Money mistakes to avoid after death of a spouse
Dear Dr Pesa,
I am a 32-year-old mother of two and I have recently been widowed. My late husband and I ran several businesses together and made investments which brought in fairly good returns. We have plenty of savings to cushion us for a while, but I'm worried about spending it the wrong way. My husband was the one who mostly handled the money, businesses and investment. I don't want to make mistakes. Please help.
Dear Monica, ?
I'm sorry to hear about your loss. The demise of a spouse is a painful experience which can wreak havoc in one's life in more ways than one. When it happens unexpectedly, the people left behind are thrown into a period of confusion. It might seem too soon to think about money matters - which is true in most cases.
But at some point, you will have to pull yourself together and deal with financial matters. When clouded with grief, many widowers and widows tend to act emotionally when it comes to money, which can lead to some serious financial missteps. However, when you know what to look out for, you might be able to avoid them.
Making major money decisions
When your partner passes on, some major decisions and changes are inevitable. However, some decisions which seem smart and logical might not be so in a few months' time. When you're grieving, your mind functions differently and it's not the time for major decisions. For instance, you might want to immediately pay off a mortgage, sell an important asset (think land, house, company, or car), quit your job, or buy new investments.
When you sell off an asset, you will probably have too much liquid cash and are likely to spend it on unnecessary expenses. Many widows and widowers waste money on vacations, home improvement projects, shopping trips, and luxury items.
To avoid having regrets, experts recommend that you keep off major financial decisions for at least a year. Pay your regular bills, file for death benefits, and keep sufficient cash for your daily needs. However, this rule isn't set in stone. The point is, think carefully before making any major financial decision.
Being too trusting
After losing a spouse, it is understandable that you have your guard down. You might therefore end up trusting too quickly and blindly. Many con men know how vulnerable one is soon after their partner passes, which makes it an opportune time for them to pounce on their unwitting victims.
When grieving, be wary of "sales people" or "financial advisors" who suddenly appear with seemingly great deals and want to befriend you. Some might even present as romantic interests. In cases where the dead spouse was the major decision-maker in financial matters, one is especially likely to fall for these financial predators.
Not collecting your money
In the fog of grief, material wealth might seem insignificant. Many grieving spouses end up not collecting money which belongs to them. These might be death benefits, money their spouse loaned to others, accrued unpaid salaries or bonuses, life insurance claims, profit sharing owed or pensions.
Check through your partners financial records to make sure you collect any money owed to them and you. Call their employer, business partners, and pension carriers as soon as possible to discuss any pending financial matters.
Not updating legal documents
Updating legal documents is an important step that many bereaved spouses defer for too long. First things first, apply for and obtain a death certificate as soon as possible - you will need it to process many legal documents. It's advisable to make as many as twenty copies of the death certificate and scan it for a soft copy. This will save you from having to make a copy whenever it's needed.
Update your will, any trusts you have in place, next-of-kin in legal documents, and beneficiaries in your own life insurance policy or financial investments. You'll also need to change any assets listed in your spouse's name. To have a clear plan, make a list of all the bank accounts, insurance policies, loans, credit cards statements, mortgages, retirement plans, and brokerage account. Then take the necessary notification steps.
Neglecting the family's financial future
It might seem too soon but you should take steps to ensure your family's financial security if you were to also pass away. In cases where the deceased was in charge of making money decisions, the bereaved might find it empowering to suddenly be in control of the purse strings. They might go on spending sprees to fill the emptiness they feel inside, a sure recipe for financial disaster.
Avoid retail therapy as a way of dealing with your emotional pain- seek out grief counselling instead. Many bereaved spouses might also fall into the trap of doling out money - as monetary gifts or loans - to all and sundry. Think carefully about who you give money to and why. You are now down to one income and might have to live more frugally.
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