As a couple, you’re doing everything you can to ensure you have a stress-free retirement . But are you prepared financially if you outlive your spouse?
It's crucial to understand the financial burdens after the loss of your spouse and take proactive steps to prepare so that you're not overwhelmed during a period of mourning.
Here are 15 financial challenges you could face after your spouse passes away.
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1. Life insurance changes
If your spouse had a life insurance policy, you’ll need to notify the insurer as soon as possible. This will help identify the policy's beneficiaries and expedite payouts. You may also want to update your own life insurance , particularly if you have no other dependents.
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2. Medical insurance changes
If you get medical insurance through your spouse’s work, you must make other arrangements when they die. You can continue your spouse’s coverage via COBRA for up to 36 months, though other options may be less expensive.
To elect COBRA coverage, you’ll need to request it within 60 days of your spouse’s passing.
3. Final costs
In 2023, the median price for a funeral was $9,995, according to the National Funeral Directors Association. However, this doesn’t include additional expenses such as transportation of the body or the burial plot.
If your spouse has specific wishes for their funeral, bear in mind that these may come at an additional cost.
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4. Additional other costs
When you experience an upheaval, such as the death of a spouse, you’ll likely need to take time off from work if you’re still employed, which can have financial implications. You may also need the help of a grief counselor or therapist, which can be an additional cost.
5. Changing credit card status
If you’re an authorized user on your spouse’s credit card rather than an owner, immediately stop using the card, as this can constitute fraud. Notify the credit card company of the death immediately, and be prepared to send a death certificate.
You can likely keep the account open, but you may have to submit a new application in your name.
6. Changes to tax status
In the year your spouse passes away, you can still file under the Married Filing Jointly status. For the next two years, you can file as a Qualifying Widow or Widower, granting you essentially the same status as Married Filing Jointly.
After that, however, you must file either as Single or Head of Household, likely putting you in a higher tax bracket.
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Once you move into a higher tax bracket, you can switch up some of your retirement holdings to minimize your tax burden. For instance, you can systematically convert some of your IRA or 401(k) funds to Roth funds each year, which can reduce your taxable income.
8. Update beneficiaries
Your spouse was likely the primary beneficiary of your life insurance, bank accounts, and other financial accounts. After they die, you’ll need to designate a new beneficiary or beneficiaries.
9. Change Social Security status
If you’re already receiving Social Security spousal benefits when your partner dies, yours will convert to a survivor’s benefit.
If you’re receiving Social Security as part of your own retirement, you can only apply for the survivor’s benefit if it’s greater than what you currently receive.
If you’re eligible for Social Security but haven’t applied yet, you can apply for either retirement or survivor benefits now and switch later if you want.
Are you a senior? Avoid these 6 sneaky money mistakes 10. Update your will
If you had a will previously, you’ll need to make changes that reflect the fact that your spouse can no longer inherit anything from you. Consider how you want your assets divided after you’re gone.
11. Lease or other contracts
If you had a joint lease with your spouse or entered into any other contracts with them, you’ll need to let the other parties know about your partner’s passing so they can update the paperwork. You may need to redraft the lease or contract to remove your spouse’s name.
12. Student loans and other debts
When your spouse dies, typically, their estate is responsible for settling their debts (other than student loans, which are discharged at death).
If you live in a community-property state, know that the executor of your spouse’s estate could be ordered to sell marital property to satisfy the debts of the estate.
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If you held the car, house, or bank account as joint tenants with rights of survivorship, the asset should pass straight to you upon your spouse's death.
However, you may need to call the county, lender, or Department of Motor Vehicles to ensure that your spouse’s name is removed from the deed or title.
This is essential if you ever get a new mortgage on a house or sell the car, as your deceased spouse cannot sign for these new documents.
14. Cellphone plans and subscriptions
If you have a joint phone plan with your spouse, you can call the phone company and pare down to a single line.
The same is true if you had subscriptions like Netflix or Hulu for your and your spouse’s devices. Ensure you’re not still paying for additional services your spouse no longer needs.
15. Outsource the work your spouse did
In many marriages, one spouse is chiefly responsible for the housework, the yard work, the finances, car repairs, and many other chores. Once your spouse passes, you’ll need to either add these items to your to-do list or outsource them to professionals.
16. Utilities
If your spouse held the home’s utilities in their name, call the city or utility company to switch the account and deposit to your name. This will allow you to call the utility company for service and make financial changes to the account in the future.
Bottom line
Pondering the death of a spouse is not something anyone wants to do, but acknowledging the financial implications of this possibility can put you in a better position to handle them should this situation come up.
If where you and your spouse stood financially was good compared to others, you may find that finances can be a struggle when you’re suddenly single.
Preparation during a time when this isn’t a difficult reality is key to making sound financial decisions in the event of your spouse’s death.
Money tips that can work for everyone
No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.
Focus on paying off your debt . Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.
Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.
Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).
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