What Issues Should I Consider If My Spouse Passed Away?
Updated: Jan 23
This checklist covers 29 of the most important planning issues to identify and consider for our client whose spouse has recently passed away. It’s structured as follows:
Cash Flow Issues
Estate Settlement Issues
Investment & Asset Issues
Hi, Todd Pouliot, Gateway Financial, visit us at www.mygatewaymoney.com. I have a checklist here, not one that we like to use, but it is the purpose of what we do and that's financial planning. And, this checklist we're going to cover, what issues I should consider if my spouse passes away? Unfortunately, we have clients that this happens to and it's never easy for us and especially with clients who become friends and we always feel like part of their family. And, in this issue or this checklist that we're going to go through, we're going to cover 29 of the most important planning issues uh when their spouses recently passed away. Cash flow issues, estate settlement issues, insurance issues, tax issues, investment and asset issues, and obviously, some other things to consider as well. So, as we always do, we're going to share our screen here and look at the cash flow. You know, will your cash flow needs change? If so, consider developing a new income and expense plan often referred to as a budget. So, if you have a dual-income household, what is that going to mean for you if you lose one of the incomes? We need to reset the budget. Where are we going to get our income from? What's going to happen here? So, a lot of changes can happen. The first thing I do want to caution you about when you get this checklist is, don't dive into it immediately. There are things that need to happen with the death of a spouse but getting all the financial stuff in order in one week is not the exact answer that I'd like to see people take. Take your time to grieve, take your time to move through the emotions with your family that you need to do. But understand, a lot of these things can take several months and even into the following year before everything is finalized. You know, everybody wants to get things done right away but that's not always the way that things need to happen. Do you need to review your social security eligibility and benefits? So, we also have another flow chart, “Am I Eligible For Social Security Benefits As A Surviving Spouse?” And, any government pension based on earnings for Social Security taxes as well. So, don't forget about that government pension offset sometimes we just say GPO. Did your spouse reach their required beginning date? Obviously, 72 is the new required beginning date from Secure Act but we are in the process of hearing about possibilities of 75 with a possible Secure Act 2.0. So, always stay up to date on the current laws when you're looking at this. So, did they satisfy their required minimum distribution or RMD before the end of the year? Make sure those things are already taken care of. Work really closely with your financial advisor and make sure that those things are being done properly. What about your pension? Payments may stop or be adjusted as a survivor benefit. So, if one of the spouses chooses a life-only or a life with half going to the spouse or a different percentage to the spouse or a period certain. Understand what those options are and your financial advisors should be aware of what options you chose and maybe help you choose those options. Did you – did your spouse appoint you the executor under their will? That's not always the case that each spouse is the executor. Don't forget to contact the attorney and assist with probate proceedings if necessary. One of the things that we do here is, we have a client vault and we store all those important legal documents, not just the will but the healthcare power of attorney – all the other important documents we have quick and easy access to that. Pass away without a will. Likely need to appoint an executor for the estate. Make sure you choose somebody that's fairly familiar with financial terms or has some background in that. Just don't choose the oldest child and just move on from there to somebody that understands it. And also, maybe something that is not burdened by their life that might be able to take on this type of endeavor because it is – there is some time that's involved in this. Do you have more assets than you need to maintain – to maintain your lifestyle? This would be a golden opportunity. If so, the contingent beneficiaries, if there are any contingent beneficiaries named, the immediate primary beneficiary can disclaim the assets. I know that sounds strange and most people would never consider doing that but in some cases, it's to the benefit of the person who might be receiving the inheritance to actually disclaim. So, make sure you understand those options and where that could be done. Now, that is something that is on a time limit and that must be done within nine months of the date of death. Do any accounts or other assets require ownership to be updated? Will your spouse – spouse’s estate exceed the federal limit? Again, this is for 2022 of 12.06. Don't forget about your federal estate tax liability that might be due. The proceeds from the life insurance policy owned by the deceased and the values of retirement accounts are included in that gross estate. And, here's something also, form 706. Maintain the portability of the unused exemption. You must file form 706. It's normally due 9 months from the date of death and there is an extension available but normally nine months. And, that will keep that within two years from the date of death when it's actually due to file for portability. Any estate tax liability? The total value of the estate on the date of death is greater than the value six months later than the date of death. So, we've seen the markets a little bit choppy lately. This may be something to look forward to or to plan around. “Hey, maybe we don't turn in all this information right away let's wait six months and see how this plays out.” “Maybe we can save some and reduce estate taxes.” So, that is a play or a tool that a lot of us have as financial advisors that most people are unaware of. Could there be property and assets not yet identified? If so, there are some other things that are out there. Points on credit cards. If your spouse traveled a lot for work. So, airline miles or Marriott club or whatever hotel chain that they were going to. All those points – can I gather those points as a spouse and make sure that they're used and not just lost? Safety deposit boxes. Many of you were with us when we had our evening with the author we talked about the book, In Case You Get Hit By A Bus, and we talked about safety deposit boxes. The pros and cons of safety deposit boxes. Make sure you follow the correct probate rules before opening that safety deposit box. Does