Were You Recently Widowed? Here Are 4 Steps You Should Take Now to Preserve Your Wealth

Teaser: No one wants to think about what to do after the death of a spouse, but planning for your financial future is key to your security.

Nothing can prepare you for the unfortunate loss of your life partner. Finding the strength to pick up the pieces can be an unbearable journey that many people don’t ever want to think about. The inescapable and unfortunate truth is that most women will outlive their spouses. Additionally, Kiplinger estimates that half of widows over 65 will outlive their husbands by an additional 15 years. This means that the assets you acquire after your spouse passes need to last.

Financial planning after the death of a spouse is crucial in the year that follows. Even though it will feel almost impossible at first to navigate financial planning for widows, it doesn’t have to be intimidating.

Financial Planning for Widows: Where to Start

Go into this new financial situation with a “can do” attitude. For many women, this could be the first time they’ve been in charge of their financial situation. It can be very overwhelming at first, but if you’re working with a good financial advisor, they should explain things in a way you can understand and help you along the way. I’ve worked with many widows who feel overwhelmed, but within a few months, they realize it’s not as intimidating as they had thought. You can do this!

The primary thing to be aware of is the unfortunate number of financial institutions that are ready to pounce and take advantage of a widow’s new situation. Far too often, widows become the victims of scams or are sold products that will lock them into something they don’t need. Avoid scams by not signing anything without a trusted family member or third-party advisor who is a fiduciary and will act in your best interest regarding financial planning.

4 Essential Steps for Financial Planning After the Death of a Spouse

Your wealth should help you accomplish your goals — which might be as simple as remaining comfortable before you pass or as lofty as traveling the world or giving significant gifts to family members. Understanding what exactly you have, how it’s invested, and how best to withdraw assets are important aspects of managing your wealth at this time in your life.

As you prepare for your future, here are the first steps to implementing security into your new financial plan:

1. Properly list all your assets.

First, you need to know exactly what you are working with so you can accurately plan for the future. Discover and list every asset you own.

Be sure to note the following:

• How your assets are titled (individual name, joint name, and transfer on death designations (or TOD)).
• What kinds of accounts you have, including bank accounts, retirement accounts, brokerage accounts, and the like, as well as how much is in each account.
• Where each of your assets is located (banks, credit unions, deposit boxes, etc.).

2. Allocate each account.

Once you have an idea of your assets, you can decide what future goals you can achieve with those funds. You have potentially been handed the means to secure your financial future — take advantage of this!

Evaluate your general expenses and keep enough cash on hand to cover several months of them. If you are retired, consider keeping 12 to 18 months of cash to pay for your needs (so you can avoid selling equities during a bear market).

Then, determine your goals and the timeframe for each. Funding for goals you hope to achieve in the near term (say, in the next two to three years) should be held in cash or cash equivalents. If you know you want to go on a big family trip next year, set aside those funds in cash as opposed to investing them. This ensures that the funds won’t be worth less when you need them. For long-term goals, you can consider investing the funds.

3. Determine where to invest.

After setting up a cash reserve to cover 12 to 18 months of your general expenses and any large expenses within the next few years, the remaining bucket of assets can likely be invested. Consider a low-cost, well-diversified portfolio of both equities (stocks, mutual funds, exchange-traded funds, etc.) and bonds.

Also, consider the types of accounts you use to fund your goals. For example, if you have enough assets in the bank that it’s unlikely you’ll ever run out, a Roth account is likely the last bucket from which you’d withdraw funds. Further, this is the best bucket of assets for your heirs to inherit. So, your Roth bucket can be very aggressive, with the majority, if not all, invested in equities. This is where having a trusted financial advisor will be beneficial to help determine what investments are right for your goals.

4. Title your assets.

All assets should be titled appropriately or have beneficiary designations to avoid probate —which is public, costly, and a hassle. Bank accounts should have payable on death (or POD) designations, and cars should have TOD designations. If you have a revocable trust, all taxable assets should likely be titled in the name of your trust (or be the TOD or POD of those assets).

Review retirement accounts, such as IRAs, Roths, and 401(k)s, to be sure you have both primary and contingent beneficiaries listed. Depending on your estate tax situation and your goals, you might want to have certain trusts, charities, or individuals as the beneficiaries of your different accounts.

One of the best things you can do at this point in your life is find someone you trust to assist you through the process. As hard as it can be, some of my best days have been working with women who have recently lost their spouses. I find such fulfillment in being able to hold their hands (literally and figuratively), explain things in ways no one has ever done for them before, help them make decisions that align with their goals, and make them feel like someone truly cares about their financial well-being. With these steps and a trusted guide, you can move securely into the future.

This guest post was authored by Sara Gelsheimer

Sara Gelsheimer is a senior wealth manager at Plancorp, a full-service wealth management company serving families in 44 states. Sara came to Plancorp with a strong financial background and a commitment to financial education, particularly for women. With this passion, she founded InspireHer: Plancorp’s Women’s Initiative, which inspires financial confidence in women through education and impactful support.

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