Assisting the Newly Widow[er]ed

By Michael David Schulman, CPA/PFS

Editor:Theodore J. Sarenski, CPA/PFS, CFP, AEP

The loss of a loved one, especially a spouse, triggers many emotions: sadness over the loss, fear of the future, concern for the surviving spouse’s well-being, and anxiety over finances. This article discusses ways to aid clients who have suffered the loss of a spouse or other close loved one. (The article does not address premortem financial planning; hopefully, that has been taken care of.) reports that a common result of the loss of a spouse is physical exhaustion, which could result either from insomnia or depression. According to Don Harold Lawrence of Shackelford Funeral Directors in Tennessee, common mental reactions include confusion, depression, auditory and visual hallucinations, and doom-and-gloom negative thinking. These reactions, both physical and emotional, can be a serious hindrance to a surviving spouse’s ability to make intelligent, thoughtful financial decisions.

Important Papers

A key first step is to collect important papers and documents. If the deceased spouse died testate (i.e., with a will), it is critical to locate the will. Common places to look for a will include a safe deposit box in a bank, a safe or desk drawer in the house, or an attorney’s office.

It is strongly recommended that a will not be kept in a safe deposit box. The reason for that is, once the owner of the safe deposit box dies, the bank locks it. If there are no other authorized users, the bank will not open the box without a court order. Therefore, it is better to keep the will among personal papers in the house, with a trusted family member, or with the attorney who drew it up.

In addition to the will, other trust documents for which the deceased was trustee or a beneficiary need to be located. Just as with a will, trust documents will have instructions on how assets should be handled on the spouse’s death. Proper planning requires that these documents be available as soon as practical. If the surviving spouse is not the trustee, the new trustee needs to be contacted.

Collect day-to-day financial documents such as savings and checking account statements, credit card bills, utility bills, and loan payment books for mortgages and car loans.

If the deceased spouse was a participant in a retirement plan, look for the plan documents and, more important, the beneficiary designations.

Other documents to look for are business agreements, especially if they detail payments to a surviving spouse.

Managing Cashflow

In many cases, the surviving spouse lacks knowledge of the family’s finances. A good place to start with the spouse is to analyze the sources and amounts of recurring income, as well as any one-time income from the deceased spouse’s estate. Presumably, the surviving spouse knows his or her own income, so the goal is to find income of the deceased spouse. Also, and just as important, the practitioner is looking for income streams that will cease on the death of the deceased spouse, as well as income that will continue. The couple’s income tax return is a good place to start. Form 1040, Schedule B, Interest and Ordinary Dividends, lists the (taxable) dividends and interest earned in the past year and is a good guide to future income. The client’s brokerage statements should also detail dividend and interest payments, including tax-exempt interest.

Usually, rental income can be easily identified on Form 1040, Schedule E, Supplemental Income and Loss. If the property is jointly held or left to the surviving spouse, it is likely that the rents will continue. If the property is left to someone else, the loss of income should be accounted for. If the surviving spouse was not the “active landlord” in managing the property, inquire whether he or she wishes to become one. Perhaps, a better option is to either (1) retain a professional management company or (2) sell the property. Also, discuss whether the property needs significant improvements that could affect the surviving spouse’s cashflow.

If the deceased spouse had pension and annuity income, investigate these sources to see how the person’s death affects the income stream. First, identify all of the plans, policies, and contracts that exist and then examine, on a case-by-case basis, the options available to the surviving spouse. In most cases, the paperwork should be in the client’s files. A peek at the checkbook will tell whether payments are being made into existing contracts. This should help uncover policies. Often, a call by the client to the couple’s investment professional will produce the required list of contracts.

If the contracts are already producing income, a Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., from the prior year should have the information. Often, clients have old IRA accounts from banks that might no longer exist. Care should be taken to investigate and try to uncover as many of these items as possible. While each IRA might have a small balance, collectively they could be worth a significant sum.

If the deceased spouse was a partner/member/shareholder of a business, there may be payments due. Check the business documents.

Limited partnership interests owned by the former spouse and transferred to the surviving spouse might also be a source of income. Existence of these entities will appear on Form 1040, Schedule E. Again, it might be necessary to view the partnership agreements. Also, make sure that the partnership interest is properly retitled.

The Social Security Administration should be contacted if the surviving spouse is over 50. The survivor might be eligible for survivors benefits. More information is available at the Social Security Administration's website.

Once income from both recurring and one-time payments is determined, it is time to look at the outflows. A good place to start is the family checkbook, going back six months or so. This should capture most monthly payments as well as quarterly and semiannual payments. Certain recurring monthly payments may disappear. For example, if a second car is sold, the insurance will decrease, and the loan payment may vanish. It is surprising and disheartening to many surviving spouses, however, how little the monthly expenses actually decrease.

From a planning perspective, the difficult work begins when there is a monthly cash deficit. If the amount is small, a few simple lifestyle changes might take care of it. Other options are to use life insurance premiums to retire debt and/or invest in income-producing vehicles, either or both of which can resolve the shortfall.

