There was a knock on the door as Janice cleaned up from breakfast. Jim had left for work, and she was rushing through chores to be free for lunch with her friends.
She dried her hands as she walked towards the front door. She could see two men on the camera monitor. One was a stranger, but she recognized the other as Officer Madison, who had coached her son Billy’s baseball team in high school. “I wonder what they want,” she thought.
Janice asked them to come in. Once inside, the stranger said, “I believe you know Officer Madison, ma’am. And I’m Father Mike, the police chaplain. I’m so sorry to have to tell you that your husband Jim had a heart attack on his way to work this morning and died before the paramedics could reach him.”
Thus, the most unreal journey began – one that proved that she was more than just unprepared. She had trusted and counted on Jim for just about every aspect of their life. And, never in a million years did she think he could die and leave her while he was still in his 50s.
While nothing can prepare you emotionally for losing your spouse, your most generous gift to yourself is to be prepared financially – regardless of your financial status.
Yet too many women, particularly those in more traditional relationships of staying home and raising a family, are woefully unprepared. Janice’s name was not the “primary” on any credit card or bank account in our story. The mortgage and house deed were in Jim’s name. And she hadn’t worked in over 30 years.
Most articles about widowhood are laundry lists of the actions to take to prepare for the loss of a spouse. We offer the same. But for each category, we also highlight the stumbling blocks that result from being unprepared, especially when the surviving spouse does not have resources of her own.
We are not providing legal or financial advice. We’re merely highlighting areas where you need to ask questions and be sure you have the power to act in case a curveball comes and you must face that dreaded day.
Will and estate documents
You should each have valid wills and possibly trusts. They should be the result of retirement planning and estate planning with advisors willing to provide clarity where needed. You should know and approve of the executor who will manage the disposition of the deceased’s estate.
Otherwise your spouse’s estate will have to go through a much longer probate. Without a will (or being “intestate”) can tie up most assets – including all cash in banks – for months and make the grieving period even more stressful. And with no will, after payment of debts, the residual assets are distributed according to the state’s succession laws, not how you or your spouse would want them distributed.
Some assets may be considered “non-probate” assets or exempt from probate. Upon the deceased’s death, they pass automatically to the designated beneficiary or according to the governing document’s terms. They might include:
• Assets held in trust
• Proceeds from life insurance
• Real property that is held jointly with rights of survivorship
• Investment accounts (stocks, bonds and mutual funds)
• Retirement accounts
But even assets available to you will have to be transferred into your name alone before any can be sold.
Cash and emergency funds
Cash is king. And access to cash makes everything easier. You and your spouse should decide on the best combination of individual and joint bank accounts, so no one is frozen out of an essential account.
And emergency funds should be funded in each person’s name to be available to finance the period while assets are being processed and distributed.
In any case, when you lose your spouse, you’ll have to take stock quickly of your new income and expenses. Income could include job earnings, Social Security, pensions, IRA distributions, dividends and interest. Expenses could include mortgage and car payments, food, utilities and insurances.
OTHERWISE: You could find yourself “running on empty” and having to ask for financial help from friends and family while assets are being released from probate. When you have to pay for expenses related to your recent loss, having no money only adds to the devastation.
You should have credit cards in your name, even if you are not working and your balances are being paid from your husband’s earnings. Credit history can be built over time. Remember that people do recuperate from bankruptcy. They do so by starting with secured credit cards, and they build their credit limit over time through responsible fiduciary behavior.
Otherwise, without a credit history, in the eyes of the credit industry, you don’t exist. And trying to obtain credit in the future – regardless of your financial standing – will be difficult.
If you are only an authorized user on your spouse’s credit card, you no longer have the right to use the card upon his death. (In fact, it’s illegal, because the contract was between the primary cardholder and the credit card company.) If the estate can’t pay off any charges you ring up, you could face civil and criminal charges for committing fraud.
Both names don’t need to be on all bank accounts, but each person in the couple needs to have access to enough funds – free from freezing or account closure – to navigate through the probate period. It’s best if you can keep open the accounts where incoming funds land. (There might be residual employer compensation, for example).
Look into the different types of bank accounts: joint accounts (which are usually non-probate property), solely managed accounts (which are probate property) and pay-on-death accounts (which pass upon death to a valid beneficiary).
Otherwise, imagine being frozen out of access to all cash. If that situation is compounded by not having your own credit cards, you will be powerless to keep your financial life afloat while other aspects are being resolved.
It’s hard to believe that we still see this in 2020, but we do. And remember that you may not be the only person harmed by being cash-strapped. Your children and anyone else who counts on you can be harmed, too.
Every couple can benefit from a financial support team. That team often includes an accountant or CPA, an attorney and a financial advisor. This same team will be available to a surviving spouse to guide the early – and difficult – decisions following a spouse’s death. The more trusted a team member, the better.
Trust is especially important if the surviving spouse is not familiar – or comfortable – dealing with or talking about finances. Even when financial resources are limited, hiring a flat-fee advisor can turn out to be a valuable investment.
Otherwise, ignorance is not bliss when it comes to unraveling the financial situation that follows a loved one’s death. If you trust your couple’s existing financial advisors, turn to those resources. A professional familiar with your deceased spouse’s affairs might save time and money.
But if you never liked your spouse’s choice of advisors, this is the time to find some that you do.