Losing a spouse can bring about significant financial changes. You may suddenly face the loss of your spouse’s income or shoulder the responsibility for their debts. Resources and supportive communities are available to help you improve your overall wellbeing and financial stability. MoneyGeek offers expert-verified steps and advice for post-bereavement personal finance situations.
Financial Resources for Widows and Widowers
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Financial Challenges of Widowhood
Recently widowed partners, on average, experience an 11% decline in income. Many widows face additional financial hurdles beyond the immediate financial implications of a spouse's passing. These include managing and settling debts — whether shared or in the deceased's name — and Social Security, because the death of a spouse can alter these benefits. Such a loss can also affect the tax filing process, bringing forth new tax considerations.
Spousal Debt Responsibilities
A surviving spouse may inherit the deceased partner's debts in addition to their assets. The specifics vary widely by jurisdiction and financial arrangements. In community property states, for example, both spouses typically share liability for debts incurred during the marriage. Beyond the community property rule, several other factors or situations can determine your responsibility for the debt.
Credit Card Debt
When determining responsibility for credit card debt after a spouse's death, several factors — such as account setup and location — come into play.
Joint Account Ownership
If you jointly own a credit card account, you're liable for any outstanding balance. This responsibility stands even if you never used the card. Failure to pay can negatively impact your credit score and may lead to collections.
Authorized User Status
If you're an authorized user on your spouse's card, you're typically only liable for the debt in community property states. Regardless, your spouse’s outstanding debts will be deducted from their estate and affect any inheritances of their assets.
Co-signer on a Loan
Co-signing a loan means you've pledged to cover it if the primary borrower can't. If your spouse left such a loan unpaid, you must settle it.
Mortgage Debt
When a spouse dies, handling the mortgage depends on the agreement, the deceased's assets and your finances. You’ll want to contact your mortgage lender to determine if you must refinance the mortgage into your own name to continue payments.
Joint Mortgage Ownership
If you and your spouse co-signed the mortgage, the responsibility now solely falls on you. Regular payments must continue to avoid foreclosure.
Sole Ownership by Deceased
If only your spouse signed the mortgage, you may inherit the house, but the mortgage usually becomes the estate's responsibility. Payments should continue, and the deceased's assets might be tapped to cover the mortgage if needed.
Medical Debt
The responsibility of medical debt after a spouse's death often depends on where you reside and the specific circumstances surrounding the debt.
Signed Responsibility
If you've signed an agreement to cover medical expenses when your spouse was hospitalized, you're legally bound to it.
Doctrine of Necessities
Some states follow this principle, making a spouse liable for "necessary" expenses like medical bills incurred by the other during the marriage.
Estate Payment
In areas where neither community property nor the doctrine of necessities is in effect, creditors may pursue the deceased's estate for payment.
Post-Bereavement Social Security Benefits
A spouse’s passing affects their Social Security benefits. If you still receive your late spouse's Social Security checks, avoid cashing them — the government will reclaim this money. Here's guidance on managing these benefits:
Switch Between Benefits
If you qualify for retirement benefits, you may be eligible to claim a survivor’s benefit and later switch to your higher retirement benefit, starting at age 62. You can start collecting Social Security survivor’s benefits as early as age 60, whereas you have to be at least 62 to begin claiming your own benefits.
Maximize by Waiting
Claiming benefits before reaching full retirement age (between 66 and 67) results in smaller monthly amounts. Waiting until full retirement age ensures you receive the full benefit. Postponing benefits beyond this age can boost monthly checks, with each month of delay up to age 70 increasing the payout.
Account for Disability and Child Care
If you became disabled before or within seven years after your spouse's death, you can claim benefits as early as age 50. If you care for a deceased spouse's child (under 16) or a disabled child receiving benefits, you can claim benefits at any age.
Seek Expert Advice
We strongly encourage new widows and widowers to call the Social Security Administration’s customer service for clarification on how benefits are impacted. Speaking to a representative is free, and they are helpful in providing guidance.
