The funeral is over, and now there is another loss the widow has to deal with — the death of financial management as a twosome.
And it happens to the majority of women.
“About 70 percent of women will experience widowhood, and 80 percent of women will be single when they die,” said Kathleen Rehl, a Tampa certified financial planner and author of Moving Forward on Your Own: A Financial Guidebook for Widows.
After a loss, it can be overwhelming to sort through bills, bank statements and investment accounts, especially if the husband was handling most money matters. But just as there are steps in the grieving process, there are ways to work through transitioning financial affairs after a spouse’s death.
The first step: Take it slow. “The biggest mistake widows make: They rush. They move too fast. They think they have to make decisions instantly,” said Rehl, a widow herself who gave up her financial planning practice to be an educational speaker.
Research has proven that cognitive ability declines when you are grieving, she said. “Attention span is short. Memory is weak and decision making is downright difficult,” said Rehl, whose husband died seven years ago.
Kathleen Day, a certified financial planner with The Enrichment Group in Miami, has worked with widows for 25 years. She said the largest hurdle for many is not preparing in advance. “They need to be involved in the family finances. Many widows come here and they don’t have a clue,” she said. “They don’t know where the bills are. They don’t have passwords to accounts. They don’t know what they own. They’re just lost and bewildered souls. It’s very sad.”
After a death, financial experts say there is a process to get your financial affairs in order:
• Get organized. Gather paperwork, like your spouse’s birth certificate, Social Security number and marriage license. Then start a filing system, Rehl said. Use color-coded folders and categorize: one for the CPA, the attorney, the financial advisor. Make folders for household expenses, life insurance paperwork and bank statements.
Start a master checklist — a one or two-page worksheet, because sometimes the paperwork gets overwhelming, said Susan Bradley, a Palm Beach certified financial planner and founder of the Sudden Money Institute, which offers training on financial planning during transitional periods. Include your primary needs and concerns, and what information you have to collect. Check things off as you go.
• Monitor deadlines. Start a calendar with due dates. “Organize, then prioritize,” Day said. “What can wait? What do we have to do now?” You should notify Social Security and pension plans right away, she said.
“Typically, we get the estate attorney involved in the beginning” to help with these matters,” Day said. “Even people with modest means need to get some help, because there’s an awful lot of stuff you need to do.”
• Start a log. “Keep a journal and write down what you did on each date, because I guarantee you’re going to forget,” Rehl said. “If you call a life insurance company and they say they’re going to send you paperwork by a certain date, you have a record of that to prompt your memory.”
• Determine your money flow. Figure out what money is coming in and going out. “Often there is an influx of liquid money — insurance, death benefits, a paycheck, and she doesn’t know what to do with it,” Rehl said. “Take your time.”
Make a cash flow plan to ensure that bills are taken care of, the electricity stays on and the mortgage is paid, Bradley said. Make sure you’re covered for six months to a year, she said.
“Put it in a money market or a bank. It’s good for you to go to someone you trust to help handle your affairs, but you’re not looking for help to invest the money today,” Bradley said. “You’re parking it, in something ultra-safe. It doesn’t really matter if you’re earning any interest at the beginning. It’s not about putting the money to ‘work,’ it’s about keeping it safe.”
As long as you have enough cash to pay the bills, you can let it settle for quite a while, Day said. “But if [the widow] needs money, she needs to figure out where to get it.”
• Don’t be pressured. “Be aware of financial wolves — sales people who try to rush you to put your money somewhere,” Rehl said.
Beware of the insurance guy who brings the check and wants to sells you an annuity, Day said. “People read the obits and prey on widows,” she said. “A lot of people know that women have not been involved in the finances and want to ‘help her.’ ”
• Don’t be a purse. Some well-meaning family members may give you advice about where to put your money — investing in real estate, or a hot stock tip, or helping them start a business. “The widow needs to think about her own needs and her future,” Rehl said.
One widow, at her husband’s funeral, took the $50,000 in life insurance proceeds she received and handed a $10,000 check to each of her five kids, Rehl said. Afterwards, she thought, ‘I may need that money myself. There’s medical expenses coming in and bills that I need to pay.’
“I teach people to practice saying ‘That’s an interesting idea. I’ll think about it,’ ” when someone asks for money, Rehl said.
• Delay house decisions. Don’t just pay off the mortgage. Sometimes a widow will take a chunk of money and pay off the house, thinking she won’t have to worry about a monthly note, Rehl said. “It might not be the best decision because you’re taking a completely liquid asset, and turning it into an illiquid one,” she said.
“Most insurance companies are paying three percent right now, which is a heck of a lot better than a passbook savings account or money market,” Rehl said. “Pay the mortgage out of that account, until you decide what your long-range goals are.”
Don’t make major irrevocable decisions for up to a year, while you are getting settled, she said.
• Wait to retitle all accounts. Keep at least one joint account open for a couple of years, Rehl said, because you’re going to continue to receive checks in his or both of your names for a while.
“I received a check earlier this year, and my husband’s been dead seven years,” Rehl said.
If a widow is under 59½ and receives a beneficiary IRA, she should keep the money there so she can take it out without penalty, Day said. “If she rolls it into her own IRA, she will have to pay a penalty on any distributions she takes before age 59½.”
• Look for hidden life insurance. When Day’s dad died, she learned there were life insurance benefits tied to some saving accounts, credit cards and credit union accounts. “If you didn’t look for that, you wouldn’t know it was there,” she said. “People could miss proceeds they are entitled to, even VA benefits.”
• Realize your investment goals may change. Sometimes investments that were appropriate for a couple are no longer right for a single woman, Rehl said.
Couples often compromise on risk tolerance, and “a widow may have different ideas,” Day said. They may be more conservative, or a more aggressive investor.
Income may have decreased. “Social Security is going to be lower, pension may be gone and you may have to reconfigure investments to create an income,” she said.
Most women’s No. 1 concern is to be safe and secure, Rehl said. “But don’t make changes in the investment portfolio right away, so you have some time to think about it and determine your long-range goals.”
• Be aware of the ‘controlling from the grave’ factor. One widowed client, a woman in her 60s, was concerned because her husband had left a portfolio of aggressively invested stocks, Rehl said. But she resisted changing it. “She said, ‘If I sell it, it’s like slapping Jim in the face. It’s saying everything he did for us was wrong,’ ” Rehl said. “You have to realize you’re a single woman now, and your needs are going to change.”
Above all, take it slow. “Realize what you have started is a process of adapting to a new way of life,” Bradley said, “and adaptation takes some time.”