Financial advice for widows and widowers: a short guide
Losing a spouse or life partner is one of life’s most traumatic experiences. If you are reading this as someone grieving, first of all, we offer our deepest condolences.
Here at Castlegate, our Grantham financial planners have seen many widows and widowers navigate “life after death.” With everything you are dealing with, it can be difficult to make wise financial decisions.
Some people fall into the “grieving money mindset”, spending more than usual. Others ignore money, get rid of it or make hasty purchases.
It is important to look after yourself even as your world feels shattered. Below, we offer five tips to help widows and widowers keep control of their financial planning, even in sorrow.
Seek help
We know this may be a big ask. Many older people do not want to feel like a burden, especially to other family members. For some, the British “stiff upper lip” continues to exert a strong influence. It can be difficult to be vulnerable and ask for help, especially if you have built an identity of being resolute and unemotional when things are hard.
We strongly encourage mourners to speak to a trusted friend or family member. You do not have to carry things alone. In many cases, working with a grief counsellor and financial planner can help you adapt to your new life situation and avoid common money mistakes.
Assess your budget
When a spouse or partner dies, it can throw your monthly finances into turmoil.
Perhaps you lose a valuable source of income (e.g. a State Pension or salary). If your spouse had primary responsibility over the household finances, their sudden absence could leave you feeling overwhelmed and confused about what money is going in and out each month.
Consider taking a few hours to sit down with a hot drink and go through your budget. Often, this simple act is enough to give you greater empowerment and peace of mind.
Make a list of your regular outgoings and consider categorising them before adding everything up. Then, write down your source(s) of income before your spouse’s death.
Where was the money coming from – e.g. State Pensions, private pensions, annuities, savings, general investment accounts, ISAs, final salary pensions, rental income, royalties etc?
How might this “income picture” change now that your spouse is gone? If you are unsure, write down the questions you may need to answer. For instance: “How much is in my husband’s private pension(s), and how do I access the funds?”
Just making a start on these important questions will make a big difference. Later, a financial planner can help you identify any areas or questions you may have missed, working through the answers together.
List your assets
Income and assets are often interlinked, but they are separate entities that must be examined.
For instance, your late spouse may have had a State Pension that was a source of income when they were alive. However, this income will likely change after their death.
Some widows may be able to inherit an extra payment on top of their State Pension. However, the entitlement depends on your situation. Some people may not receive anything at all.
By contrast, if you and your late spouse paid off the mortgage on your house, then this asset will not produce an income (unless you get a lodger). However, the value of the home has important implications for your financial plan – e.g. funding for possible future care, equity release etc.
Some assets can be difficult to value (e.g. a small business owned by your late spouse). Also, your assets need to be offset against any outstanding liabilities, such as unpaid credit cards and other costly debts.
A financial planner can help you work through these complex areas.
Take a look at tax
The death of a spouse can radically change the surviving person’s tax position.
For instance, if you claim tax credits, you need to tell the Tax Credit Office about your spouse’s death within 30 days of the event.
Inheritance tax (IHT) is also very important to examine at this time. In particular, any unused basic threshold (nil rate band) from your spouse can be transferred to you.
This has important implications for your wider estate plan, especially if you hope to pass your wealth to loved ones when you eventually pass on too.
Speak with a financial adviser for personalised tax information and advice.
Final thoughts
There are other key financial planning areas to consider during bereavement.
For example, your insurance requirements may be different now. Policies such as critical illness cover and income protection may need updating. Also, if your spouse had life insurance, have you claimed any payout that you may be entitled to?
In all of these matters, we suggest taking your time. Be careful not to rush any big financial decisions when you are grieving. Avoid selling major assets or making large investments until you have spoken with a financial expert.
If you’d like to make sure you’re taking the right steps to safeguard your financial future, please get in touch.
