Commonwealth Independent Advisor

Financial Guidance for Recent Widows

Posted by Whitney Drechsler, JD, LLM, CFP

October 23, 2019 at 1:30 PM

financial guidance for recent widowsYesterday, we focused on what financial advisors can do to help women navigate the financial implications of the end of a marriage. Today, we’ll discuss how to assist recently widowed clients.

A 2018 UBS Investor Watch Survey found that nearly 70 percent of married women from around the world believe they’ll outlive their husbands. This belief is confirmed by recent U.S. government data showing that women are living longer than men by roughly five years. Yet many of the women who experience a husband’s death are unprepared to handle the major financial issues that suddenly fall on their lap. That’s especially true for women who’ve abdicated control of financial planning and investing decisions to their spouse over the years.

When your role is to provide financial guidance for recent widows, it may be difficult to keep money concerns from being pushed to the back burner. Losing a spouse can take a great deal of time to process emotionally. But you can do a lot to help a widowed client bring her finances into focus, even while keeping in mind the sensitivity of her situation. As you know, there are immediate financial burdens to navigate, as well as the concern of helping ensure your client’s long-term financial stability.

“Achieving Financial Fitness: A Checklist for Your Female Clients” summarizes what your recently widowed clients need to know about protecting their financial future—download it today!

Keeping a Focus on Finances

Financial guidance for recent widows should include discussion of these topics:

Estate administration. It’s important to tell your client to obtain several copies of her husband’s death certificate. You’ll also want to review with her the status of existing estate planning documents. Having a list of assets and accounts can streamline the estate administration and ultimate distribution of the decedent’s assets. Contact with the appropriate institutions is a starting point for knowing what documentation is required to transfer and distribute the assets of a recently deceased person. You can be involved as a point of contact and advisor of record where it involves assets under your management. Coordination with an estate attorney can help connect the estate administration to the distribution or transfer of the financial assets.

Short-term finances. After she has wrapped up her deceased spouse’s estate, a recent widow should evaluate her own situation and how it has changed. In the short term, she will likely need to adjust her monthly and yearly budget and spending habits. For income needs, she could consider the social security survivor’s benefit, available to widows as early as age 60 on their deceased spouse’s record. This can create an early income stream even though she may not be eligible to begin her own benefit until age 62. (Keep in mind benefit reductions will likely apply for early claiming.) Surviving spouses can still independently decide when to take their survivor’s benefit versus their own, allowing for benefit maximization.

Life insurance held on the decedent can provide an immediate source of income and liquidity for a spouse who was not the breadwinner. Having a listing of the policies in force can quicken the payout process. Contact the decedent’s employer about group policies that may also provide a death benefit.

Long-term finances. The UBS survey also revealed that 76 percent of widows wish they had been more involved in making financial decisions. Moving forward, the topic of long-term financial stability should be of the utmost concern in your representation of these clients, in addition to getting a handle on the day-to-day financial needs. This should include a review and update of their estate plans and beneficiary designations.

Another consideration, sometimes overlooked, is the need for a new widow to take care of herself. Death of a spouse has been known to result in health issues for the surviving spouse, adding to what already may be a strain on her finances. Advise her on the health care options available, including Medicare plans and the possibility and cost of institutional long-term care. Encourage her to sit down with her family or those closest to her to discuss end-of-life medical decisions and funeral arrangements. Remember, the person who likely knew her best, her spouse, has passed away, and others needs to know about her long-term care wishes.

Advanced Planning and Early Action Items

For any life event, financial advisors can help to position their widowed clients for a more stable financial future by providing education and forethought. There is a burning need for financial guidance for recent widows, as many women in this position lack a comprehensive view of their finances. In a Fidelity Investments survey, only 56 percent of widows believed they had a comprehensive financial plan in place (see below).

financial guidance for recent widowsIn addition to encouraging estate planning, emergency savings, and health care plans, an advanced strategy should ensure protection against a loss of income with adequate insurance for health, life, and disability. Disability insurance can provide necessary income replacement when a single female has no partner to step in, and a single female with children can use life insurance to protect the needs of those under her care after her death.

Do you have any additional tips for guiding clients who have been recently widowed? What topics are important in discussions about financial independence? Please share your thoughts below!

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Topics: Financial Planning

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