Death of a Spouse: Financial Steps You Should Take

Tip: If the deceased was already receiving benefits, do not deposit any checks received after death before checking with Social Security.

If your spouse was eligible, there are two additional types of possible benefits: (1) a death benefit and (2) survivor's benefits.

• One-Time Death Benefit. Social Security pays a one-time death benefit toward burial expenses. Complete the necessary form at your local Social Security office or ask the funeral director to complete the application and apply the payment directly to the funeral bill. This payment is made only to eligible spouses or to a child entitled to survivor's benefits.
• Survivor's Benefits for a Spouse or Children. If you are age 60 or older, you may be eligible for survivor's benefits. The amount of any benefits for which you will be eligible before age 65 will be less than any benefits due at age 65 or over. If you are under age 60, you may also be eligible for benefits if:
• You are a disabled widow, age 50 or older,
• You care for dependent children under 16 or disabled children.

Note: Children who are under age 18 or are disabled may also be entitled to benefits.

Tip: When applying for Social Security benefits, have available your spouse's birth and death certificates, your marriage certificate, birth certificates of any dependent children, Social Security numbers, and copies of your spouse's most recent federal income tax return.

Veterans' Benefits

If your spouse was a veteran who received a discharge other than dishonorable, you may be eligible to receive a non-service related death lump-sum payment of $300 for burial and funeral expenses and an allowance of $300 toward a plot in a private cemetery on deaths on or after December 1, 2001 ($150 is the allowance for deaths prior to this date). Further, if the death happened while the veteran was in a VA hospital or under VA nursing home care, some or all of the costs of transporting the deceased's remains may be reimbursed. Burial in a national cemetery is free to a veteran, his or her spouse, and dependent children. Veterans are also eligible for a headstone or grave marker at no charge. The funeral director can help you apply for these benefits or you can contact the regional Department of Veterans' Affairs (VA) office.

If your spouse was receiving disability benefits, you and any dependent children may also be entitled to monthly payments. Check with your regional VA office.

Employee Benefits

If your spouse was employed at the time of death, ask his or her employer about any survivors' benefits. Your spouse may also be due a paycheck for vacation or sick leave. If the employer provided life, health, or accident insurance, you may be entitled to receive payments under these policies. If your spouse belonged to a union or professional organization, find out if this organization offers death benefits for members. If the death was work-related, you may be entitled to worker's compensation benefits.

You should contact all past employers, including federal, state, or local governments, to determine whether you are entitled to any payments from a pension plan.

If your spouse was already retired and was receiving a pension, check with the employer to determine if you will continue to receive a pension payment, and in what amount. You should get professional guidance as to when and how to take any retirement plan distributions due your spouse or you.

Related Guide: Please see the Financial Guide: RETIREMENT PLAN DISTRIBUTIONS: WHEN To Take Them.

Related Guide: Please see the Financial Guide: RETIREMENT PLAN DISTRIBUTIONS: HOW To Take Them.

The Will

If your spouse had a valid will, try to find a copy of it. Check with your lawyer, family and anyone who might know where the will is kept. It may be stored in a safe deposit box, which is sealed at the time of death in some states.

Caution: Wills should not be stored in safe deposit boxes.

If your spouse did not have a will, his or her estate will be distributed according to state intestacy law. However, the state intestacy law will not apply to property where the title is in the name of the deceased and another person who has a right of survivorship. This property automatically passes to the co-owner.

Probate

Probate is the legal process of paying the deceased's debts and distributing the estate to the rightful heirs. This process usually entails:

• The appointment of an individual by the court to act as personal representative or executor of the estate; this person is often named in the will. If there is no will, the court appoints a personal representative, usually the spouse.
• Proving that the will is valid.
• Informing creditors, heirs, and beneficiaries that the will is to be probated.
• Disposing of the estate by the personal representative in accordance with the will or state law.

The personal representative named in the will must file a petition with the court after the death. There is a fee for the probate process. Depending on the size and complexity of the probable assets, probating a will may require legal assistance.

Assets that are jointly owned by the deceased and someone else are not subject to probate. Proceeds from a life insurance policy or Individual Retirement Account (IRA) that are paid directly to a beneficiary are also not subject to probate.

Taxes

There are various taxes that will have to be paid. Here is a summary.

