When one’s partner passes away, the emotional stress can be overwhelming. However, in households where a good financial plan is not in place, this grief is often replaced quickly by despair about what the future holds and how to remain financially buoyant. Even when the overall economy was healthy, dealing with the death of a partner was not an easy task. With the current uncertainty, the toll is heavier.
So, in this article, we’ll discuss common issues that spouses face when their significant other passes away, and how they can better handle their affairs. In truth, the most viable solution is to put a solid financial strategy in place ahead of time. However, if that’s out of question, it is essential to have alternate plans.
Loss of benefits from Social Security
For couples who are no longer working and depend on Social Security for part of their income, the first big change is that two payments become one. This wouldn’t be a big problem if expenses also get divided by two at the same time. But this is rarely the case; rent or mortgage payments, insurance premiums, utilities, and transportation costs mostly remain the same whether it’s two people paying or one.
If the primary provider passes away first, the impact is even more pronounced since the larger payment is no longer available. In this situation, the surviving spouse needs to inform the Social Security Administration about their partner’s death. They can do this through the funeral director. By doing this, they ensure there’d be no issues with receiving benefits on behalf of the decedent in the future.
When kids younger than 16 years are involved, it is essential that the surviving spouse starts an application to get extra benefits early. The benefits start to count from the application date and not the day of death.
Lack of adequate income
This point is similar to the one above, but with more serious consequences. In homes where one partner is working and the other is not, the survivor may struggle to make ends meet. And occasionally, they’d need to return to work to meet their needs. That’s why it is advisable that a financial plan is in place to help loved ones cope better with the loss of income. For instance, a fixed-index annuity can be used to replace primary income when the breadwinner dies. You can check out this post to learn more about fixed-income annuities.
Handling taxes
Thankfully, taxes often provide relief for surviving spouses. Some people found their tax burden significantly reduced after their partner’s death, or even in some cases, that they no longer needed to pay income taxes. How is this possible? Well, if the decedent was in a high tax bracket, the survivor’s Social Security, pension payments, and retirement income may not add up to the standard deduction (or itemized deduction) amount. Alternatively, even if their income exceeds that amount, they may have dropped to a lower tax bracket.
It is important to note that the surviving partner’s filing status will not remain the same. While they can file jointly during the year their spouse died, they won’t be able to do so moving forward. If the survivor is supporting any kids, they will be able to file as a qualifying widower for two years following their partner’s passing. Afterward, their status either changes to head of household or single – with each bringing different scenarios.
It is never easy to lose one’s partner, and it is the worst possible time to be worried about finances, Social Security, or taxes. That’s why everyone must start planning towards a future where their spouses and loved ones have adequate financial coverage. You can do this through your retirement plan and by working with a financial advisor.
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