Losing a spouse is one of life’s most challenging experiences, and it often comes with a host of unexpected financial responsibilities. While it’s common advice to avoid making major decisions during the initial period of grief, certain financial tasks need immediate attention. Let’s dive into three key areas where pre-planning and consulting with knowledgeable experts can make a significant difference.
1. Revise Your Budget for Changed Circumstances: The first step in your financial journey is to reassess your budget. A study by the Federal Reserve Bank of Chicago revealed that the income of survivors drops by an average of 37% in the three years following their spouse’s death. You might need to adapt to life without your spouse’s paycheck or adjust to receiving a smaller Social Security benefit.
If you have children, you might qualify for additional Social Security benefits. Other resources, such as life insurance proceeds, investment accounts, or retirement funds, might also be available to you. However, creating a sustainable income stream from these sources can be complex. This is where pre-planning and consulting a fiduciary financial adviser can be invaluable. They can help you navigate these waters, ensuring your financial stability.
2. Consult a Tax Professional: Your tax situation is likely to change after your spouse’s death. Consulting a tax professional is crucial to understand these changes. They can guide you on managing inherited retirement accounts and suggest possible tax savings strategies.
For example, before the year ends, you could utilize joint filing rates for Roth conversions or taxable withdrawals from retirement funds. Additionally, if your spouse incurred investment losses, a tax professional can advise whether to sell some investments to utilize that loss carryover. Remember, the right tax strategy can make a significant difference in your financial health during this transition.
3. Ensure Access to Credit: Credit access is a critical aspect of financial independence, especially after the loss of a spouse. You can typically transfer jointly held accounts into your name by providing the institutions with a death certificate. However, credit cards often work differently.
Most credit cards are not joint accounts. If you are listed as an authorized user on your spouse’s credit card, you might lose access to this line of credit upon their death. Pre-planning for such eventualities is crucial. Ensure you have your own credit resources in place. This might mean setting up your own credit lines or accounts before they are urgently needed.
In Conclusion: Losing a spouse is an emotionally and financially challenging time. Pre-planning and seeking the advice of experienced professionals like an experienced real estate advisor, financial advisor and tax professional can help you manage the financial aspects of this transition. Remember, taking these steps is not just about managing your finances; it’s about securing your independence and peace of mind during a difficult time.
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