Estate Planning: Finances and the Death of a Spouse

The death of a spouse is hard enough emotionally. But add to it the financial issues that can blindside the surviving spouse and you could seriously compound the grieving process.

A spouse's death – and its impact on finances – is one of the toughest issues families have to confront.

Ideally, a married couple will have talked about all the components of their finances before one partner dies, but unfortunately that doesn't always occur.

"The spouse who takes the lead on family finances should make sure his or her spouse has everything needed to take the reins," said Chad Norfolk, a certified financial planner in Columbia, Md.

Here's what you need to share with your spouse:

1)  Everything electronic

Given the prevalence of electronic tools to manage finances, make a list of all computer logins and passwords for bank, investment, credit card, e-mail, cellphone and bill-payment accounts.

"Store it in a safe place and make sure your spouse can find it," Norfolk said. "If you don't have a list of login information, privacy rules can prevent or make it difficult to access a deceased spouse's account. If you handle your financial affairs online, it is crucial to provide a spouse who may be acting as your power of attorney with this information so he or she can access funds or pay bills while you are incapacitated."

2)  Key financial advisers

Compile a list of all professional advisers, such as your financial planner, tax professional, insurance agent, attorney and so on.

"Typically the best place for a spouse to start is by contacting a trusted adviser," Norfolk says. "Caring for a sick spouse or grieving from the loss of a loved one puts you under a lot of stress and turmoil. Leaning on your trusted adviser in difficult situations is a big part of why you pay them for their expertise."

3) Important documents

Make a list of the locations of all important documents including checkbooks, credit cards, Social Security numbers, passports, marriage license, divorce decrees, birth certificates, military discharge papers, tax returns for the last five years, deeds and titles to real and personal property, vehicle registrations and titles, mortgage and loan documents and statements, wills, trusts and safe-deposit box keys with access instructions.

4) Financial obligations

This is key because many surviving spouses wonder if they're on the hook for debt and other financial obligations their partner was paying.  With credit cards, the general rule of thumb is what's yours is yours, and not your spouse's.

"If the card was a spouse's card alone, with no joint account holders, then the debt is the spouse's debt only," said Victor Garza, financial education specialist at Consumer Credit Counseling Service of Greater Dallas. "Likewise, if someone cosigned, making it a joint-account credit card, then the cosigner would be responsible for the debt as well."

Still, just because your name isn't on the credit card, that doesn't mean creditors won't try to come after you, the surviving spouse. The typical practice is for a creditor to file a claim against the deceased spouse's estate, which is responsible for paying off any debts.  The tricky thing about Texas is that it's one of nine community-property states, which means that property acquired by either spouse during the marriage isn't separate property. The exception is gifts to each spouse, which are considered separate property.

Applying the community property law to debts after the death of a spouse can be stretching it, said Michael Wald, an estate planning lawyer at Underwood Perkins P.C. in Dallas.

"The law is that everything is presumed to be community property unless you can prove otherwise," he said. "So people, without thinking about it very much, jump to the conclusion that everything's a community debt." That's not necessarily the case. "Community property is not subject to a liability that arises from an act of a spouse," according to Darrell W. Cook and Associates, a Dallas collections law firm.

An individual is personally liable for the acts of their spouse only if the spouse acts as agent for the person or the spouse incurs a debt for necessities, according to Texas family law.


One Dallas resident found herself in such a dilemma after her husband died in January. They both leased their cars. His name was on the contract for a 2007 Mitsubishi Endeavor , and her name was on the contract for a 2009 Nissan Altima.

Ann, who didn't want her last name used, wanted to return one of the cars but ran into a roadblock. When she contacted Mitsubishi, she said she was told that her credit would suffer if she returned the car before the lease term ended. "It didn't matter to me which one I kept," Ann said. "I wasn't going to have my credit ruined."

Ann eventually kept the Mitsubishi and got out of the lease on her Nissan by using LeaseTrader.com, a Miami-based company that matches people who want out of a car lease with those looking to take over a short-term lease.

Ann said she figured the Nissan was more marketable because it was newer and had fewer miles than the Mitsubishi, but said that she was frustrated by the whole situation. "If someone passes away, then why can't you get out of the lease?" Ann said. Mitsubishi officials couldn't be reached for comment.

It's critical that spouses know what financial obligations they're both liable for, said Norm Lofgren, tax and estate planning lawyer at Looper Reed and McGraw P.C. in Dallas.

"You need to understand the financial circumstances of your family," he said. "You need to understand your tax returns, you need to understand debts, particularly those where both of you sign any documents."

It may not ease your grief over the death of your spouse, but at least it won't add to your worries.

SOURCE

The Tender Scar: Life After the Death of a Spouse
Surviving the Death of Your Spouse: A Step-By-Step Workbook (New Harbinger Self-Help Workbook)
Getting to the Other Side of Grief: Overcoming the Loss of a Spouse
Finding Your Way After Your Spouse Dies