Managing Finances After The Death of a Spouse
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When seniors lose their spouses, the effect can be devastating. In addition to the grief they experience, they need to deal with critical financial issues. Decisions can be hard to make while grieving. What can you do to help a loved one in this situation? Here is what you need to know about loss and finances.
Step One: Organizing Paperwork and Banking
Your first step is to help your loved one gather their paperwork. That includes birth, death, and marriage certificates; mortgage papers; wills; and bank records. Do they understand their spouse’s monthly bill payment and banking system, or will you need to help them with that?
Kiplinger has some great tips for this, and advises hiring a financial support team. That can include an accountant, a lawyer, a financial planner, or a trusted friend or family member who has expert financial skills.
Step Two: Calculating Assets and Benefits
Using a team will be helpful in making decisions that set your loved one up for security. Forbes reviews two key steps seniors may need to take: retitling assets under their own name and filing paperwork for insurance, annuities, Social Security and more. This can be an emotionally challenging procedure, so your support will be appreciated.
Transferring assets can be tricky, especially in terms of inheritance and taxes. Advise them to consult with a lawyer before placing anything in their name. Learn the ins and outs of transferring property upon the death of a spouse from LegalZoom.
Finally, it’s important to review current finances and help your loved plan for his or her future. According to Ameriprise, you should calculate all assets, including current income, insurance policy proceeds, and investment and retirement savings accounts that their spouse held. There may also be Social Security and other government benefits as well. Be sure to deduct the monthly bills and expenses to determine the budget and see if it’s wiser to sell the house. Rodgers Associates also advises widows and widowers of federal, state or local government workers to contact FERS, the Federal Employees Retirement System, for help on benefits.
While a windfall can be exciting, Market Watch cautions seniors to bank this type income for several months rather than spend it on something that’s “needed” or for their children. It’s critical to make sure they have enough for themselves and their future first.
Step Three: Deciding To Sell Their Home
Another big decision is whether or not to keep the family home. Selling it can free up cash to help with expenses and medical costs. This post from SFGate states that the type of home ownership will impact what steps they need to take regarding the property title. Was it owned jointly, or solely owned by the late spouse? Was it a revocable living trust or deeded in a will? Depending on this structure, seniors will need to take different actions in order to be able to sell it.
Selling the home can also affect his or her taxes. Accounting Web claimsthat if the house has been owned for decades and is highly appreciated, there can be a lot of taxes to pay. However, if it has not appreciated that much, tax breaks can be favorable. Make sure your loved one qualifies for the capital gains tax exclusion by having used it as a primary residence for two out of the last 5 years, and that two years have passed since the last time they claimed this type of exclusion. Read about the tax mistakes that can trap widows and widowers at Bottom Line Inc.
Seniors can be vulnerable after losing a spouse. They will appreciate the help of trusted friends and family to navigate those first few months. Your support can protect them from making bad financial decisions and untrustworthy acquaintances.