Most people feel uncomfortable talking about loss. Indeed, planning for the loss of a loved one seems morbid. However, dealing with a loss when you’re unprepared often makes matters even worse. In addition to the emotional toll it can take on you, loss can make routine decisions and responsibilities feel overwhelming.
While your finances may be the last thing on your mind after a loss, there are certain steps you must take to protect your assets and maintain your lifestyle. When it comes to navigating the loss of a spouse or partner–whether due to death, incapacity, or divorce–you need a plan.
#1: Navigating Loss Due to Death
According to research from Morningstar, 90% of women will manage assets on their own at some point during their lifetime. Although there are several contributing factors, one of the main reasons for this is that women tend to live longer than men. If you married at a young age, that means you may one day find yourself making important financial decisions alone for the first time.
When navigating the loss of a spouse or partner due to death, it can be helpful to understand how the estate settlement process works. First, you’ll want to locate your partner’s will, so you can file it with the local probate court. You’ll also want to have a copy of the death certificate on hand. If you worked with an estate planning attorney to develop your wills, they can likely help you locate and file the appropriate documents.
You’ll also want to gather any other relevant documents that can help facilitate the estate settlement process–for example, insurance policies and financial account statements. If you work with a financial advisor or CPA, it’s a good idea to contact them, so they can advise you on the next steps. These may include valuing assets, paying bills and expenses, and filing necessary tax paperwork. After the administrative work is complete, your partner’s assets can then be distributed to all beneficiaries.
#2: Navigating Loss Due to Incapacity
Losing a spouse or partner due to mental incapacity can be just as devastating as losing them to death. Unfortunately, cognitive disease continues to be an increasingly present risk among older adults. An estimated 6.2 million Americans age 65 and older are living with Alzheimer’s dementia in 2021, according to the National Alzheimer’s Association.
If you and your partner are still young and vibrant, it’s a good idea to plan for incapacity now, before it becomes a potential issue. For example, you should legally establish power of attorney and medical directives so that you and your partner can make decisions on behalf of one another if necessary. In addition, you may want to work with your financial advisor to determine if you should incorporate trusts into your estate plan in preparation.
You may also want to consider purchasing long-term care insurance while you’re both still in good health. Insurance can help defray the cost of in-home or outside care if your spouse becomes mentally incapacitated. This, in turn, can help alleviate your caretaking responsibilities as you adjust to your new role as the primary decision-maker.
If your partner begins to quickly decline before you have a plan in place, you may have to petition the court for guardianship and conservatorship. Guardianship allows you to make healthcare-related decisions on behalf of your loved one, while conservatorship gives you the legal right to make financial decisions for them. Since this process can be time-consuming and emotionally draining, it’s best to only use this option as a last resort.
#3: Navigating Loss Due to Divorce
While divorce looks different for every couple, all divorced couples must learn to adjust to their newfound independence. The process itself depends on the complexity of your divorce, as well as your relationship with your spouse.
In general, both you and your spouse will need to disclose your assets, liabilities, income, and expenses. Once again, a trusted advisor–either your attorney or financial advisor–can help you gather the information you need. They can also help you navigate complex financial decisions regarding spousal and child support, insurance, retirement, and Social Security benefits.
Preparing for the Loss of a Spouse or Partner
We all know that life can change unexpectedly, for better or worse. While it’s not always possible to emotionally prepare for the loss of a spouse or partner, you can take steps to prepare financially. Proper planning can help you avoid additional setbacks and maintain your lifestyle as you navigate an already stressful situation.
One of the best ways to prepare is to improve your financial literacy. In addition, if you tend to leave the financial decision-making to your partner, try to get more involved in the process so you can familiarize yourself with your finances. At a minimum, you should keep a record of all of your advisors, assets, and accounts, as well as online accounts and passwords, so you know where to start if you experience a sudden loss.
You Don’t Have to Go It Alone
It’s hard enough thinking about loss, much less the complex financial decisions that frequently accompany it. Fortunately, with the right planning, navigating the days, months, and years that follow a major loss is possible.
The good news is you don’t have to go it alone. A trusted financial advisor can help make the process a little bit easier. If Align Financial can help you navigate the recent loss of a spouse or partner–or prepare for the possibility–please don’t hesitate to contact us. We’d love to hear from you.