Mainsail Financial Group

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Financial Steps to Take After the Death of a Spouse or Loved One

They say there are only two guarantees in life: death and taxes. We have many resources and information around taxes, and while death is never a fun topic to discuss, it is inevitable. Unfortunately, it also is an area we all have to deal with at some point. You may experience the entire range of emotions when a loved one passes away, so I have put together a checklist for after the death of a spouse, as well as some financial considerations to help guide you during this challenging time.

On a more personal note, my father passed away unexpectedly when I was in my 20s. We didn't have a plan for when he passed away, and as you can imagine, it was a very difficult time for my family and me. My sister and I found ourselves very emotional during this time. We had minimal direction on how to handle everything, whether it was making arrangements, taking care of financial obligations, or processing our loss. This was truly a time where some guidance could have gone a long way for myself and my family.

If I can provide any advice, it is to be as proactive as possible. The below checklist for after the death of a spouse or loved can be addressed in advance to help make arrangements and obligations easier on your family.

Take inventory of all of your spouse's accounts and assets

As the very first step, it's essential to take inventory. Find out where all accounts, assets, liabilities, insurances, estate planning documents, and payment obligations lie. Without a clear picture of the entire situation, you may find yourself making decisions in a vacuum that affects other assets. As you take inventory, it will be necessary to get a death certificate. It may be wise to get multiple copies while you are at it.

Notify institutions of the death of your loved one

Once you have listed out where everything is and requested copies of the death certificate, you should quickly notify each institution. Early notification allows these institutions to stop any activity and record the death to help you begin the next steps in that process. This stage is where the death certificate will come in handy. For those acting proactively, you may look into setting up a power of attorney and ensuring these institutions have this information so a loved one can see accounts before your passing.

Understand the tax impacts

Next, you will want to carefully review and understand all options with different accounts and any tax impacts involved. If your loved one had a sizeable estate, there might be some inheritance or estate taxes due. If your loved one had retirement accounts, there will be specific rules regarding your distributions options and may also lead to significant tax impacts. While you are still living, you may be able to minimize your estate or reposition your retirement assets to be more tax-efficient for your heirs. 


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As an example, I had a client that I started working with late in his life. He was diagnosed with a terminal illness and worked hard in the last couple of months of his life to position his assets for his children. Even with some proactivity, the kids were young and were not ready for these tough decisions at such a young age. When the funds came to them, they decided to cash out retirement accounts and unravel a lot of the estate planning work we had done. The impacts were still better than what would have been left without the work we did in his last few months, but the kids' emotional decisions led to significant tax implications that easily could have been avoided. Emotions can play a prominent role in decision-making, and even though I shared the tax planning considerations, they didn't want to hear it at this stage in their grieving process.

Strategize for what is next

What happens next can be the most challenging part. Often when we are dealing with the death of a loved one, the last things we want to think about are financial strategies. Unfortunately, taking time to be thoughtful in your choices is critical. The decisions made early on after a loved one's passing can have significant and long-lasting impacts, for better or worse.

As hard as it may be, it is important to try to think clearly during this tough time. It is critical to make sure you make educated financial decisions around taxes, retirement accounts, social security, pensions, and how these choices fit into you and your family's plan. If you have help, your advisor should be a part of step one and help make these other steps a bit easier. If you need help to make the best choices, an advisor can help you navigate the financial challenges during this difficult time while providing an outside perspective.

Unfortunately, death is a fact of life. When dealing with the death of a loved one, we can find ourselves in a very stressful time where even the most minor decisions can be extremely difficult. Some of these decisions can have long-lasting implications, so making the correct decisions with all information of the future impact is critical in your personal planning. Whenever possible, help your loved ones to address some of these issues proactively, as the more that can be addressed ahead of time, the more simple this will be on the family. Whether there has been some pre-planning or not, use this checklist for after the death of a spouse or loved one as a reference to be sure nothing is missed.

Learn more about life transitions and their impact on financial planning:

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