Estate Planning for the Surviving Spouse

“In this world nothing can be said to be certain, except death and taxes” – Benjamin Franklin

While death and taxes are inevitable, there are ways that you can prepare yourself and your family to better manage them when they occur. Estate planning is one way to do this.

To begin, let’s clarify what exactly estate planning is.

Estate planning involves creating a thorough plan for how you would like your assets to be preserved, managed, and distributed after you die.  Not only is estate planning a complicated process, but it also can prove to be quite emotional as it forces you to take a holistic look at your life and face your own mortality. The fact of the matter remains, however, that estate planning is crucially important.

Several duties of developing an estate plan include: taking an inventory of all assets and liabilities belonging to the individual, designating beneficiaries of your estate, setting up trusts, and settling taxes on your estate. A comprehensive estate plan ensures that your money goes where you want it to and your family is cared for.

While it is advised that both spouses remain fully aware of their financial situation, it is common for one partner to be more actively involved in the family’s finances. In those situations, what happens when the spouse that is more financially astute dies first?

If you are the surviving spouse, here are some next steps that can help you prevent or manage any issues that can arise with the estate planning or settlement process.
 

Get the full picture

The first thing you should do is reach out to various professionals to collect information.

It is very important that both you and your spouse have a solid relationship with any professional that helps to manage your finances. The Wall Street Journal reported that a significant percentage of widows – close to 70% - end up firing the financial advisors they inherit. This can greatly increase the stress, time, and money involved with managing your partner’s death and updating your estate plan. This is why it is important for both spouses to be actively involved in your family finances and to build a relationship with your financial advisor prior to your spouse’s death. 

Financial advisor. If you are the surviving spouse, it is incredibly important to gain a holistic understanding of your entire financial situation if you don’t already have one. This means becoming aware of all assets and income, as well as all debts and liabilities. Your financial advisor will be able to provide you with the information you need to get up to speed with your personal financial situation.

According to Susan Bradley, founder of the Sudden Money Institute, the first three things you need to understand about your finances before making any big decisions are:

1. What your family’s financial assets are and what debts, if any, need to be paid on a regular basis or in a lump sum, and when.
2. How much you will have to live on in the immediate future and in the long run.
3. How much are you spending now and what changes, if any, will be necessary in the way you live in order to match your future expenses to your future income.Gaining an understanding of these three foundational issues can allow you to feel financially empowered and guide you in taking the next steps.

Estate Attorney. It is a good idea to hire an estate lawyer to help you sort out all the details of your estate plan. Their duties can include drafting trusts, strategizing how to reduce estate taxes, helping to resolve potential guardianship issues, and engaging in legal processes if they arise. An estate lawyer's specialized knowledge in this area is very valuable when you are developing an estate plan or going through the estate settlement process.

Accountant. Once again, depending on your level of financial literacy, it might be a good idea to consider hiring an accountant to help you file your spouse’s final income tax return.

This final tax return can be complicated as it can include items such as proceeds from life insurance, retirement account values, income received from stocks or securities, among several other things. Tax can be deferred if the money is held in a spousal trust or transferred to the surviving spouse.
 

Will and beneficiaries

Having a well-prepared will can make your partner or executor’s life significantly easier when you die. This is something that you and your partner should be proactive about - periodically updating it to account for newly acquired assets or changes in beneficiaries. The document generally addresses the majority of your assets including property, prized possessions, account balances, and items of sentimental value; and outlines who is to receive them upon your death.

If your partner dies without a final will, also known as ‘dying intestate’, things can get messy. Provincial legislation differs, but generally, in Canada, the division of the deceased’s estate will be decided by the province. If your partner dies without a will or designated executor, you can submit an application to the probate court to become a voluntary administrator. A voluntary administrator essentially assumes all duties that would be performed by the executor. This can be a lengthy and complicated process, however, so it is important that you and your partner take the initiative to create one before.

It is not only your partner’s will that needs to be considered upon their death, but yours, as well. You likely have your spouse as a beneficiary for some of your estate in your own will. Review all beneficiary designation forms for retirement accounts, bank accounts, property, and life insurance to ensure that your will is up-to-date.

Similar to the beneficiaries listed in your will, if your spouse was listed as a durable power of attorney, medical power of attorney, or digital power of attorney for you, this needs to updated, as well. These power of attorney documents authorize a named individual to act on your behalf in regards to your personal, financial, medical, and digital affairs, in case you are no longer able to. Ensure that your newly chosen individual is another person you deeply trust.

Primary care physicians tend to have copies of medical power of attorney documents. If you do make changes, ensure that you redistribute updated copies to these parties so they can be appropriately filed.
 

Canada Pension Plan survivor benefits

Consult with your accountant or estate lawyer about applying and claiming monthly survivor’s benefits through Canada Pension Plan (CPP). The amount you receive is determined in part by the amount your spouse would have received upon retirement. More information on how and when to apply can be found here.
 

Retitle bills

Retitling household bills such as internet and utilities that were in your spouse’s name will help to avoid the potential for future billing or payment issues. Further, surviving spouses have also reported that simply retitling monthly bills helped to reduce some of the emotional impact of their spouse passing away, as they weren’t constantly reminded about their loved one’s passing.
 

Managing the death of your loved one is difficult enough, as is. Do yourself a favour and take proactive steps to reduce the financial, legal, and logistical stress that accompanies their passing. Understanding your family’s financial situation and being adequately prepared with a will and estate plan can take some of the pressure off you and allows you the opportunity to properly celebrate your spouse's life.