• Federal Estate Tax. Estate tax is generally only due on estates exceeding the unified credit exemption equivalent, which for 2011 is $5,000,000. In 2010, there was no exemption amount. Estates over $5,000,000 are subject to 35% tax.
• State Death Taxes. State laws vary, but generally any estate which pays a federal estate tax must also file a state estate or death tax form and pay the state death tax. This amount is paid by the estate to the state in which the deceased lived.
• State Inheritance Taxes. Again, state requirements vary. Most states charge no inheritance tax.
• Federal and State Income Taxes. The federal and state income taxes of the deceased are due for the year of death. The taxes are due on the normal filing date of the following year, unless an extension is requested.

Tip: Professional guidance is strongly recommended in preparing the tax returns because the filing rules are quite complicated and many tax-saving opportunities might be overlooked by an unqualified preparer.

Changing Ownership Or Title

You may need to transfer ownership or change title of property or revise documents after a death. Here are some items that should be checked:

Insurance Policies

If you hold any insurance policies, you may have to change beneficiaries. You may decide that you no longer need to have the same coverage if you do not have dependents, especially in the case of life insurance policies. Auto insurance and home insurance may also need revision.

Your spouse may have medical insurance coverage through work. Under a federal law called COBRA, you and any dependent children may be entitled to continue under your spouse's work-related medical insurance plan for up to 36 months, provided you pay the premiums. On the other hand, you may need to purchase your own medical.

Tip: Check with the employer to see if you can continue with its group health insurance plan, which may be less expensive. Contact the company issuing the policy to make any changes or for more information.

Automobiles

The title of the car owned by your spouse may need to be changed. Contact your state's Department of Motor Vehicles.

Will

If your will provides for property to pass to your spouse, it should be updated. You may want to contact your estate planner for assistance.

Related Guide: Please see the Financial Guide: ESTATE PLANNING: How to Get Started.

Bank Accounts, Stocks, Bonds

If you had a joint bank account with your spouse, it will automatically pass to you. Check with the bank about changing the title and signature card on the account. To change stocks or bond tittles, check with your stockbroker.

If a bank account was held only in the name of your spouse, those assets will have to go through probate. An exception to this would be trust accounts.

Safe Deposit Box

In most states, if the box was rented only in the name of your spouse, it will require a court order to open the box. Only the will or any other materials pertaining to the death can be removed before the will has been probated.

Credit Cards

Credit cards held exclusively in the name of your spouse should be canceled. Any payments due on these credit cards should be paid by the estate.

Your spouse may have used credit cards in both your names or used cards listed only in your name. If so, make the payments due on these cards to keep your own good credit rating. Notify the credit card companies that your spouse is deceased and that the card should list your name only. Some people, particularly widows, may experience difficulties in getting a new card if they do not have their own credit rating.

Tip: When applying for a card, inform the lender about credit cards you shared with your spouse, even if your name was not listed.

General Finances

Debts owed by your spouse will be the responsibility of the estate and should be forwarded to the personal representative or executor who is settling the estate. However, you should pay debts which are jointly owed, particularly mortgage payments and utility or phone bills, in order to keep a good credit rating.

Caution: Do not immediately make permanent significant financial decisions, such as selling your home, moving or changing jobs. You will need some time to consider your situation before you can make these decisions responsibly. If at all possible, do not rush into a decision you might later regret.

Recommended Reading

• Many programs are available to provide support and assistance to the newly widowed. For more information and to locate a widowed persons program near you, write to AARP's Widowed Persons Service.
• A bibliography of books on the topic of widowhood, entitled Bibliography On Loss And Grief (D435D), is also available from AARP Fulfillment.
• For more information on probate, write AARP for a copy of A Consumer's Guide to Probate (D13822).AARP, 601 E Street, NW, Washington, DC 20049, 1-888-OUR-AARP (1-888-687-2277)
• Kenneth Morris, Alan Siegel and Virginia Morris, The Wall Street Journal Guide to Planning Your Financial Future, (Lightbulb Press, Inc., 1995), ISBN 0684802023.
• Scott Schmedel, Kenneth Morris and Alan Siegel, The Wall Street Journal Guide to Understanding Your Taxes, (Lightbulb Press, Inc., 1994), ISBN 0671502352.