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Grief and Finances: Navigating Loss Without Losing Wealth

Grief and Finances: Navigating Loss Without Losing Wealth

September 19, 2022
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Losing a loved one, especially a spouse, is one of the most significant and difficult transitions most of us will face in our lifetime. Navigating all the many decisions that follow can be overwhelming when dealing with a flood of emotions. As we know, there are many stages to the grieving process, and our decision-making and mental health can change dramatically across the various stages. It is important to allow yourself time to grieve and surround yourself with those you trust. Since we never know when we may lose a loved one, preparing in advance for this inevitable life change can help alleviate some of the burden and worry. Having a professional financial advisor that you and your spouse both rely on can be critical in the days and months following a loss and can assist in keeping your wealth intact—something that is not your top priority during this difficult time.

If your spouse typically serves as the household CFO, meaning they are the primary person in charge of your collective finances, losing them can cause feelings of inadequacy and financial anxiety. Financial anxiety has been defined as “a psychosocial syndrome that results in someone having an unhealthy attitude toward thinking about, engaging with, or administering their personal financial situation in an effective manner” (Grable et al., 2015, p. 6). In many cases, this financial anxiety manifests due to underlying money beliefs that subconsciously cause you to want to avoid money or develop money-avoidant behaviors. Combining emotional grief with financial anxiety and stress can cause you to make poor financial decisions.

Women represent between 60% and 80% of the widowed population in the United States (Statista, 2021). They also make up the majority of the population that delegate financial responsibilities to their spouse, which can increase stress and anxiety when it comes time to settle their spouse's estate. Women who avoid tackling their finances not only put their wealth at risk but can also delay the development of financial confidence and a sense of empowerment. By putting a plan in place and finding a trusted advisor, you can avoid compounded feelings of anxiety and make better decisions with your money.

While it is common advice to avoid making significant life or financial decisions for the first year following the loss of a loved one, some important financial decisions must be made during the initial grieving period. The most crucial financial decisions you make in the first year of spousal loss may include filing insurance claims; deciding how to use, save, or invest life insurance proceeds; consolidating and rolling over retirement accounts; applying for Social Security survivor benefits; and attending to probate matters and budget rebuilding if income has changed drastically. Money-avoidant widowers may be especially fearful of handling personal finances and may resist for many months, stalling the financial planning process. Worse, inaction can cause adverse long-term financial consequences for the family’s financial future.

Womenare impacted the most as they make up most of the widowed population. A 2020 study by Streeter found that women suffered a 22% decline in income and a 10% loss in wealth, whereas men’s financial situation remained stable (Streeter, 2020).

Revising your financial goals, adjusting your financial plan, and taking control of your overall finances now can help lead you to a brighter future. To mitigate potential financial losses, here is a list of things to consider before you lose a spouse:

  1. Establish a Relationship With a Financial Advisor

If you do not currently have a trusted financial advisor, consider finding one together and establishing a complete financial plan. If you already have one, be sure both spouses are comfortable with your advisor and meet with them periodically.

  1. Gather and Store Important Documents

Property deeds, vehicle titles, official certificates (birth, marriage, etc.), passwords, the contact information for your attorney, insurance broker, doctor—all of these are things you can gather and put in the same, safe place now to make it easier for your loved ones later.

  1. Establish an Estate Plan

A will or living trust can be critical financial tools to help ensure that your wishes are carried out and your finances are protected. A trust can also help bypass probate and save both time and money. 

  1. Update Your Beneficiaries

If you have life insurance, retirement accounts, pensions, pay-on-death (POD) or transfer-on-death accounts, make sure your beneficiaries are up to date, as these accounts transfer according to their beneficiary designations; your last will does not control them. Any family situation changes are a good time to review your beneficiaries. This can help prevent assets from being distributed to the wrong person(s) and avoid unnecessary financial losses.

  1. Plan Final Arrangements

You are very vulnerable after the loss of a loved one and can easily make financial decisions based on emotions, especially when having to arrange a funeral. Planning ahead can help prevent you from making costly decisions. Pay-on-death bank accounts are often the best way to handle funeral expenses. This can all be included in your estate plan.

  1. Keep Everything Current

Once you put together your estate plan, you should revisit the documents regularly to ensure they still reflect your intentions.

 

Grieving a spouse or loved one is never easy and can make managing decisions seem impossible. Planning ahead with a trusted advisor can help minimize the stress, anxiety, decisions and potential financial losses you or your loved one will have to endure.