The Surviving Spouse’s To-Do List, Part 4: Change of Ownership

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Losing your spouse is one of the most difficult setbacks to overcome. Navigating through the different stages of grief leaves many feeling alone and afraid. This leads to vulnerability and, all too often, the widow(er) becomes the victim of crooks and/or the pressure to make decisions they do not fully understand.

Today, we’re sharing with you Part 4 of our 6-part series: The Surviving Spouse’s To-Do List. Each individual’s situation is unique, so this is meant to serve as a guideline. We urge you to wait before making any life-altering decisions and, of course, seek the advice of a trusted professional when it comes to insurance or financial matters.

Transfer of Ownership

If you are like most married couples, you and your spouse accumulated some assets together throughout the years. You likely also have several bills and policies that are in both your names. You will need to remove your spouse as a named owner/insured, when getting your affairs in order. Again, we urge you to seek legal advice before making any big changes, particularly before the estate has gone through probate. One wrong move could lead to hefty tax implications later.

Below are a few items that should be checked for ownership:

Motorized Vehicles, Recreational Vehicles, & Boats

If there are any vehicles or other assets titled in your spouse’s name only or, if you are jointly listed, they may need to be re-titled out of your spouse’s name. Contact the Department of Motor Vehicles in your state for rules specific to your region.

Credit Cards

If your deceased spouse held credit cards in his/her name only, those cards should be canceled. Typically, those bills will be paid out of the estate.

If you were listed jointly on a credit card, notify the company of your spouse’s recent passing. Ask them to remove her/his name from the account. Payments on these accounts should be made on time to ensure your credit rating doesn’t suffer.

Pro tip: Some consumers experience difficulties when trying to get a new credit card in their name. This typically occurs when all or most of the credit was listed under the spouse’s name only. When applying for a new card, let the lender know that you shared these accounts with your spouse. Do so even if your name was not listed on the account.

Bank Accounts

Joint bank accounts automatically pass on to you, as the surviving spouse. Notify the bank of the recent changes and ask them about the process for retitling and changing the signature card on the account. If you own any stocks or bonds, be sure to notify your financial advisor of your spouse’s passing.

If you spouse held any bank accounts in his/her name only, those assets will have to go through the probate process. Trust accounts are the exception to this rule.

Insurance Policies

Hopefully you have been able to locate the paperwork on any household insurance policies. Auto and homeowners policies will need to be revised to list your name only. Many homeowner insurers require a copy of the death certificate, before making any changes.

If you and your family are currently covered under your spouse’s employer-based medical coverage, notify the health insurance representative immediately. In most instances, you should be eligible for continued coverage through COBRA for up to 36 months. There is typically an increase in monthly premium, and you must remain up-to-date on your premiums to continue with this coverage.

Life insurance policies should be reviewed for any necessary changes. If your spouse was the listed beneficiary on a policy, contact your insurance representative to have that modified as soon as possible.

Pro Tip: Some employers allow the surviving spouse to continue with their current policy. Since your current premium is significantly less than COBRA, check with your spouse’s employer to see what their specific rules are.

Safe Deposit Box

While the rules vary from state to state, most safe deposit boxes require a court order to open, when rented in only one name.

Will

If your will provides for property to pass to your spouse, it should be updated. You may want to contact your estate planner for assistance.

General Finances

Like the credit cards, any outstanding debts/bills shared by you and your spouse should be kept in good standing. Anything in your spouse’s name should only be passed on to the executor of the estate, to be paid by the estate.

Do not immediately make permanent significant financial decisions, such as selling your home, moving or changing jobs. You will need some time to consider your situation before you can make these decisions responsibly. If at all possible, do not rush into a decision you may later regret.

As previously mentioned, we urge you to take your time making any significant decisions. Take a moment to grieve, review your current financial situation, and consider where you would like to go, moving forward. Your primary focus should be on healing from this devastating loss.

Stay tuned for Part 5, where we address the next items on your to-do list. Don’t hesitate to contact us with any questions, at 1- 866-450-2424.

The Surviving Spouse’s To-Do List, Part 3: The Estate

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Over the last few weeks, we’ve detailed the initial steps a widow(er) should take after the loss of their spouse. Part One tackled the paperwork that must be gathered, while Part Two offered advice regarding collecting survivor benefits. This week, we will address the steps regarding handling the will and preparing the estate.

