THE BLOG
03/29/2012 11:07 am ET Updated May 29, 2012

A Financial To-Do List for the Recently Widowed

Losing your spouse is one of life's most stressful events. Ironically, it's during that time of grief, when you're probably not thinking clearly or focusing on such matters, that you're expected to make many important financial decisions that will impact the rest of your life.

Although there are certain actions you must take right away to ensure your current financial security, several major decisions with long-term consequences should probably be postponed until you've had a chance to reflect on how -- and where -- you want to spend the rest of your life.

Right away. If your spouse primarily handled the finances or you're not up to the task alone, ask a trusted relative or friend to help you sort out the following information:
  • Gather legal and financial documents that will give a better sense of where you stand financially, including: wills, trusts and powers of attorney; mortgage and car title; recent tax returns; bank, loan and credit card statements; safe deposit box contents; insurance plans; and income sources (pay stubs, Social Security, savings, retirement and investment accounts).
  • Compile outstanding bills and monitor the due dates to avoid late charges or penalties for: utilities; mortgage/rent; health, auto and homeowners insurance premiums; car, student and personal loans; and credit cards. If you use automatic bill payments, load the bank account with enough money to ensure you don't trigger an overdraft.
  • If your spouse was still working, contact his or her employer regarding unpaid salary, benefits, life insurance and retirement accounts. This is particularly important if they provide your health insurance. Investigate your options under COBRA continuation coverage.
Sooner rather than later. Other critical actions to take within the first month or two include:
  • Contact companies where you have joint accounts and convert them to your name only. You'll be asked to provide copies of the death certificate, which can be obtained from the mortuary or the county health department. Also close any accounts that were in his or her name only that you don't wish to maintain.
  • If your spouse was eligible for Social Security, you and your children may qualify for Survivor Benefits. Make an appointment with your local Social Security office by calling (800) 772-1213 or via their search engine.
  • Similarly, if your spouse was a veteran, contact the Department of Veterans Affairs regarding possible survivor benefits.
  • Contact your spouse's former employers to see if he or she was eligible for retirement benefits you're not aware of. For help finding old pensions, you can also try the Pension Benefit Guaranty Corporation. The National Registry of Unclaimed Retirement Benefits can help locate unclaimed 401(k) plan benefits.
  • Pay attention to income tax filing dates, particularly if you file quarterly estimated taxes. While the IRS may waive penalty fees on a late filing or underpayment related to your spouse's death, you're still responsible for any taxes or interest owed. Call 800-829-1040 or read Filing Late and/or Paying Late for more information.
  • The IRS considers you married for the whole year in which your spouse died for tax-filing purposes, provided you don't remarry that same year.
  • If your spouse's death was accidental or sudden, there may be additional benefits attached to credit card or bank accounts, union or professional organization memberships, or home, auto or health insurance policies. It may be worth the extra research.

After the dust settles. Most experts advise against making any irreversible financial decisions until you've had a chance adjust to your new status -- six months to a year, at least. For example, some people rush to pay off their mortgage, only to discover later that the house is too large or they can't afford the taxes and upkeep. Others feel pressured to move closer to family members, only to discover that they miss their former life.

A few long-range planning suggestions:
  • Rewrite your will and other documents that outline how you'd like your financial and health matters handled if you die, become disabled or become seriously ill. Chances are your spouse was your main beneficiary and decision-maker.
  • Until you have a better handle on your new living expenses, live frugally -- especially if you're used to having two incomes.
  • Don't be rushed into using life insurance payouts to buy annuities, stocks or other investments, especially if you're not a savvy investor. Consider parking the money in savings, CDs or money market accounts until you feel qualified to decide.
  • Hire a financial adviser. My previous blog, Financial Planners Not Just for the Wealthy, contains tips on choosing the right adviser for your needs.
  • Free or low-cost legal assistance is often available for lower-income people. A few helpful sites include LawHelp.org, Legal Services Corporation and the American Bar Association.

One final caution: Obituaries often elicit legitimate condolences from friends and past acquaintances. But they also sometimes trigger solicitations from companies hawking home repairs, annuities, reverse mortgages and other products and services. Even if you do want or need these services, tread very carefully and do your due diligence before signing anything.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial adviser for specific information on how certain laws apply to you and about your individual financial situation.

To participate in a free, online Financial Literacy and Education Summit on April 23, 2012, go to Practical Money Skills.

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