Losing a spouse is a devastating experience. For many widows and widowers, however, this experience can become even more of a struggle depending on the financial implications of their partner’s death. Widows in particular often receive financial advice from friends and family members following their loss. This advice, however well meant, can have the potential to be very damaging. Moreover, the damage can often have long ranging effects.
When trying to deal with the loss of your spouse, clearing your mind in order to make objective financial decisions is difficult. As a result, you might find yourself relying more than usual on the advice your loved ones provide. However, it is important to be aware of the facts and judge the advice to determine whether it is worth following. The following are some of the worst pieces of advice you might expect to receive as a widow.
“Invest as Soon as Possible”
This piece of advice might be given in earnest by those who want the best for you. However, it can also hint that someone may be trying to take advantage of your situation. This is particularly dangerous if any of the following applies to you:
- Your spouse was responsible for handling your money.
- You are not familiar with financial terms.
- You received a large pay out from a life insurance policy.
- Your spouse left you a large estate.
Even a family member could start pressing you too hard to invest in a business or financial plan, assuring you that this is the best way to invest your money. You may be tempted, particularly if you are not used to financial management. It might seem as though your money will be taken care of, and you will be saved the worry of making your own plans.
Related article: Types of Investments
However, committing to one of these schemes before you thoroughly consider the implications can lead you to lose the money you invest. If in doubt, and especially if you are unsure of your own financial knowledge, hire a professional to help you find a place to invest your funds.
“Wait to Sell Your Home”
Selling your home is a big decision, and should not be made too quickly. You may feel compelled to sell your home and move on as soon as possible, only to regret it later. On the other hand, it is also possible that selling your home is better done early on, rather than waiting. The housing market in your area might be at the perfect point to sell your home, and waiting a year or two could mean you will lose out.
You may be told, after your spouse dies, that you can benefit from the capital gains on your home. Capital gains permits you to take a $500,000 profit, tax free, on a home owned by a married couple, as opposed to the usual $250,000. However, this rule only applies for two years after your spouse dies. If you wait longer than this, your capital gains tax exemption reverts to $250,000.
“Just Sell Your Assets”
Although selling your home may be best done sooner rather than later, selling all of your assets without proper consideration is a bad idea. Selling the items you shared with your spouse may in part be an emotional reaction, as you might want to rid yourself of the attached memories.
Related article: Evaluating Your Assets
However, turning all of your assets into liquid funds is not advisable. The sudden influx of cash that occurs after the death of a spouse may be seen as a silver lining by those giving you advice. However, suddenly having a large amount of money without proper financial planning in place can easily lead to unwise decisions.
“Give Money Away”
Your friends or family are unlikely to advise you to give away all of your money. However, others might suggest that you give away sizeable amounts to good causes. This could be anything from a younger family member who needs college tuition to a charity soliciting donations.
Choosing to share the money you were left after you spouse’s death can be beneficial, allowing you to feel comforted by helping others. However, giving away too much, too soon, could leave you with a cash flow problem.
Try to focus on the practical aspects of your money to begin with, especially if you are still learning how to manage your finances on your own. Make sure you know what your weekly, monthly and yearly expenses are, including bills and debt payments. Have a plan in place, and be confident that you can support yourself, before you begin making any donations.
“You Have to File Separate Taxes”
The first time you file taxes after your spouse dies, you may be told you now have to file separately. When you have been accustomed to the advantages of joint filing, this can be difficult. However, if your spouse died in the last year, you may still be able to file jointly, complete with exemptions for your spouse.
If your spouse died within the last two years, you might be able to file under “Qualified Widow(er)” status. While this status does not permit an exemption for your spouse, you still benefit from many of the advantages of joint filing. Later on, you can qualify for head of household status when filing if you have a dependent child in your home.
“You Can Rely on Social Security”
Social security provides a $255 death payment to qualifying widows. However, this small amount is unlikely to make a big difference to your expenses, such as the cost of a funeral. In addition to this, more than half of the deaths of social security-insured workers do not result in any payment. If you do qualify, and you still owe back payments on social security benefits made in the month your spouse died, the money is withheld.
Related article: What to Know About Social Security
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