee stock options prior to expiration.
- Disclaim property by the ninth month after the date of death.
- Split an inherited IRA if there is more than one beneficiary.
- If remarriage is likely, run the Remarriage Checklist in the eBook.
Schwartz’s eBook can be downloaded from WidowedCommunity.org.