Tax Implications Following Bereavement
A change in marital status due to a spouse's death can affect tax rates, deductions and available tax breaks. The IRS has provisions to help ease the tax strain for the bereaved. Here are key tax points and strategies for widows and widowers:
Consult a Tax Pro
Consider reaching out to a tax professional to inform them of your loved one's passing. If you don't already have a tax professional, now might be a good time to engage one to help walk you through the changes to your tax situation.
Leverage Beneficial Filing Status
You might be eligible to use the Married Filing Jointly status in the year of your spouse's death. The Qualifying Widow(er) status could be available for the next two years, providing joint return tax rates and a higher standard deduction. This status, however, doesn't allow joint return filing.
Financial Steps to Take in Early Widowhood
Remember that you’re establishing a new long-term financial strategy that will take time. Some tasks will be more urgent than others. Key steps involve organizing assets, refraining from hasty investments or major financial decisions and learning enough about personal finance to boost your confidence and decision-making.
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Set Up Bill Payment
Address immediate financial needs, such as funeral costs, and stay on top of paying bills. Take inventory of what bills are set up for autopay and from which account, and make sure these accounts aren’t frozen when the bank is notified of the death. Identify which accounts need to be paid via one-time payment each month.
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Steer Clear of Big Investments
Avoid making major financial decisions for six months after a loss. This gives adequate time for the estate to settle, and you can get a clearer picture of your financial situation. For instance, refrain from buying or selling a house, making significant changes to your investment strategy and lending or gifting large sums of money during this period. Seek professional advice when in doubt.
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Compile an Asset Inventory
Compile an inventory of your assets, including bank accounts, investments and real estate. Check past tax returns to uncover additional assets and income. Review retirement accounts, like IRAs or pension plans, annuities and life insurance policies, because you may be entitled to benefits or proceeds. Likewise, run a credit report to see a list of every debt your name is on. These actions provide a clear bird’s-eye view of your financial standing.
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Get Clear on Your Expenses
List and prioritize expenses, with essentials like housing at the forefront. Use budgeting tools or apps to help you create a budget, and always review any auto-debits from bank accounts or credit cards tied to these services. You can consider creditor hardship programs for benefits like deferred payments as a last resort.
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Rebuild Your Financial Safety Net
If you didn't have an emergency fund before or if it was depleted, now is the time to start rebuilding it. The amount should be able to cover your essential living expenses for about three to five months — keep this fund liquid. A high-yield savings account would be a great place to park your emergency fund. Avoid linking it to your checking account's overdraft protection to prevent unintentional withdrawals.
Federal and State Assistance Programs
Although there aren't exclusive government grants for those mourning a spouse, several programs address the needs of widows and widowers.
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Benefits for Military Families
There are dedicated financial resources to assist spouses who have lost a military service member. If a service member dies in the line of duty, the surviving spouse is entitled to a tax-free death gratuity of $100,000, symbolizing the country's appreciation for their sacrifice.
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Charitable Foundations and Community Support
Many charitable organizations and community groups financially and emotionally support widows and widowers. These organizations, ranging from local religious institutions to expansive national foundations, deliver various types of assistance.
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Additional Resources
MoneyGeek compiled financial management resources to help widows and widowers gain financial stability and plan for the future.
- American Association of Retired Persons (AARP): Provides a wealth of resources on retirement planning, which can be particularly useful for older widows and widowers.
- Consumer Financial Protection Bureau: Provides tools for making financial decisions, including a section specifically aimed at those dealing with the death of a loved one.
- IRS Publication 559: Offers tax guidance for survivors, helping widows understand their new tax obligations.
- National Association of Personal Financial Advisors (NAPFA): This association can help widows find fee-only financial advisors for unbiased and personalized financial planning.
- U.S. Department of Veterans Affairs: Essential for widows of veterans, this site provides information on special financial assistance programs and benefits.
- Wiser Women: Focuses on women's financial security, offering resources to help widows navigate their unique financial challenges.
About Nathan Paulus
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
sources
- American College of Trust and Estate Counsel. "What Is Community Property?." Accessed September 11, 2023.
- Consumer Financial Protection Bureau. "Financial Challenges Faced by Recently Widowed Older Adults." Accessed September 11, 2023.
- Internal Revenue Service. "Glossary." Accessed September 11, 2023.
- Military Compensation Department of Defense. "Death Gratuity." Accessed September 11, 2023.