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A Comprehensive Financial Guide for Recent Widows
If you find yourself facing un-anticipated widowhood, or standing at the end of a drawn out battle against illness resulting in your partner’s passing, it is inevitable that you will be feeling overpowering pain, fear and loneliness. In learning to peacefully
co-exist with your loss and adjusting to your new normal, you will encounter a number of financial hurdles that no matter your level of financial sophistication, may feel too high to jump. Women tend to live longer than men and the consequences are drastic, with half of surviving spouses outliving their husbands by 15 years. Widows may not be as familiar with investing, insurance policies, taxes or estate planning. If you are responsible for managing family financials, these matters will likely take a seat on the back burner as you enter a state of mental anguish. Your memory, attention span and decision making ability may be compromised while grieving your loss. However, the death of a spouse opens a floodgate of financial tasks, most of which are time sensitive. Here I lay out a comprehensive guide for recent widows who are tackling sudden independence and responsibility over a surge of important financial decisions.
Government agencies and other institutions will require a Proof of Death Certificate in administering your spouse’s affairs. To be safe collect 10-15 original copies from the funeral home you chose.
Will and Estate Settlement
You will need to contact the lawyer who developed your spouse’s will and identify the names and addresses of any beneficiaries named in the will to inform them of their interest. You may also hire an estate lawyer. It is likely that your spouse’s estate will require probate. Probate serves as proof to government and financial institutions that the will has been certified before a court and you are authorized as the executor to represent the estate. Probate requires court supervision of transfer of assets from the decedent to the inheritors of the will, after all creditors are paid off. This process will take longer and cost more than you expect - your lawyer will advise you on the fees associated with probate, especially if there is property located in different provinces.
As a first step toward identifying your financial priorities and possible lifestyle changes, ask yourself the following questions:
- What are my family’s financial assets?
- If any debts exist, which need to be paid on a regular basis or in a lump sum payment, and when?
- How much income do I have access to for the immediate future and in the long run?
- How much am I currently spending? What changes will be necessary in order for me to match my future expenses with my future income?
Next, begin to document what stocks, bonds, bank accounts, real estate, partnerships, retirement plans and insurance the two of you own, either separately or jointly. Below is a list of what you should be looking for and reviewing with your Financial Advisor:
Review your Assets
Check for Insurance Entitlement
- Locate bank statements, chequebooks, canceled cheques, savings accounts, and online banking access.
- Look for payments to an insurance company, brokerage firm or a secondary bank which may lead you to discover unknown assets, such as a safety deposit box.
- Immediately notify your spouse’s banking institutions and go over their ownership transferal requirements. Joint accounts that were listed under both your names will become yours upon death of your spouse, only requiring an account name change. Singularly owned accounts may only be granted to you upon completion of probate.
- Check your homeowner’s insurance to view which family assets are protected under insurance.
- Contact your provincial securities commission, or the Canadian Securities Administrators to determine your spouse’s securities holdings, if any.
- If your spouse has investments in private companies, notify them directly. Your Financial Advisor will help you to assess your options concerning holding or disposing of shares.
- Speak with the human resources department of your spouse’s last company concerning life insurance coverage, health benefits coverage, pension plans, profit-sharing plans, deferred-compensation plans, or other savings plans that your spouse was a member of.
- Speak with your Financial Advisor for guidance on administration of your spouse’s pension to complement your broader financial plan, for instance a lump-sum payment or regular income stream.
- Inquire about any payment due on their salary or commission, unused vacation, sick leave pay, stock options and whether the company pays a death benefit.
- Speak with your employer about life insurance benefits, grief counselling or any applicable human resource policies you feel appropriate to your situation.
- Check for RRSPs, RRIFs, TFSAs, non-registered investment accounts and any rollover accounts. You may be eligible for certain benefits if you are designated as a successor of the account. Talk to your Financial Advisor before transferring ownership on these accounts.
Review your Debts
- Life insurance: This will likely be your first and largest sources of cash flow following your spouse’s death. If you or your children are named beneficiaries of any of your spouse’s insurance policies, immediately notify each insurance company. You may contact them directly or with the aid of your Financial Advisor.
- CPP Death Benefit: This is a one-time, lump-sum payment to the estate on behalf of the deceased CPP contributor. If an estate exists, the executor named in the will or the administrator must apply for the death benefit within 60 days of the date of death. If no estate exists or the executor did not apply for the death benefit, the payment will be directed first to whoever covered the funeral costs, second, the surviving spouse and third, the next-in-line-kin. The payment is capped at a maximum benefit of $2500.
- CPP Survivor’s Pension: The amount that you receive as a surviving spouse or common law partner will depend on your age, how much and how long the deceased contributor has paid to the CPP, and whether you are receiving a CPP disability benefit or retirement pension.
- CPP Children’s Benefit: This benefit provides monthly payments to dependent children of deceased CPP contributors. To be eligible children must be under the age of 18, or between the ages of 18 and 25, attending a recognized school or university. Generally, the deceased contributor must have contributed to the CPP for a minimum of 3 years – speak to your Financial Advisor for more information on contribution requirements. The monthly children’s benefit is a flat rate adjusted annually.
- Pay off immediate expenses such as household overhead, credit card balances and funeral related costs. Your life insurance benefit or access to a line of credit can serve as a quick source of liquidity to cover these expenses.
- Identify any outstanding debts such as loans, lines of credit, mortgages and credit cards. Some of these payments may be eligible for insurance provisions that will pay off the remaining balance in the event of the borrower’s death.
- Review any medical expenses your spouse incurred. You may be able to deduct these expenses depending on the amount relative to your income.
- As an executor, you will be responsible for determining the tax liabilities of the estate and paying any taxes owing.
This process can feel overwhelming but acting immediately will save you irreparable financial damage later. Keep in mind that securing your financial position early can give you control over your life when you need it most, and serves as a first step toward regaining clarity. Obtaining an objective review of your finances from a Financial Advisor who can offer unbiased guidance and comprehensive suggestions is vital in learning to manage your new life. Contact a member of Faheem Allidina & Associates to review your situation in more detail.