In more serious cases, the surviving spouse will have to make major decisions. Often this centers on the principal residence (see “Housing,” below). A useful technique for addressing a cashflow shortfall is to divide the expenditures into two categories: those that are needed to maintain a lifestyle and those that are discretionary. Examples of the former are rent, utilities, food, and dry cleaning. Examples of discretionary spending are country club memberships, vacations, and lavish spending.

If the surviving spouse is living on a relatively fixed income, inflation must be factored in. Will inflation turn a surplus into a deficit in a few years? If that appears to be the case, does the client want to address it now or later, when it becomes a problem?


Another major issue facing a widowed client involves housing and what to do with the principal residence. In many cases, living in the existing home is just fine. This is especially true if there is no mortgage on the property. Complications arise when either the family is unable to pay the mortgage, or modifications to make the house habitable for older adults are financially impractical. What needs to be done? Options include taking a new mortgage on the property to pay for improvements, or selling the house and moving to a more appropriate facility. In the former case, will there be sufficient cashflow to make a monthly mortgage payment? In the latter case, given the present state of the real estate market, will a satisfactory price be obtained when the house is sold?

Perhaps, now is also the time to discuss alternatives to remaining in the couple’s old house. Options include adult housing, nursing homes, and moving in with the kids.

The Costs of Catastrophic Care

Clients equate “catastrophic care” with “nursing home” and have the same response to the topic, i.e., “It will never happen to me! I’m not going into a nursing home.” This is an interesting denial, especially in cases where they have witnessed the passing of a loved one who had a catastrophic illness. In any event, this is a topic that must be discussed because of the effect a catastrophic illness can have on an adult’s finances.

A one-month stay in a nursing facility in New York state costs approximately $10,737, according to’s website. This equates to $128,844 for a year and $309,226 for 2.4 years, which is the average length of stay in a nursing home (for current residents) according to the 2004 MetLife Market Survey of Nursing Home & Home Care Costs . Many adults claim to want to self-fund these costs. They view their retirement and invested assets as being there for exactly that purpose. In some cases, they are right, and out-of-pocket payment for such care will not significantly affect them. For many or most, however, exactly the opposite is the case. Their retirement and invested assets are being used to fund their current lifestyle, and there will not be enough left to continue doing so after paying for catastrophic care.

One option is to purchase long-term-care insurance. If the adult is currently insurable and the premiums will fit into his or her budget, this should be looked into. For those with equity in their principal residence, a reverse mortgage could provide monthly cashflow. However, reverse mortgages are extremely expensive and should be considered as a last resort.

Elder Abuse

According to the 2000 Census, one out of every seven Americans was over age 60. While those 60 and over comprise only 15% of the population, 30% of all cases of fraud are committed against them. The National Center on Elder Abuse’s National Elder Abuse Incidence Study in 1998 reported that in 1996 more than 550,000 adults age 60 and over suffered some type of abuse or neglect (including self-neglect).

Victims of fraud and abuse have been shown to have a shorter life expectancy than the nonabused. In addition to shorter life spans, victims suffer from the loss of their dignity, independence, homes, life savings, health, and security.

It is a sad fact that some Medicaid patients, especially the elderly, are physically and sexually abused or neglected by health care workers. In many cases, an abused person is totally dependent on the abuser and is afraid or physically unable to complain.

An excellent resource for the surviving spouse is a compilation of state and local agencies such as local aging and senior citizen centers and the local Social Security office. This list can be prepared at any time and should be reviewed and updated regularly.

Preparing for the Future

Finally, it is prudent to work with surviving spouses (and their children) to ensure that their financial documents exist and are in order. In many cases, these documents will need to be updated. Examples of such documents include:

  • A will;
  • A health care power of attorney;
  • A general power of attorney;
  • A living will;
  • Bank and brokerage statements;
  • Insurance policies, especially life insurance policies on the life of the surviving spouse;
  • Credit card statements;
  • Deeds and mortgage papers;
  • Business agreements (e.g., partnership agreements, shareholder agreements, buy-sell agreements);
  • Documents evidencing interests in retirement plans including corporate plans and IRAs;
  • Prior-year income tax returns;
  • Estate tax returns for the deceased spouse;
  • Social Security earnings record; and
  • Beneficiary designations for life insurance policies, retirement plans, annuities, and trusts.



Theodore J. Sarenski is president and CEO of Blue Ocean Strategic Capital, LLC, in Syracuse, NY. Michael David Schulman is the owner of Schulman CPA, an Accountancy Professional Corporation, in New York, NY. For more information about this column, contact Mr. Schulman at

Newsletter Articles


Directions in Individual Taxation

This article covers recent developments in the area of individual taxation, including the treatment of support payments and IRA and qualified plan distributions, the Sec. 469 material participation rules, and the taxability of state economic development credits.


2015 Tax Software Survey

See how nearly 5,000 paid CPA tax preparers rated the strengths and weakness of major tax preparation software products they used in 2015.