Again, we encourage you to partner with a friend, family member, or trusted professional to assist you in making any necessary decisions during this difficult time. Anything that can wait – leave it until your emotions aren’t quite as high. Allow yourself the time the mourn. There are few things that can’t wait.

Estate Preparation

The first thing you will need to do is contact key people regarding the estate. Hopefully, you and your spouse worked together during the will preparation, so you are familiar with the attorney that drafted the will, as well as the contents of it. Contact the executor of the estate as well as the lawyer. If you are the executor, enlist the help of your estate attorney throughout the estate-settlement process.

Until you’ve had a chance to meet with your estate lawyer, experienced attorneys recommend that you not transfer any of your spouse’s assets into your name. Once you’ve done so, you lose the right to “disclaim” the property. When you “disclaim” property, those assets are transferred directly to your living heirs, protecting those assets from your federal and/or state-tax exemption when you pass away.

Pro tip: Before you agree to work with an attorney, inquire about their fees. Many will agree to a flat fee of a few thousand dollars. There are, however, many that charge based on a percentage of the assets in probate. Depending upon the contents of the estate, this could turn out to be a very large bill.

Probate

The term “probate” refers to the process of distributing the contents of the estate to its named heirs and paying any outstanding debts the deceased had at the time of their death. It generally entails the following:

  • Appointment of an executor of the estate. If a will was never drafted, the court will appoint a personal representative, generally the spouse.
  • Proving the validity of the will.
  • Notification of probate to all heirs, beneficiaries, and creditors.
  • Disposal of the estate, according to the contents of the will or state law.

Any assets that are jointly owned by the deceased and another party are excluded from the probate proceedings. Proceeds from an IRA and life insurance policy are also excluded when distributed directly to the beneficiary.

State and Federal Taxes

You are required to file a federal estate-tax return within nine months of your spouse’s death. State estate taxes and inheritance taxes could have an earlier deadline, so be sure to check the laws on a local level.

Summary of taxes that should be addressed and paid:

Federal Estate Tax: Estate taxes are typically only due on estates in excess of the unified credit exemption. The exemption amount changes each year, so check with your estate attorney for the most up-to-date information.

State Death Taxes: While the laws on this vary from state to state, beneficiaries are typically required to file a state death tax form or state estate and pay state death taxes. Taxes due are paid to the state in which the deceased resided upon their death and are dispersed directly from the estate.

State Inheritance Taxes: While many states do not require an inheritance tax, it is required in some states. Again, speak with an attorney or trusted tax representative regarding local law.

Federal and State Income Taxes: Taxes are due on the normal filing date of the following year. An extension can be requested if necessary.

Pro Tip: Save all receipts that are relevant to the estate, particularly if the estate’s value exceeds the estate-tax exemption. Funeral and post-funeral expenses are a legitimate write-off.

This is also a good time to revisit the subject of who will make financial and healthcare decisions on your behalf, should something happen to you. If your spouse was your representative, you will need to designate a new agent for your healthcare power of attorney, healthcare directive, and/or financial power of attorney.

Stay tuned for Part 4, where we address the next items on your to-do list. Don’t hesitate to contact us with any questions, at 1- 866-450-2424.

The Surviving Spouse’s To-Do List, Part 2: Collect Benefits

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Last week, we started our six-part series – The Surviving Spouse’s To-Do List, detailing the initial items a widow(er) should do after the loss of their spouse. While we encourage you to leave any big decisions for after you have had a moment to grieve, there are some things you will need to start doing in the months to follow.

Last week was about gathering paperwork. This week, it’s time to start thinking about what you need to do to collect survivor benefits. Let’s get started.

Enlist Help

Whether your spouse had a long battle with an illness or his/her death was unexpected, this is an incredibly difficult time in your life. To help you with the tasks and decisions that lie ahead, consider putting together a "financial support team." This could include a close family member or friend, a financial advisor, accountant, or attorney. Just make sure your team is comprised of individuals who understand and respect your views and can be trusted to help you make sound financial decisions.

Social Security

A widow(er) of full retirement age is entitled to 100% of their deceased spouse’s Social Security benefit. You can collect this survivor benefit before you reach retirement age, but you will only receive a percentage of the total benefit. If you were collecting spousal benefit prior to your spouse’s death, the survival benefit will take its place. Individuals who are younger than full retirement age will lose all the spousal benefit if they decide to wait until they are fully eligible. For more information or to view your (or your spouse’s) annual Social Security statement, log on to the Social Security website.

