Navigating Loss: 4 Essential Steps to Take as the Surviving Spouse (Ep. 132)

Losing a spouse is a challenging and emotionally overwhelming experience. Amidst the grieving process, it’s crucial to address the financial aspects that come with being a surviving spouse.  In this episode of the Life Unlimited podcast, Larry Heller aims to provide a step-by-step guide to help you navigate some important financial considerations following the loss of your partner. From understanding step-up basis and reviewing inherited assets to managing required minimum distributions (RMDs) and estate taxes, we will cover key topics that can help you make informed decisions during this difficult time.

One of the first steps you should take is reviewing and updating the step-up in basis of your inherited assets. When a property or investment needs to be sold, a capital gains tax may apply if there is a gain on that asset. However, as a surviving spouse, you are entitled to a step-up in basis on half of your accounts when you inherit them. To ensure accurate tax calculations, it is essential to update your custodian accounts with the death certificate and obtain multiple copies of the death certificate for documentation purposes.

If you own a house, consider getting an appraisal to determine its current value. This documentation will be valuable for future reference and potential tax implications.

If the deceased spouse had reached the minimum distribution age threshold, it is crucial to understand and manage the required minimum distributions (RMDs). As a surviving spouse, you must take the required distribution in the year of your spouse’s death to avoid penalties, which can be as high as 50%. However, if you are younger and have the option, consider rolling the inherited IRA into your own IRA. This allows you to take RMDs annually based on your own age, providing more flexibility and control over the distribution process. 

Informing Social Security about the death of your spouse is an important step. Typically, the funeral home takes care of this task, but it’s essential to ensure that the last Social Security checks received by your spouse are returned. Understanding the potential impact on your own Social Security benefits is also crucial. 

Estate taxes can be a significant consideration, depending on the size of the estate. If you have substantial assets and anticipate receiving additional assets from the deceased spouse, it is worth considering options like disclaiming certain assets. By gifting assets to your children or other beneficiaries, you can potentially reduce the amount of taxes owed. This strategy may allow the next generation to benefit from potential growth while assuming the responsibility of tax payments. 

Navigating the financial matters as a surviving spouse can be overwhelming, the support and expertise of professionals can provide the necessary guidance to help you navigate these financial challenges and help you ensure a more stable future.

For more on this topic, check out the full episode of Life Unlimited or schedule a call with us for more guidance.