Are You Suddenly Single (Separated, Divorced, Widowed) and Need Financial Advice?
Few things in life are as difficult as losing a spouse, be it through separation, divorce or death. Yet, any such change will impact your financial plans, and, despite your grief, this is something that must be addressed.
In many relationships, one person may handle the finances for both, including retirement plans. If the spouse who did the financial planning is the one to depart, the remaining spouse is often lost.
Every financial tool we use to plan for retirement is impacted by divorce. State laws and the courts will determine how each is divided during the property settlement portion of the proceedings.
The death of a spouse may also result in the court’s involvement, though in a different way. Rather than dividing financial assets between two people, probate might determine which may be tapped to pay off liens held by the decedent. Working with a qualified attorney is helpful in such situations.
Understanding how your financial plans will change when you find yourself suddenly single is important to maintaining your retirement plan. At Lundervold Financial, some of the most important matters we help clients address include:
- Divorce financial planning
- Divorce finances
- What to do when a spouse dies
- Divorce pension payouts
- How to keep your pension in a divorce
*Lundervold Financial does not provide estate planning or legal advice, but we can work alongside clients’ estate planning attorney. If you are looking for an estate planner, we can refer you to professionals who provide the following services: trusts, probate, charitable giving, estate planning and tax planning.
What to Do When a Spouse Dies
When your spouse dies, there will be a barrage of pressing financial matters to attend to. Filing a life insurance claim is often the first financial issue, requiring a certified death certificate and signatures from all beneficiaries prior to disbursement.
Another important matter will be to report your loss to Social Security. Social Security will issue a death benefit of $255 to the surviving spouse if he or she was living with the deceased; or, if living apart, was receiving certain Social Security benefits on the deceased’s record.* Also, certain family members may qualify for benefits including children under 18 and other family members under special circumstances.
The holders of any other insurance policies, annuities, pensions and retirement funds must be notified. Each will send their own paperwork and most will require a death certificate. In fact, most funeral homes will acquire death certificates for you. Just let them know how many are needed. There is usually a small charge for this, but doing so can save you a lot of time later.
Eventually, your estate may enter probate. At this stage, any claims against the estate will be settled in the courts. There will need to be an executor of the estate to manage the process, which is often either the surviving spouse or a close relative. But your estate planner may also be named.
Amid all of this, you may have many questions, including how to create a budget. Whether we advised your spouse or not, feel free to phone us at 651.209.1906 for help.
*Social Security Administration. "If You Are the Survivor." https://www.ssa.gov/benefits/survivors/ifyou.html. Accessed Nov. 17, 2020.
Financial Planning After a Divorce
Financial planning after a divorce is especially tricky. Aside from the need to adjust your budget, any financial planning tools in place must be divided in accordance with the law. Each state differs a bit.
Minnesota has what is termed “equitable distribution” laws, but in actual practice operates more like a “community property” state, because of how state law defines marital property. In general, most property acquired during the marriage is considered to be held in common. This means that each spouse is generally entitled to half, though not necessarily. The final division is up to the courts to decide.
Again, we at Lundervold Financial are not permitted or licensed to give legal advice during a divorce; however, we can and will work alongside your legal team to ensure you have a financial plan for your future post-divorce.
Considering that the national divorce rate is 50%, millions each year face such changes to their retirement plans each year. Which financial plans and tools are affected by separation or divorce?
- 401(k) or other retirement funds
- Insurance policies
- Social Security benefits
When planning your divorce, your attorney will want a list of all financial tools, plans, investments and debts. You should gather them all, review each and write down any questions you have.
Some of the questions you may ask your attorney or financial advisor include:
- Can I keep my spouse’s life insurance policy in place?
- Who will pay the mortgage/keep the house?
- Can I still share my spouse’s pension?
- How do we divide our retirement accounts (401(k), IRA, Roth IRA, etc)?
- How will divorce affect Social Security?
Just remember, there is no such thing as a bad question. Write them all down, whether you think the question matters or not. You are going to need information, and more is always better.
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