How to protect finances if you're widowed

Losing a spouse can be emotionally devastating and is often a difficult time in which to make important life decisions. Yet it’s typically when many financial matters require your immediate attention—such as handling retirement assets, learning to budget on one income, making sure you're properly insured, or figuring out your government benefits. 

To help avoid making emotionally driven—and potentially harmful—financial decisions, it's important to be prepared should you find yourself suddenly single. Here are six important action steps that can help protect your personal finances.

1. Update your financial accounts 

When you lose a spouse, you'll likely need to change the registrations on any financial accounts that are owned jointly into your own name. Such ownership changes typically require you to provide your financial institutions with copies of your spouse’s death certificate. 

2. Divide or transfer retirement assets 

Pension and retirement account assets have their own set of rules when it comes to shifting ownership from one spouse to the other. 

Generally, upon the death of the account owner, retirement account assets pass directly to the beneficiaries (often the spouse, for those who were married) designated on the account. This is why keeping your beneficiary designations up to date on all retirement accounts is very important. Even if your will makes provisions for your retirement assets, your beneficiary designations will likely supersede them in most countries. 

3. Adjust your income and budget 

Chances are, when you're suddenly single, you may be taking a cut in your income, so you may need to adjust your budget accordingly. Start by listing your essential expenses (housing, food, insurance, transportation, etc.) and your optional expenses (dinners out, holidays, clothing, etc.). Try to match reliable sources of income (salary, government benefits, pension, etc.) to your essential expenses and see where you might trim your discretionary spending. Check out this article for more on managing your budget through difficult times.  

4. Evaluate your insurance needs 

What you'll have and what you'll need for insurance can change dramatically when you lose a spouse. It's important to take a careful look at all the different types of insurance that are available, to see where you may need to adjust your coverage. Be sure to review: 

Life 

Depending on where you live, if you are the surviving spouse and the beneficiary on your deceased spouse's life insurance policy, you may receive the proceeds with little or no tax due. But if you are still caring for children, you may want to either purchase or increase your own life insurance coverage to make sure they will be protected in the event of your death. Read more here on life insurance.  

Health 

Even if your spouse carried your family's private health insurance coverage, you may be able to maintain it for a period of time after becoming widowed. Read more on health insurance here.  

Disability 

We all hope we will never need it, but disability insurance is one of the least understood and most useful ways of protecting ourselves and our loved ones. What if you were injured or sick and couldn't go to work? Disability insurance is often offered through an employer, government, and/or private market, and is designed to protect you and your loved ones against lost income. Read more here on disability.  

Long-term care 

If you’re in your 50s or older, you may want to consider buying long-term care insurance to help keep potential costs of old-age home stays and home health care from depleting your income resources if you become seriously ill or injured. 

5. Understand outstanding debt 

After the death of a spouse, you should take inventory of all the accounts and loans that are open in your name and/or jointly with your former spouse.  

Unfortunately, there are circumstances in which a surviving spouse may be personally responsible for paying a deceased spouse’s debt, including credit card debt. Depending on where you live, if you jointly assumed responsibility for debt with your deceased spouse, the surviving spouse may be personally responsible for paying your deceased’s spouse debt.  

6. Maximise government benefits 

Even if you're now on your own, the government may recognise that you were once part of a married couple, and offers benefits to surviving spouses.  

You can't avoid the turmoil that comes with the death of a spouse but recognising how your personal finances might change could help you make thoughtful, rather than rushed, decisions and provide more solid financial ground as you transition to being single.