anybody know where the key is? How do they get there? Do they know where everything is? And also, state agencies have an unclaimed properties website you can go on and look to see if there are any unclaimed funds or old 401ks from old jobs. There are a lot of ways to search for assets that may not have been recognized during the lifetime but you may be able to find them after your spouse passes away. Do you need to update your estate plan? Pretty sure you might have to. And, are there any digital assets that should be preserved? You know, we talk again about the book, In Case You Get Hit By A Bus, I really don't collect as many books as I used to. I usually read about 20 books a year but a lot of mine are digital now. So, what happens to my library if something happens to me? I want to make sure I can pass on those books that I purchase to the next generation or other members of my family. So, things like that are also talked about in that book. So, those digital assets include social media. Insurance issues. Was your spouse employed at the time of death? The employer may provide group life insurance or compensation related to their employment. Make sure you follow up on those things. “Hey, you know, I want to let you know your employee is no longer here and you know, what benefits packages do we have, what's going on? What about a veteran? May be eligible for death and burial benefits and survivor pensions and other benefits. A lot of great programs for our veterans. Was the death accidental or work-related? Some of the issues that we have here. Some life insurance policies have an accidental death provision for higher benefits. Do you or your spouse have a minor child or child permanently disabled? A child may be eligible for Social Security survivor benefits. Could there be any life insurance owned by your spouse or ensuring the life of your spouse that has not been identified or claimed? Sometimes parents purchase a policy as I did for my child. Now she could go off in life and have, you know, married and have children and move on but that life insurance policy may not be known to the spouse at that time. So, there may be other life insurance policies out there. Tax issues. Did you and your spouse own a home? You may still qualify for the half-million dollar capital gains housing exclusion if the home is sold within two years of the spouse's death and other conditions are met. So again, we were talking about that budget. The very first line item, “Can I still afford to stay in my home?” So, these are some of the things that we want to consider. Do you own property jointly with your deceased spouse? “Will I Receive A Stepped-up In Basis For The Appreciated Property I Inherited?” Great flow chart we have for you here. And, we have to be cognizant of all these other tax issues. Confirm that all of your spouse's prior income taxes have been paid. So, work really close with your accountant or CPA to make sure all these details are taken care of. Did you file married filing jointly? Last year we had a lot of chaos with married filing jointly and married filing separately how do we handle this? If so, you can continue to file as married filing jointly in the year the spouse passes away. Obviously, there are some other claiming options, so make sure that you work with your CPA on how to do those properly. And, I love that we have our CPA here where we can just ask them those questions. Do you have dependent children? You may be able to use the qualifying widower tax filing status for the two tax years following the year your spouse passed away. And, I would recommend, having your CPA run it through married filing jointly, run it through the widower – how do I best come out and what is our best plan of action? And, by the way, that's not just tax preparation, that's tax planning which is very different. Kind of get ahead of the curve so when you walk in with your tax documents you're not burdened with a lot of these questions. Do you have any stock options, grants, or restricted stock units? If you follow our channel you know we talk a lot about this. Consider how these assets will impact your tax liability and your cash flow planning. See how we always go back to number one? Again, these are just yes or no logic statements that these are issues I need to talk about or not talk about. Business owner. Does a plan need to be developed to transfer or sell the business? Hopefully, you thought about that beforehand. And, have the circumstances changed or altered your investment objective or risk tolerance? If you were a business owner that no longer has this income that may affect your risk tolerance and risk capacity which are two different things, so make sure you understand that. If your spouse has annuities or other illiquid assets, review and understand those options. Is there a spousal beneficiary or a spousal transfer? Some companies will just allow the spouse to take over the annuity without making any transaction or any taxable events. So, be cognizant of how each individual company handles its contracts. Very important, very time-consuming but if mistakes are made down here, I can tell you there can be a big tax bill waiting for you at the end of the year when you go to file and you say, “Oh, I didn't know.” And, that doesn't count. The insurance companies, once they pull those triggers, really hard to undo those bad mistakes. Do you need to reduce the threat of identity theft? Here I am back to that book again. We talked about it several times, In Case You Get Hit By A Bus, what do we do with the spouse's email accounts, social media accounts, and driver's license, and notify credit bureaus, and the board of elections? Identity theft and cybercrime are at an all-time high and I don't see it ending anytime soon. Be cognizant that right now you are most at risk because there's a lot of data being shared about your deceased spouse. And boy, I would hate to see that identity stolen. And, are there any state-specific issues that you need to consider? Boy, I appreciate you being here. This is a really tough checklist for me I can't tell you how many times I do this. It seems like recently we've had to go through this a lot with the pandemic and it's not an easy discussion to have but it's one that we would love to have with you. If you're not a client of ours, this is why we share these videos. And, if you are a client of ours, we have this available for you and we just want to do a little bit to take the burden off your shoulders. So, we appreciate you being here. We appreciate our subscribers coming back again and again. Click that thumbs-up button, which helps with the algorithm. And, subscribe to our channel, and feel free to visit us and contact us with any ideas on any flow charts or checklists you'd like to make. And, we're just here to help you be your best and enjoy your day, thanks.