Financial Literacy for Everyone

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The death of a spouse is devastating. During such an emotional and difficult time, even just paying bills can seem overwhelming – but it's important to ensure the deceased spouse's financial wishes are carried out and the surviving spouse is covered financially.

Death of a Spouse

Paperwork
Gathering the proper paperwork is the first step in settling your spouse's affairs. Start with the following:

  • The Deceased's Will – Work with an attorney to review the deceased's will, or if there is no will, discuss the next steps.
  • Death Certificate – The death certificate will be needed for many financial procedures you will encounter. You should request several copies from the funeral director or county health department.
  • Complete List of All Properties – A list of real estate, stocks, bonds, savings accounts and personal property will be needed.
  • Insurance Policies – These will help you determine if you are entitled to any benefits.
  • Marriage Certificate – If you can't find your original marriage certificate, you can usually get a copy from the courthouse of the county you were married in.
  • Birth Certificates for Dependent Children – Copies of birth certificates for dependent children are available at the state or county public health offices where the child was born.
  • Certificate of Discharge from the Military – If your spouse was in the military, you may need his or her certificate of discharge to collect benefits.

Many of the documents you need may be held in a safe deposit box. If you can open this safe deposit box before your spouse's death, take out all the contents. Some states seal the boxes after a death, even if the box is registered in both your names. If your spouse has already died and the box is sealed, consult your attorney about getting court permission to access the box.

Get Your Finances in Order
If you receive a life insurance benefit, save that money. Put it in an interest-bearing account such as a savings account or money market fund. Check on your health insurance if you were covered under a joint plan. Call your insurer or your spouse's company if you were covered under your spouse's work insurance plan to see whether you are still covered and for how long. If you're not still covered, find a new health plan as soon as possible.

Use the paperwork you gathered to claim the following:

  • Life Insurance Benefits – Most likely, the company will pay the proceeds directly to the named beneficiary in either a lump sum, fixed payments or as interest payments on a larger amount. It may take several weeks for you to receive payments. If your spouse is named as your beneficiary on your life insurance policy or retirement plans, you should take this time to name another beneficiary.
  • Social Security – Surviving spouses or widowers are eligible for a $255 death payment designed to help pay for funeral costs. You may also be eligible for survivor's benefits, depending on your age and if you have any dependent children.
  • Employee Benefits – Your spouse may have had life insurance, a 401(k) plan, vacation or sick pay and other benefits to which you're entitled. Contact the human resources director at your spouse's workplace for a list of benefits. If your spouse was employed by a large company, you will still be eligible for health insurance under COBRA legislation for 18 months after your spouse's death.
  • Veterans' Benefits – If your spouse served in the military, contact the U.S. Department of Veterans Affairs. You may be eligible for burial expenses, money toward a plot or headstone, or disability benefits if your spouse already was receiving such payments. Veterans are also eligible for free burial in a national cemetery.
  • Miscellaneous Benefits – If your spouse belonged to a credit union, a labor union, the American Legion, a college alumni group, or other organizations, you may be eligible for insurance coverage or assistance programs.

Taxes
Taxes can be especially complex and difficult after an event like the death of a spouse, and it's wise to consult a professional tax adviser for assistance. However, there are a few basic things you should know before you get started.

Within nine months, you are required to file an estate tax return if the assets of the estate exceed the threshold for taxability. Your spouse's estate will not be subject to estate taxes if its net worth is less than the current exclusion amount for the year of death. Taxes, which can be as high as 50 percent, must be paid on any amount above the threshold amount. You also are required to file annual income tax returns reporting any income earned by the estate.

The Unlimited Marital Deduction allows you to avoid estate tax completely if your spouse has left everything to you in his or her will and you are a U.S. citizen.

You must file a final federal and state income tax return for your spouse on income earned that year up to the date of death. As with your return, these are due by April 15th. You can file a joint return as long as you do not remarry prior to the end of the year he or she died. If you have a child still at home, you can use the joint tax rates to figure your income taxes for two additional years.

Reassessing Your Finances
Review your will and make adjustments to reflect your new situation. You'll probably need to change who will inherit your assets and you may need to decide on a new executor. Change accounts and jointly held property to be in your name, including credit cards, deeds, etc.

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