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How Financial Advisers Can Help Widows and Widowers

Financial advisers provide guidance and a sounding board as clients re-evaluate their future following the death of a spouse.

Financial advisers are there for their clients dealing with life-changing events -- and probably no life event is as traumatic for a client as the death of a spouse. Widowed clients need emotional support to cope with their loss but they need financial guidance that only a professional can provide.

According to the U.S. Census Bureau, as of 2015 almost 25% of all people who were 65 or older were widowed. With life expectancies increasing for both men and women, a widow or widower might live another 25 years or longer after the death of their spouse. With women outliving men on average, the number of women retiring now who will outlive their husbands for at least a few years is significant.

Starting the Conversation

The best time to begin the planning process for the death of a spouse is while both spouses are still living. While these conversations may seem difficult, planning and preparation is important.

Key issues for the couple include retirement and ensuring that all aspects of their estate planning are buttoned up.

On the retirement side, both clients should understand what assets are available for retirement. This might include 401(k)s, IRAs, or pension plans. It’s important to ensure that each plan or account lists the other spouse as a beneficiary.

As far as estate planning, key issues include proper beneficiary designations on life insurance policies and ensuring that all accounts and property are owned in a proper fashion to ensure the surviving spouse receives the assets with little or no hassle. If one spouse owns a business, or if it is jointly owned, it's important that proper succession planning has been done to ensure that the surviving spouse receives the maximum benefits from the business.

Whether or not the couple did proper planning, it's important for the surviving spouse to comprehend their new financial reality as soon as possible. Their financial adviser plays a key role in this process.

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Especially if the surviving spouse wasn’t fully involved in managing the couple’s financial affairs, there can be many issues to review and change. Immediate concerns include ensuring that all life insurance death benefits are claimed, any survivor’s benefits from the deceased spouse’s pension are taken (if applicable) and that any accounts or other assets are retitled into their name as needed.

Beyond this, the surviving spouse will need to do a full inventory of their assets, liabilities, monthly cash inflows and expenses. Depending upon their involvement in the couple’s finances while married, this may be relatively easy or it can take some work. It’s important they have a complete picture, especially in terms of their cash flow as a single person.

A financial plan will need to be completed for your client’s future as a single person. The details will vary, based on their age and other factors, but key topics to cover will include:

  • Retirement planning
  • Tax planning
  • Revising their estate plan
  • Investments
  • Long-term care needs

Use the financial planning process to help your client focus on the strengths of their new financial situation and areas that need improvement. This financial plan can be a great starting point on their financial journey as a single person.

As part of this process, it's important that you act as a sounding board for your client. Counsel them to avoid rash decisions. For example, it may or may not make sense for the surviving spouse to downsize their living arrangements at some point but encourage them to take some time before selling the family home to be sure this is the best decision for them.

Whether or not you move forward with the surviving spouse may depend, in part, on your relationship with that spouse when you served as the couple’s adviser. This is often an issue if the wife is the surviving spouse and she felt that you talked over her when working with them as a couple. She may consider switching advisers if this was the case. How you approach dealing with her as a widow may decide whether or not you retain her as a client. If the relationship doesn’t seem like it’s going to work, you can best serve her by recommending a more suitable adviser and helping to make the transition as smooth as possible.

When working with a widowed client, either the husband or the wife, it's important that your focus be on them in their new situation. Even if you were closer to the deceased spouse, it's all about the surviving spouse now and you need to show that spouse that you are focused on them and that you value them as a client.