It’s important to start this article with the fact that widowhood, whether it comes suddenly or after a prolonged illness, is an incredibly difficult life transition. The biggest financial mistakes we have seen women make after losing a spouse or life partner is that they go too fast making big decisions that could have been postponed. The single best advice we can give you is to do nothing you don’t have to do- for now, keep your bills paid, and get through your days. Gradually, you will most likely be able to do more and more until you get it all together. However, once you feel like the earth may be under your feet again, these are the things you should plan for:
Liquidity. Liquidity is another word for having adequate cash reserves. The transition is the most important time to make sure you have enough cash on hand to weather any storms that may come your way- including living expenses, loss of income, medical bills, and any other issues that may arise. Keep your cash in savings, including any life insurance proceeds that are paid out. You may feel some pressure to invest this right away, but wait. The downside risk of investing too much at the wrong time in the wrong things is usually not worth the upside potential.
Spending: This is a tough one. You need to take care of yourself, but you should also be careful not to hurt yourself by spending so much that you are jeopardizing your future. Life insurance and other investment money that may now be liquid can sometimes be viewed as “blood money” and you may want to just get rid of it. But you bought that policy because you were smart enough to know you were going to need it, so be smart now and don’t blow it. Keep a modest budget as you put yourself together again. Make sure your bills are paid monthly as you grieve. If you didn’t have this organized before, or your spouse was responsible for bill paying, this is one area that likely requires your immediate attention.
Risk Management: This includes having enough liquidity, but it also includes insurance- particularly health insurance. If your spouse worked for a large employer, you may be eligible for COBRA for up to 36 months. The portion the company may have covered, however, is likely gone, leaving the full (and often surprisingly large) premium on your shoulders. You will want to get on top of this as soon as you are able as well, especially if you are not COBRA eligible and do not have your own health insurance coverage. If you have your own, but your kids were covered through your spouse, don’t forget to get them covered. The passing of your spouse is a “change of status” so the kids may be immediately eligible for your insurance, again depending on the type you may have through your employer. When you can, you’ll also want to review your property and casualty insurance, your disability coverage, and your life insurance.
Legal. If your spouse just passed away, chances are so did your Power of Attorney for health care and financial decisions if something happens to you. This is something else you may want to do soon – even if just as a stop-gap until you really have time to reconsider it. If you have minor children, you have to consider updating your will. Trusts should all be reviewed at least briefly in the first 30 days, but unless there is an emergency, making changes can typically wait.
Investing. We see women get tripped up here all the time by well meaning friends and associates. This is especially true if they have control of their assets for the first time. There should be no “hurry up and…” around investing ever, in our opinion, but certainly not after a loss like this. What if you might miss a year to contribute to an IRA? Sure, if you are up to it, and you can really put your head around your short and long-term needs, your overall planning needs, your investment and risk management strategy, rewrite all your legal work and still be ready to talk IRA tax laws, then go for it. But if not, slow the heck down. The very nature of investing implies long term opportunities. Going to fast can hurt far more than missing a short term one.
Tax. Depending on the time of the year that you become a widow, this could be incredibly time sensitive or not. If you are paying quarterly taxes or coming up on a filing deadline or even December 31st, you probably need to at least have a conversation with your CPA to weed out what is immediate and what can wait. Hopefully, you’ve had a CPA for a while who may know your tax situation better than you do. This can be invaluable.
Having a Team. With any luck you have an advisor team that you have worked with and trusted for years. However, there may be a missing piece, or your circumstances may require a change. A good team will make time for you now when you need them most. They will not pressure you, but help you put a timeline on the handful of issues that are critical. They will be kind, but also honest with you so you don’t do long term harm to yourself. This team will usually include your attorney(s), your accountant, your banker, and of course your financial planner. Also, don’t overlook a good therapist. They can be the most invaluable part of your team right now.
This is a hard process, but you can utilize your resources, including your team, to help you prioritize your needs in all of these areas and avoid major mistakes.