Financial Guidance for Recent Widows

Keywords: portfolio management, risk management, financial/
estate/retirement income planning, tax/debt management, charitable planning,
women investors, financial literacy, ESG/sustainable investing

A 2019 UBS Investor Watch Survey found that nearly 68 percent of married women from around the world believe they’ll outlive their husbands. And it’s a belief that’s grounded in reality—according to U.S. Census data, by 2060, women are expected to live longer than men by roughly four years. For advisors, these numbers point to a growing need to provide financial guidance to recent widows.

Losing a spouse can take a great deal of time to process emotionally. But when your role is to provide financial guidance for recent widows, it may be difficult to keep money concerns from being pushed to the back burner. You can do a lot to help a widowed client bring her finances into focus, even while keeping in mind the sensitivity of her situation. In the past 16 months, this need has become even more critical. Men are dying in higher numbers than women from COVID-19, leaving behind countless widows—yet another area where we’re seeing evidence of the pandemic’s impact on women.

As you know, there are immediate financial burdens to navigate, as well as the need to help ensure your client’s long-term financial stability. Here are some things to keep in mind.

Keeping a Focus on Finances

Many women who experience a husband’s death may be unprepared to handle the major financial issues that suddenly fall on their lap. That’s especially true for women who’ve abdicated control of financial planning and investing decisions to their spouse over the years.

Financial guidance for recent widows should include discussion of these topics:

Estate administration. It’s important to tell your client to obtain several copies of her husband’s death certificate. You’ll also want to review with her the status of existing estate planning documents. A list of assets and accounts can streamline the estate administration and ultimate distribution of the decedent’s assets.

Contact with the appropriate institutions is a starting point for knowing what documentation is required to transfer and distribute the assets of a recently deceased person. You can be involved as a point of contact and advisor of record where it involves assets under your management. You can also explain the 50 percent—or, if your clients live in one of the nine community property states, 100 percent—cost basis step-up on the value of the assets. Coordination with an estate attorney can help connect the estate administration to the distribution or transfer of the financial assets.

Short-term finances. After she has wrapped up her deceased spouse’s estate, a recent widow should evaluate her situation and how it has changed. In the short term, she will likely need to adjust her monthly and yearly budget and spending habits. For income needs, she could consider the social security survivor’s benefit, available to widows as early as age 60 on their deceased spouse’s record. This can create an early income stream, even though she may not be eligible to begin her own benefit until age 62. (Keep in mind that benefit reductions will likely apply for early claiming.)

The social security survivor’s benefit is separate from a benefit the widow may be entitled to receive based on her own earnings record, and surviving spouses can still independently decide when to take their survivor’s benefit versus their own. If her own retirement benefit will be greater than the survivor benefit after the addition of the 8 percent per year delayed claim credit, she could collect the survivor benefit first and then switch to her own benefit at age 70.

Life insurance held on the decedent can provide an immediate source of income and liquidity for a spouse who was not the breadwinner. Having a listing of the policies in force can quicken the payout process. Contact the decedent’s employer about group policies that may also provide a death benefit.

Long-term finances. The UBS survey also revealed that 76 percent of widows wish they had been more involved in making financial decisions when their spouse was alive. Moving forward, the topic of long-term financial stability should be of the utmost concern in working with these clients, in addition to getting a handle on their day-to-day financial needs. These discussions should include a review and update of their estate plans and beneficiary designations.

Another consideration that is sometimes overlooked, when providing financial guidance for recent widows, is the need for a new widow to take care of herself. The death of a spouse has been known to result in health issues for the surviving spouse, adding to what already may be a strain on her finances. Advise her on the health care options available, including Medicare plans and the possibility and cost of long-term care. Encourage her to sit with her family or those closest to her to discuss end-of-life medical decisions and funeral arrangements. Remember, the person who likely knew her best, her spouse, has passed away, and others need to know about her long-term care wishes.

Advanced Planning and Early Action Items

For any life event, financial advisors can help position their widowed clients for a more stable financial future by providing education and forethought. There is a burning need for financial guidance for recent widows, as many women in this position lack a comprehensive view of their finances—and the pandemic’s impact on women has heightened this need. In a 2017 Fidelity Investments survey, only 56 percent of widows believed they had a comprehensive financial plan in place (see below).

How Likely Are Women to Have Core Financial Protections in Place?
Have These Core Financial Safeguards in Place% of Single Women Overall% of Divorced Women% of Widows
Comprehensive Financial Plan283256
3-6 Month Emergency Fund535675
Will385581
Health Care Proxy354472
Estate Plan242964
Source: Fidelity, “Single Women on the Rise, but Too Often Missing Key Opportunities to Safeguard Their Futures”

 

In addition to encouraging estate planning, emergency savings, and health care plans, an advanced planning strategy should ensure protection against a loss of income with adequate insurance for health, life, and disability. Disability insurance can provide necessary income replacement when a single woman has no partner to step in, and a single woman with children can use life insurance to protect the needs of those under her care after her death.

Editor's Note: This post was originally published in October 2019, but we've updated it to bring you more relevant and timely information.

This material is for educational purposes only and is not intended to provide specific advice.

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