Life Insurance

If your spouse carried a life insurance policy, you will need to file a claim to receive the death benefit. You will need a copy of the death certificate to begin the process.

When filing the claim, you’ll be given some paperwork to review and sign. Read this document carefully, as you will need to make a decision regarding how you would like the funds dispersed. There are benefits and downsides to each option, so seek the advice of a financial advisor or attorney if you don’t fully understand your choices.

If you cannot find the paperwork for your spouse’s life insurance policy, go through your bank statements or check registers to see if any payments were made to an insurance carrier. It’s also a good idea to check with your spouse’s employer and any professional organizations they were a member of. If you are still unable to locate a policy, MIB Solutions' Policy Locator Service can often help find the information needed. Inquire about their fees before enlisting their help.

Employee Benefits

In addition to a life insurance policy, you may have other employee benefits due to you. This could include: unpaid salary, accrued sick leave and vacation, unpaid bonuses, stock, and/or funds from a medical flex spending account.

You will also want to check on pension benefits and your spouse’s 401(k). Notify the pension plan administrator of your spouse’s death as soon as possible. Some pensions reduce the pension’s payment amount once the primary has passed. If this is less than what you are currently receiving, you could be expected to send back any overpayment.

Health insurance is another item to consider. If you were covered under your spouse’s employer plan, speak with the plan administrator to review your options.

Veterans’ Benefits

Spouse’s of veterans are generally eligible to receive burial expense benefits in the amount of $300 and up to $150 towards private cemetery fees. If you wish to have your spouse buried in a national cemetery, this comes at no cost to you.

If, prior to his/her death, you spouse was receiving disability benefits, your family may be entitled to continue those monthly payments. Your regional VA office can help you with any questions you might have.

Stay tuned for Part 3, where we address the next items on your to-do list. Don’t hesitate to contact us with any questions, at 1- 866-450-2424.

The Surviving Spouse’s To-Do List, Part 1: Paperwork

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The death of a spouse is one of the most devastating events you will endure in your life. To make matters worse, you are asked to make significant decisions about your loved one’s burial and your financial future. Whether you were the financial decision-maker or not, the stress and sadness felt from this loss can make even the simplest of decisions feel paralyzing.

Our first bit of advice: don’t make any major decisions until you’ve had a moment to catch your breath and adjust to life without your spouse. Financial advisors typically recommend waiting six months to a year before making major changes to your financial portfolio. Trust me, there are a number of items you will be tasked with that should keep you busy in the coming weeks and months. Your primary focus – healing from this devastating loss.

While the next few months should be centered on healing, there are a few decisions you must make to get your affairs in order. Part 1 of our 6-part series addresses the first item on your to-do list – gathering your paperwork. Do not expect to tackle this entire list overnight; it could take months for some of this paperwork to come in. Use this as a guideline as you map out a plan of action for this new life you have suddenly been introduced to.

Gather Your Paperwork

There are a few documents you will need to gather in order to collect your life insurance death benefit, any additional benefits, and to update your estate.

  • Death certificate- Order 15 – 25 copies of the death certificate from the local health department or funeral home. Your life insurance, bank, and financial institutions will require this when claiming benefits or making changes. Certified copies can be purchased through your local health department or the funeral home.
  • Social Security numbers- You will need the Social Security numbers of surviving members of the estate, as well as your deceased spouse’s.
  • Birth certificates- Make sure you have copies of the birth certificate for each dependent family member. Contact the county or state public health offices where each child was born to obtain a copy.
  • Marriage certificates- This is required if you plan to collect any surviving spousal benefits and can be purchased from the County Clerk’s office where the original certificate was issued.
  • Military discharge paperwork- If your spouse was ever discharged from the military, you will need a copy of their discharge paperwork (honorable or dishonorable). A copy can be requested online through the Department of Defense’s National Personnel Record Center.
  • Insurance policies- Gather copies of each insurance policy. Review them for any potential benefits and/or necessary changes.
  • Will- Wills are commonly stored with an attorney, in a safe, or safety deposit box. If you spouse did not have a will, his/her estate is dispersed in accordance with your state’s intestacy law. Any property titled in more than one name will automatically pass to the surviving co-owner.
  • List of assets- Gather a complete list of assets. This should include items in your name, your spouse’s name, and jointly owned.

