Five Financial Blind Spots That Burden Grieving Spouses
Losing a spouse is a profound emotional blow, and it often triggers a second crisis: a financial fog of legal hurdles and hidden tax traps. From being locked out of assets to facing a “widow’s penalty” that can raise tax rates, the transition from a partnership to solo financial management is fraught with potential costs. The Wall Street Journal asked financial planners and other experts for their advice on ways to help ensure a grieving spouse is prepared for the road ahead.
Surprise debt
Survivors are often surprised to discover that the late spouse had individual credit-card debt. In many states, if a card is only in one spouse’s name, the survivor is generally not legally obligated to pay it. But rules vary: In “community property” states spouses might be liable for debts incurred during the marriage, even if they didn’t sign for them.
Locked out of accounts
Assets owned solely by the deceased must go through probate—the court process of validating a will—before they can be transferred to a surviving spouse. In some counties, this can take more than a year, leaving the spouse locked out of necessary funds.
To avoid these delays, Kestenbaum recommends:
Revocable trusts: Assets in these don’t go through probate.
Joint ownership: Property or accounts held jointly transfer automatically to the survivor.
Invisible credit records
Widows are sometimes surprised to find they have little or no personal credit history, said Carla Adams, a financial planner in Lake Orion, Mich. If one spouse handled all credit cards and loans, the survivor might appear essentially invisible to credit bureaus—even with significant household assets. To avoid this, both partners should maintain active credit in their names, Adams said.
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