Navigating widowhood is not easy. A common piece of advice given to new widows is, “Don’t make any decisions for a year.” If you’re a widow, you’ve probably heard that more than once. But is it true? In some cases, yes. In others, no. And when have you ever gotten a year off from decisions?
Widowhood is pervasive. It touches every aspect of your life. You also don’t want to go through widowhood alone. The average age of a widow is only 59. You don’t plan to be alone so soon. It makes sense to get some help.
You also have decisions to make when you may not be your usual decision-making self, and you are accustomed to making decisions together, with your spouse. But now they aren’t here to help. Another harsh reality is you don’t get to take a year off from some obligations. For example, you still must file your tax return every year. This is important to note because you can make moves that can help or hurt your tax situation.
Waiting can also rob you of your reality.
Losing a spouse is a profound and challenging experience that reshapes every aspect of your life. While the grieving process is unique to each individual, financial situations are, too. Which makes it important to consider blanket advice very carefully. What is good for some may not be right for you. Certain decisions are timely and demand attention sooner rather than later, even within the first year after the loss. Seeking some help along the way makes sense, too. Hiring experienced professionals can make things easier for you. Doing so can also allow you to avoid mistakes or miss out on opportunities. There are some crucial decisions widows should address to promote healing and pave the way for a more secure future.
Whose Help Should a Widow Seek Right Away?
Let’s review what kinds of professionals you might need right away.
- Grief counselor
- Financial planner/advisor
- Tax Advisor
Losing a spouse is painful. You no longer have your life partner. Your plans for the rest of your life may look very different. While they mean well, friends and family may not truly understand what you’re going through and do not have the expertise that you need to be fully supportive of you. Working with an experienced grief counselor can help. A grief counselor brings a greater understanding of your emotional state. She also can provide comfort, emotional support, empathy, and offer exercises or modalities that can help you feel and reconcile tremendous loss.
Navigating Widowhood: Hiring a Grief Counselor
A widow should consider hiring a grief counselor, as soon as possible. A post-COVID trend for new patients places you on a waiting list. While friends and family provide crucial support, a grief counselor brings specialized expertise to the table. Seeking professional help early on can make a significant difference in a widow’s ability to cope with grief, promoting a healthier emotional journey through the difficult process of losing a spouse. A grief counselor can help you in each of the following areas:
- Providing emotional support
- Navigating the grieving process
- Coping skills and strategies
- Avoiding more severe issues
- Helping other family members
- Crisis intervention
- Normalizing grief
- Creating a support network
- Setting realistic expectations
- Helping with long-term healing
Navigating Widowhood: Key Financial Decisions
Financial decisions and requirements to file tax returns don’t stop or get placed on pause when your spouse dies. Unfortunately, in some cases, you need to make decisions in a short period. Even if you have a strong understanding of personal finances, working with a professional can help. Not all the rules that apply to couples apply to widowhood. By engaging a financial planner promptly, a widow can begin to gain clarity surrounding her financial situation, make informed decisions, and lay the foundation for a stable financial future. This proactive approach helps mitigate financial challenges during a period of emotional upheaval, providing a widow with the support needed to navigate the complexities of financial planning after loss.
Areas Where a Financial Planner Can Help
A financial planner can conduct a comprehensive review of a widow’s current financial situation, including assets, liabilities, changes in her income, and expenses. This assessment is vital for understanding the immediate financial landscape. A financial planner can also provide help in each of the following areas:
- Budgeting and cash flow planning
- Emergency fund planning
- Debt management
- Investment review
- Estate planning updates
- Social Security and pension review
- Insurance evaluation
- Tax strategies
- Education and guidance
Please note that while we have listed a financial planner/advisor and a tax advisor separately, some advisors – such as those at Apprise – can help you with both your financial planning and your tax planning.
When new to widowhood, you may want to schedule a meeting with a Social Security survivor specialist. Social Security has a myriad of complex rules. You will want to maximize the benefits paid to you and any minor children who live with you.
Property and Housing Decisions.
Do you want to stay in your current residence, downsize, or explore new housing options?
Your family situation matters. Your home can also represent a form of security for you and your children. When you have school-age children, moving can be disruptive. Even if you know your current home doesn’t represent your ideal future living situation, you may want to wait until your children finish school before moving. While some may suggest changes such as painting or getting new furniture, those steps don’t work for everyone. Perhaps you know where you need to be and when. You may also know when it will be time to leave. Planning and understanding a move can be settling and bring peace of mind.