Unless you took an active role in the day-to-day finances, the paperwork could start to feel overwhelming. Keep your stress level at a minimum by developing a document storage system that is organized and safe, yet out of eyesight. Make notes on the outside of envelopes whenever necessary and keep a running list of all bills. Continue to pay outstanding balances as they arrive, but inquire about any items listed solely in your spouse’s name. Some balances, like federal student loans, are forgiven in the event of the borrower’s death.

Stay tuned for Part 2, where we address the next items on your to-do list. Don’t hesitate to contact us with any questions, at 1- 866-450-2424.

What to Do If You Can’t Afford to Pay Your Life Insurance: Part 2

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Last week, we shared some options regarding what to do if you have found yourself in a difficult financial situation and are unable to pay your upcoming life insurance premium. Today, we wanted to offer a few more alternatives, as well as review some commonly asked questions.

Before making your final decision, take a moment to speak with your insurance agent. Each insurer has their own set of rules and guidelines – some of our suggested options might not apply to you and, you never know, your agent may have some more tricks up their sleeve that aren’t covered here.

Apply for Consideration of a Change in Health Classification

Remember when you applied for your life insurance policy, you took a medical exam and answered a series of questions? There are a number of conditions that could have impacted your rate classification and, in turn, your annual premium.

Were you a smoker at the time? Did you have cancer, that is now in remission? Depending upon the pre-existing condition, you may be eligible for a change in rate class. If your application is approved, you could receive a more affordable rate on your current policy.

Life Settlement

As defined by the Life Insurance Settlement Association, “A life settlement is the sale of a life insurance policy to a third party for a value in excess of the policy’s cash surrender value, but less than its face value, or death benefit.”

The third party agrees to pay all future policy premiums and receives any available death benefits when the insured passes away. Unfortunately, this option is typically only available to insureds over the age of 65 or for customers whose policy has accumulated enough cash value to sell their policy. Since each insurer (and policy) has their own set of rules, contact your agent to learn more about this option.

Frequently Asked Questions: How Can I Make My Life Insurance More Affordable?

Question: I really want to invest in a life insurance policy, but don’t think I can afford it. What should I do?

Answer: We have a few suggestions that might help make your policy more affordable:

  • Purchase a policy as soon as possible – The younger you are, the cheaper your life insurance policy will be. Plus, you never know what kind of health conditions could pop up unexpectedly. So, if you’re young and you do not currently have a life policy, start shopping now. Our website offers multiple options for figuring a rate quote or, if you prefer to speak with a person directly, an agent would be happy to discuss your options with you. Just give us a call at 1-866-450-2424.
  • Buy a term life insurance policy – Insurers understand that consumers need options to fit every budget. Term life insurance rates are the most affordable option, with term periods lasting anywhere from one to thirty years. Just keep in mind that, when the policy term expires, your rates will be significantly higher than your original investment.
  • Inquire about payment plans – As a rule, your insurance premium will be cheaper if you pay the full annual premium upfront. There are, however, options to pay semi-annually, quarterly, and monthly. These payment plans often have processing fees tacked on to the total, so make sure you have all the information before making your final decision.
  • If you are a smoker, quit ASAP – We aren’t here to judge you; everyone has a guilty pleasure (or two). As a smoker, however, your rates are guaranteed to be higher than as a non-smoker. When you are ready to quit, write your quit-date on a calendar you can refer back to. Depending upon the insurer and policy, you can reapply for a lower rate in one to three years.

Question: What are some of the situations that could cause my life insurance rates to be higher?

Answer: As previously mentioned, smokers automatically earn a lower table rating, which results in higher policy premiums. There are a number of other pre-existing conditions, however, that could affect your table rating. To learn more about what to expect during the paramedical exam and what they are testing for, visit our blog here. If you feel you will classify as a higher risk, discuss your health issues with an insurance professional. They can assist you in finding the best policy for the very best premium.

Question: I’m still not sure I can afford the premium. Is there anything else I can do?

Answer: A term life insurance policy is very affordable. Consider sitting down and evaluating your budgetary spending. According to the National Resource Defense Council, each household spends approximately $529/year on unwanted snacks. Is there anything you can eliminate or cut down on in your monthly spending? Our blog, 7 Everyday Things That Cost More than Term Life Insurance, should be a great place to start getting ideas.

Before making any permanent decisions, remind yourself why you purchased your life insurance policy in the first place. While you may feel lost and desperate right now, this situation is temporary. Work with your agent and/or insurer to identify all options available to you before making your final decision. Best of luck to you!