Sudden Responsibility

85% of American women outlive their husbands.
Few are prepared for the financial responsibilities that follow.

How much time have you and your spouse spent planning how the surviving partner would manage financially if one of you dies before the other? The most common response to that question is "little or none." You’ve probably spent more time planning for your retirement. Yet, according to the Women’s Institute for a Secure Retirement, the shocking reality is that half of the women who become widowed in America are younger than 63.

AARP estimates that there are currently about 11 million widowed women nationwide, versus 2 million widowed men. Of the widows now living in poverty, 80% were not poor before the death of their husband. Why? Elderly widows receive an average of only $5,964 a year in Social Security benefits, compared to the average joint Social Security benefit of $14,580 received by married couples. At the same time, only 21% of widows receive a survivor’s pension based on their husband’s retirement benefits. Half of those who do get a benefit receive less than $4,800 a year because at retirement their husbands have selected "50% joint and survivor" payout options. This means that the payment is slightly higher than other options when both spouses are alive, but it drops by half once the husband dies.

Couples should focus financial planning on retirement and on protection for the surviving spouse. Women should ask themselves the question, "Suppose he dies first... will I be financially secure?" The couple should have that discussion openly, in consultation with a financial planner.

If the husband dies first, clearly it is imperative that widows make the most of whatever assets they are eligible to receive. Yet the responsibility for managing this ‘Sudden Money’ comes on the heels of one of life’s most distressing events, the loss of a spouse. Having a Sudden Money^™ road map can make all the difference in getting through this painful time without making financial decisions you will regret later.

Betty expressed great fear about her financial circumstances after her husband died. Betty and her husband had always lived frugally. Her children urged her to sell her house thinking that it was her major asset and potential source of income. By the time Betty and her children learned the full value of her assets, it was too late. She had acted from fear and sold the home she loved.

The first Sudden Money™ principal is to declare a 'Decision-Free Zone' while you sort through the ‘Chute of Emotions’ that inevitably accompanies life-changing events. Many widows describe themselves as feeling numb, empty, as if nothing mattered in the first year after the death of their husbands. This is hardly the time to make hasty, irreversible decisions. Sit down with a financial advisor who can guide you step by step through all of the decisions you will have to make. He or she can help you develop a time line for decision-making.

Your most immediate financial task is to review all of the assets owned by you and your spouse jointly and individually. These may include stocks, bonds, checking and savings accounts, business interests, insurance, retirement and pension plans, real estate, and real property such as boats and automobiles. Bank and brokerage statements, canceled checks, tax returns – even homeowners insurance lists of itemized valuables – may lead you to assets of which you were unaware.

Check with the human resources department where your husband worked to find out what you may be entitled to from pension plans, life insurance, profit-sharing, deferred compensation, and any other of his employee benefits. Is payment due on salary or commissions, unused vacation, or sick pay? Check with former employers as well. If your husband ever served in the military or worked for the federal government, contact your nearest Veteran’s Administration Office or the Office of Personnel Management in Washington, D.C.

You should also notify the nearest Social Security office of your spouse’s death as soon as possible. You and your minor children may be eligible for monthly payments. They will need a certified copy of the death certificate, your marriage certificate, a birth certificate, and Social Security number for your spouse and each family member who is eligible for support. Ask the funeral director to supply you with at least a dozen copies of the death certificate, as it may be required by numerous agencies and financial institutions.

Once you have gathered all of the information, an important part of the Decision-Free Zone process is doing a ‘Reality Check.’ Your financial advisor can help you figure out what you are spending now, whether to pay off outstanding debts in a lump sum or gradually, whether any changes in your lifestyle will be necessary to live within your income, and how you will finance your retirement. The Reality Check process allows you to examine various "what if" scenarios. Particularly if you did not take an active role in managing your joint finances before your husband’s death, the Reality Check process can be very comforting. You will emerge from the process with a good financial plan.

Most of the time new widows leave my office feeling more secure. They are better off than they thought they were. If your completed Reality Check reveals that you won’t need all of the assets of the estate for your own use, you might even want to consider “disclaiming” part of your husband’s estate, allowing it to go to a trust, for instance, in order to minimize taxes. You should consult both your legal and tax advisors before proceeding with such a move, of course.

Your financial planner can help you develop financial goals and educate yourself about your financial options before you enter Phase II of the Sudden Money^™ process, in which you begin to implement the plan that you and your advisor agree is appropriate for your needs, your means, and to achieve your goals. Once you feel confident with the direction you want your life to take, you will be in the best possible position to help make your plans and your dreams come true.