You may want to stay in your home to provide space for visitors (adults with children, parents, and others). Considering how often guests will come and how an empty home or a home full of memories makes you feel. Your current house was your home when you were a couple. But not your home. Staying or moving can be emotionally and financially overwhelming, especially on a reduced income. Plus, it can feel emotionally and financially overwhelming. Have you considered the amount of space and tasks your home requires? A bigger home takes time, attention, and care which may begin to feel overwhelming, too. The financial aspects can also be overwhelming for some.
At Apprise, we are here to support our clients, especially when facing a new beginning like widowhood. We carefully consider with our clients what is best for them NOW, while keeping our eye on serving their lifetime needs. At Apprise, we aim to support widows and show them the grace and compassion we hope they learn for themselves. We also aim to hold space for them to understand that being on your own when unplanned or sudden is not a small moment.
We can be present and lean in and step back; what’s the next right move? Does it align with her values? Have lasting repercussions? Is she running from or to? Does it represent a moment or forever? Is it necessary? Is it honoring him? Next, we witness the transition of how you saw yourself in your role as a wife. Is it how you see yourself now? Is it part of the woman you want to become? Finances represent the easy part of our work. Do they support the moment? Is there enough for the next right step? And how does this idea or move play out on your 100th birthday?
We never want our clients to experience a decrease in their lifestyle. However, widowhood could be a time when we need to really investigate and help you explore your financial reality. We encourage a widow to engage with her finances, for perhaps the first time or at least the first time on her own. We address a common worry called “bag lady syndrome” – the lady in the car under the bridge with the cats… and talk to the fear and address it head-on. Part of our job means we will be honest about the financial realities of if and when that may happen.
Do you need to rent rooms to keep your home? Is there a particular year when the exodus must happen? There’s no spouse with the history and experience of doubling the joys and half the burdens, any longer. However, guiding a widow is our honor. We know we fill in a place of reverence.
Home can be the center or the heart of a family. This one is a struggle for some and clear for others… And since our home is sometimes the largest asset of worth both personally and financially, and that can weigh heavily on a widow… the importance and pressure of being smart with decisions is not something you have to face alone. We have the utmost patience. If you can afford to wait, be still.
Tax Implications of Selling Your Home
There are important tax implications to consider as well. You want to avoid making significant decisions too quickly. But waiting too long can also have negative implications, especially from a tax perspective. As a result, property matters including ownership transfers or adjustments must also be addressed.
One concern when selling property is capital gains taxes. A capital gain is the difference between your “basis” in a property and its selling price. The basis is usually the purchase price of the property, which includes many purchase-related costs. You can also add the cost of any improvements. So, if you purchased a house for $450,000, made $50,000 in improvements, and sold it for $800,000 you would have $300,000 of gains ($800,000 – $450,000 – $50,000 = $300,000).
Couples who are married and file taxes jointly can sell their main residence and exclude up to $500,000 of the gain from the sale from their gross income. Single individuals can exclude only $250,000. Surviving spouses get the full $500,000 exclusion if they sell their house within two years of the date of the spouse’s death and if other ownership and use requirements have been met. The result is that widows who sell within two years are less likely to have to pay any capital gains tax on the home sale.
Step-up in Basis: An Example
If it has been more than two years after the spouse’s death, the surviving spouse can exclude only $250,000 of capital gains. However, the surviving spouse does not automatically owe taxes on the rest of any gain.
When a property owner dies, the property’s cost basis is “stepped up.” This means the current value of the property becomes the basis. When a joint owner dies, half the property’s value is stepped up. For example, suppose a husband and wife buy property for $300,000, and then the husband dies when the property has a fair market value of $500,000. The new cost basis of the property for the wife will be $400,000 ($150,000 for the wife’s original 50 percent interest and $250,000 for the other half passed to her at the husband’s death). In community property states, where property acquired during marriage is the community property of both spouses, the property’s entire basis is stepped up when one spouse dies.
Crucial Decisions to Make When Navigating Widowhood
1. Financial Planning.
Your circumstances change when you lose a spouse. You need to reassess and update your finances based on these changes. Consulting with a financial advisor can allow you to create a comprehensive financial plan that aligns with your individual needs and aspirations.
