Business Matters Sensible steps after a spouse dies

By Patrick Duffy

My husband has just passed away. I am left to sort through all the financial stuff. He used to look after everything. I am lost. Can you help?

— M.M., Manhattan

Yours is not an unusual situation. It happens to many people, and not just women.

The first thing to do is not panic. A general rule is not to do anything drastic for a while. However, to deal with the situation, it is necessary to do certain things quickly.

The first is to get a number of death certificates. You will need them. The number will depend on how many financial institutions, government agencies and employees you have to deal with. About 10, originals or copies, ought to be enough.

While you are at it, also have handy a copy of your birth certificate, marriage certificate and direct deposit information. This additional information will be needed, in some cases, to proceed smoothly.

The overriding aim of what you do in the next few months as you sort through everything is to keep the end goal in sight, that of at least maintaining the standard of living you have become used to.

In order to do that, you need to get a very realistic idea of how much money you need to support that lifestyle. Knowing this will help you determine what is best for you.

So let’s have a look at the sources of income you now have. You mention that you are just past 60 years of age, and that all the children are grown and left the house. Because of your age, you qualify for social security. So, one of the first things you ought to do is go to the nearest social security office. They will calculate for you the amount of the benefits you are entitled to. The actual amount will depend on how much your husband would have received at age 65.

Since it is the widow’s social security benefit you will now receive, while at the social security office it might be a good idea to check out your own social security benefits, if any. You indicate you are not sure how many years or quarters you have in your own social security account. Also check out how much difference it would make to your own account if you were to go back to work until you are 65.

Why? Because when you yourself are eligible for social security, you will then have more options. Your own social security benefits may be greater than the spouse’s social security benefit.

Be careful, however, if you do go back to work. In 1999 for every $2 you earn over $9,600, you will have to give back one dollar of the social security benefits you receive.

And, don’t forget that social security pays a one-time death benefit of $255.

After that is looked after, you have to turn your attention to other sources of potential income.

Your husband had term life insurance. Insurance proceeds are not taxable, so that is a handy windfall. However, the next question is, what do you do with it? Just sock it away at the moment until things become a little clearer in a few months.

Now to your husband’s pension benefits. From what you tell me, he had two pension plans at work. With each of them you have some options: (a) take a regular monthly pension, (b) take a lump sum.

In deciding which you take you will be presented with a number of difficult choices. Each has its pluses and minuses.

If you take the regular payment, some questions arise. Is it indexed for inflation or will the amount be the same now as in 10 years? The security of having a regular payment can be offset by the fact that, if not indexed for inflation, the payment will buy fewer groceries, etc., as time goes on.

If you take a lump sum, what do you do with it? You have three choices: (1) take it, pay taxes on it and spend it as you wish; (b) roll it over and reinvest it for further growth, and (c) a bit of both.

It ought now be apparent why calculating income and expenses needs to be done early. Knowing how much you need on an annual basis ought to be a great help in determining how to take payments.

And if you decide to invest it, knowing your income needs will be a great help in determining where to place the money and how much risk to take.

Another source of income might be your house. You have no mortgage. The kids are gone. The grandchildren are living a little farther away. If, in time, you consider selling it, remember that you will pay no tax on the profit. You may wish to sell it if it becomes too big for you or if you wish to relocate.

The profit from the sale of the house would be an additional source of income.

It is a difficult time, a time when the old Latin phrase "festina lente," to hasten slowly, applies. But it needs to be done, and done in a manner that you are emotionally comfortable with.