Widowhood:

Be Prepared to Carry On
Chapter 11

Widowhood

Despite the trauma caused by the

death of a spouse, life goes on. And
often its lifes little details that can
cause the biggest hassles and trip you
up financially.
According to the Census Bureau,
women in their 50s and older are four
times more likely to be widowed than
men in the same age group.

Money Smart Women

If you follow the advise of the book,

you wont have to worry about any
major financial problems during those
first psychologically and emotionally
devastating months because plans you
have set in place will kick in
automatically.

Who to Contact

Your husbands Employer

Unpaid bonuses
Life insurance
Retirement benefits

The Social Security Administration and the

Department of Veterans Affairs
You should be eligible for SS Benefits if your
husband received them
If your husband was in the military you may be
entitled to funeral and burial benefits

Who to Contact

The issuer of your husbands life

insurance policy
Life insurance benefits are tax-free, and
eventually youll have to make some
decisions about what you want to do with
that money- but for now, that decision can
wait.

Make Settlement Easy

Probate is the procedure by which state

courts validate a wills authenticity, clearing
the way for the executor to collect and pay
debts, pay taxes, sell property, distribute
funds, and carry out other necessary tasks
involved with settling an estate the process
can be slow and expensive, and probate
fees can absorb as much as 10% of the
estates assets.
What is an executor?

Make Settlement Easy

Have a Will
Roughly 50 percent of Americans die without
a will --- this is known as dying intestate
In the absence of a will, theres potential for all
kinds of mischief. There may be disagreements
about how to divide property your husband held
in his own name. Creditors might show up with
claims you were unaware of. A hostile relative
might be able to acquire a share of the estate, or
a relative who is already well-fixed might take
legal precedence over needier kin. And you
might find yourself depleting the estates assets
by fighting costly court battles.

Make Settlement Easy

You will eventually have to notify

dozens of institutions that your spouse
has dealt with, each of these
institutions may request a death
certificate; make sure that you get a
dozen or so from the funeral director to
have on hand if you need them.

Sit Tight with Your Money and

Say No

Because of insurance settlements or

other inheritances, new widows often
end up with more money than theyve
ever had to deal with. You may be
tempted to spend it on a cruise or give
it to the kids, and youll be besieged by
people who want to sell you something.
Your best response: SAY NO and GO
BACK TO THE DRAWING BOARD!!

Take Your Time

Dont make any major financial

decisions for at least 6 months if not 1
year.
Your insurer can hold it in an interestbearing account until you want it or you
can keep the money in a very liquid
and safe investment that five you easy
access if you need it.

Manage Carefully

When you get the life insurance

benefits, be sure to set aside enough
to get yourself through the first year,
including any major expenditures you
can anticipate will be necessary, before
making any long-term investment
decisions.

Take a Lump Sum or Invest in

an Annuity?

Annuity
When you buy and annuity, you pay
money to an insurance company and
receive in return a guaranteed income,
starting right now or later on. The income
can continue for a specified period of time
or for as long as you live. The size of the
payments will vary accordingly.

Take a Lump Sum or Invest in

an Annuity?

Annuity
Have a tax advantage

No federal or state income taxes are owed on

any interest or investment earnings until the
money is withdrawn

Youll usually pay a 10% penalty tax on

amounts you withdraw or borrow from an
annuity before age 59.5.

Revisit Your Investment Plan

Consider your goals

Short-term, medium-term, or long-term

Retired with no dependents

A guaranteed lifetime income may give
you the security you crave

Young widow with small children

You may need to invest all or part of your
insurance proceeds so that the money
grows enough to cover the cost of college
for the kids

Get Support from the

Widows Safety Net

Social Security
You can start collecting widows benefits starting
at age 60, or age 50 if youre disabled
If over 60 you can remarry and still collect
benefits on your deceased husbands record.

Choose the greatest of the three

Your deceased husbands full benefits

50% of your new spouses benefit
You benefit based on your own work history
Note: for younger generations, dont count on Social
Security or at the very least --- count on minimilized
benefits.

Get Support from the

Widows Safety Net

Pensions
Survivors Benefits

Electing a survivor benefit may reduce the pension you

and your husband receive during his life, but it ensures
that you continue to get payments after his death
If you choose
Joint-and-survivor 100%
The payments he gets over his lifetime will continue
at the same level for you after he dies
This is the best option for a surviving widow
Joint-and-survivor 50%
Payments will be somewhat higher during his lifetime
but will cut in half after he dies

Get Support from the

Widows Safety Net

IRAs
Traditional

Taxable to you in your top tax bracket

Roth

Tax-Free

Wont you be glad you invested in an

IRA if you end up in this situation??

Deal with Death and Taxes

Insurance Proceeds
Proceeds you receive from your husbands
insurance policy are not subject to federal
income tax

Estate Tax
Unlimited Marital Deduction

Your husband can leave any amount to you, his wife,

without incurring the federal estate tax. Why? Because
it passes out of probate if your spouse is a US citizen.
Check with you lawyer to determine if you have any
special conditions that would not allow for your assets
to pass outside of probate.
He can also leave a total of $2 million to other
beneficiaries without incurring the estate tax

Deal with Death and Taxes

Income Tax
The chore of filing your husbands final income
tax return also falls to the executor of the estate
or to you. Youll have to report any income your
husband earned between the beginning of the
year and the date of his death. You will have to
file a final tax return. Yes, the IRS requires that
you file one FINAL return.

Medical Expenses
You can deduct medical expenses if they exceed
7.5% of your adjusted gross income

Deal with Death and Taxes

Capital Gains
When you inherit stock, mutual fund
shares, or other assets, the capital-gains
tax on any appreciation in the value of
your husbands share of the property prior
to his death is forgiven. Assets
experience a stepped up cost basis.

Capital Gain Tax

The Following Rules Apply:

If your husband held the asset in his own
name, you can sell it immediately and not have
to pay tax on the capital gain
If you owned the property jointly, you can sell
it and there will be no tax on his half of the profit.
If you hang on to the property and sell it in
the future, the capital gains tax on your
husbands share of the asset will be figured only
on appreciation since he died and you inherited
the property. This is one area that is beneficial.
It pays to stay alive though think of the time
value of money.

Take Care of Yourself

Widowhood/widowerhood is one of
those critical life events that require
major reassessment of your estate
plan.
For starters, you must redo your own
will and change the beneficiaries of
your insurance policies and retirement
plans. Go back to the drawing board
and re-think everything in your own
estate plan.

Dont Panic

Save for your own retirement

Dont leave estate planning to your

husband

Get your share of other benefits

Dont Stop Now!

Be sure to get plenty of copies of your

husbands death certificate when you
are making his funeral arrangements
Ask a family member or friend to make
some of the necessary business calls
Dont rush to invest insurance
proceeds or any other payout. Take
your time and DONT PANIC. If you
have been a Money Smart Woman,
you should be confident in your status.

Dont Stop Now!

File a joint tax return for the year in which

your husband died, use any balance left in a
flexible spending account, and take
advantage of any medical tax deductions
you may be entitled to. Another good case
for staying involved throughout your life in
the financial matters of your household.
Revise your own will and related
documents, such as power of attorney,
advance directive for health care, etc.
Dont overlook any resources that are
available to you such as organizations like
the Womens Philanthropy Board.