If your spouse had insurance, an advisor could help you determine if and how to best invest the proceeds. Where applicable, you also want to make the best decisions about account transfers, investments, and retirement benefits. These decisions can relate to your spouse’s retirement accounts, pensions, businesses, and taxable brokerage accounts.
2. Estate Settlement.
The probate process can be complex and expensive. You also need to address any remaining estate settlement matters. You may need to consult with legal professionals to ensure all legal obligations are met and any outstanding issues are resolved.
3. Career and Employment.
It is important to evaluate the impact of the loss of your loved one on your current employment as well as your future career plans. This can be especially true when you have young children. As a solo parent, it is likely your caregiving responsibilities may change. This can contribute to changes in workplace hours, responsibilities, or career paths.
4. Social Security and Retirement Planning.
When you lose a spouse, you can claim Social Security survivor benefits for you and any minor children (unless you are in the blackout period). Unfortunately, the rules are complex. Finding an advisor who understands survivor benefits can help you maximize the benefit to how it fits your circumstance.
You also want to review and update your retirement plan. Your plan should reflect the loss of your spouse as well as its impact on current and future income. The goals and objectives reflected in your life plan may change. Don’t be in too much of a hurry to make such decisions. It may take some time to decide what you truly want to do and what is the best strategic financial change.
5. Health and Well-being.
Make your physical and mental health top priorities. As noted earlier, we recommend working with a grief counselor. You can also consider engaging in activities that promote well-being and aid in the healing process. Following a regular exercise routine or other physical activity can reduce stress levels. This includes scheduling regular checkups and seeking support. Grief increases stress and can lead to physiological complications. Prioritize healthy living in this time of duress.
6. Parenting and Guardianship.
If applicable, make decisions regarding children’s welfare, education, and guardianship. You also want to ensure that your legal documentation reflects any changes in custody or guardianship arrangements. This can include updating wills, beneficiaries for your financial accounts, and possibly setting up trusts for minor children if they did not exist previously.
7. Social Connections.
Don’t forget social connections. Losing a spouse can be isolating and isolation can be detrimental to coping with significant loss. Engaging in community activities or joining a support group can help you maintain social connections. Fostering relationships that provide emotional support and companionship can help combat feelings of isolation or loneliness.
8. Self-Care and Personal Growth.
Think about exploring opportunities for personal growth and self-care through education, hobbies, or travel. You can prioritize your well-being. You can also embrace new experiences. These steps can contribute to the healing process.
A Look at Income Taxes
Widows can file jointly with the deceased spouse in the year your spouse dies. For the two years following the year of death, the surviving spouse may be able to use the Qualifying Widow(er) filing status if there are surviving dependents.
There are significant differences between the income limits in each tax bracket for those filing as single filers or married filing jointly. Tax planning strategies such as Roth conversions should be considered to take advantage of the higher income limits in the year your spouse dies.
Social Security Benefits
As discussed in this video, the Social Security Administration (SSA)needs to take steps to help ensure that widows know about their options to delay their application for retirement benefits. According to the video, based on a random sample of 50 beneficiaries, it is estimated that the SSA underpaid about 131.8 million to 9,224 beneficiaries who were aged 70 and older. They also estimate an additional 1,899 beneficiaries who were under age 70 will be underpaid about $9.8 million annually, beginning in the year they attain age 70.
Remember that you can collect Social Security benefits based on either your work history or survivor benefits. This is referred to as dual entitlement. Most claiming errors result from the misapplication of these rules. As noted, hiring a Social Security survivor specialist can help alleviate claiming-related issues. And allow you to maximize your benefits. A larger benefit can also make navigating widowhood easier.
Navigating Widowhood: Closing Thoughts
While grief has no set timeline, addressing these decisions within the first year after loss can provide a lot of long-term benefits. You may gain a sense of control and stability during a challenging period by engaging with a financial advisor/planner. Seeking support from friends, family, and professionals is essential in navigating the complexities of widowhood. By taking proactive steps, widows can lay the groundwork for building resilience and fulfillment.
If would like help navigating widowhood, please contact us. We would be honored to help.
If you would like to talk to us about creating your life plan as well as other financial topics, including your investments, saving for college, and/or saving for retirement, please complete our contact form or schedule a call or a virtual meeting via Zoom. We will be in touch.
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For firm disclosures, see here: https://apprisewealth.com/disclosures/
Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.
