Planning for Widowhood

Many of you have heard the phrase “the great wealth transfer” and wondered what it meant. Many assume that it means that the wealth accumulated by “Baby Boomer’s” in their working years will be passed along to their children over the next decade or so.

It does.

But much of that money will first go to spouses before, eventually and hopefully, going to children.   Two points are well worth remembering:

1. It is estimated that $54 trillion in wealth will pass to spouses during what is often referred to as the great wealth transfer, with $40 trillion going to senior women.
2. Women make up the greatest number of primary beneficiaries of account holders. With the average life expectancy for males in the U.S. of 76.5 years as of 2024 versus 81.4 years for females, it is far more likely women will inherit money from husbands than the other way around.

Because of this, women whose spouses have traditionally handled investments and family finances may want to make sure they begin learning what their husbands are doing.

A key question to ask yourself: Would you feel confident taking control over your investments and overall family finances during one of the most emotional times of your life, after your husband passes away? Similarly, could you manage things if he becomes incapacitated?

For many of you the answer will be no.

This guide explains how women who have not been involved in their family investments and finances can gain transparency and control.

Women and Finances: Why They Can Be Left Vulnerable

For many married women, the biggest financial transition of their lives will come when it is least welcome: after their spouse passes away.

And it is likely to come at a time when it will be difficult to take over the chore easily – most likely when the spouse is in the mid-to-late 70s.  It is incumbent upon the couple to recognize this and deal with it much earlier rather than waiting until the last minute.

As most of us know, women, on average, live longer than men.  At birth, the average life span for males in the U.S. is 76.5 years as of 2024, according to the Centers for Disease Control and Prevention. For women, the average is 81.4 years.

This difference in life expectancy means women are expected to receive most of the spouse-to-spouse wealth transfers that will happen between now and 2048.  This period is called “the great wealth transfer.”  It is estimated that $124 trillion will be passed from people born before 1964 to others, according to research from Cerulli Associates.

Of that amount, about $54 trillion will be left to spouses, 95 percent of which will go to widows. And of that,  $40 trillion of it will go to women who are baby boomers or older. To put those sums in perspective,  at the present time the total valuation of the S&P 500 Index is roughly $64 trillion.

Why Women Need Familiarity with Family Finances

It is common in couples, especially among older generations, for husbands to manage the family finances – investments, insurance, long-term planning, credit, and day-to-day bills.  Wives were usually minimally involved and often were comfortable with that dynamic, even if they had jobs outside the home.

However, that lack of financial knowledge may leave the wife feeling ill-prepared or overwhelmed at a challenging time, either when their spouse passes away or if they become incapacitated.

How to Prevent This from Happening to You

Here are steps you can take to avoid being left vulnerable in challenging times.

Know where all your assets are!

A first step toward gaining financial transparency and control is to know where all assets and debts are.  This includes bank accounts, stocks, bonds, and other investments,  insurance policies, credit cards, and other debts. These are integral parts of your finances that you will need to control should something happen to your spouse. You can do this by starting a spreadsheet or even a simple list with your husband that contains the information about each account you will need to know.

This should include all the information you will need to access and manage the accounts,  including login information like websites, user names and passwords. It should also include key contacts with phone numbers and email addresses, and a description of the asset or liability.

If your husband is resistant to creating and maintaining this list with you, explain your concerns about being left vulnerable if something happens to him. Also, remind him that he could be harmed if he becomes incapacitated and you do not have access to funds. These concerns are typically enough to get even the most reticent spouse to share critical information.

Take this effort a step further by asking your husband to put the latest statements, policies, and records for each account in a convenient place so you will not have to hunt in various places for them.

Get professional financial support

Having access to and records of all aspects of your finances is important.  It will allow you to make the further decision as to whether you are able or even want to manage your finances going forward, or if you want to seek help from a family member or outside professional.

It is often prudent to have an additional trusted family member knowledgeable and involved in your finances.  And even beyond that,  many of you might consider working with a financial professional.  This can occur while your husband is still alive or afterwards.

Should something happen to your husband, a  wealth manager can help you work through a transition. But even prior to that, they can help with your investment and finances in any way that you and your family prefer. This can range from solely providing advice to managing your entire portfolio. Many men who enjoy investing prefer the former because it allows them to maintain control over their investing strategies while setting the stage for protecting themselves, their wives, and their families in the future.

Build an estate plan

An estate plan is a comprehensive, regularly updated strategy that includes critical documents like wills, trusts, and powers of attorney, outlining how assets (property, finances, investments) are managed and distributed upon death or incapacity.

An estate plan can reduce the pressure to make critical financial decisions during extremely challenging times. It can help honor the deceased’s wishes, protect beneficiaries, minimize taxes, and avoid court.

Key components of an estate plan include:

• A will, which is a legal document that specifies how to distribute assets.
• Revocable living trust, which is a method of holding assets while alive, then allowing them to pass directly to heirs without going through the probate process.
• Designated power of attorney, which identifies a person to manage finances and other critical matters during a period of incapacitation. (In a situation where a wife does not have much financial experience, this could be a child or other trusted relative who understands managing money.)
• Health care proxy/directive that appoints someone to make medical decisions if the patient is unable to communicate.
• Beneficiary designations that provide instructions for transferring life insurance and retirement, bank, and other accounts to beneficiaries.

All these components of an estate plan can help women more easily manage new financial responsibilities when it becomes necessary because of a husband’s death or incapacitation.

Allow time to make a transition

In the immediate aftermath of a husband’s illness or death, the wife’s financial priorities should focus on the essentials, such as ensuring access to cash, notifying institutions, paying ongoing bills, and claiming benefits like life insurance. After the initial feelings of loss begin to stabilize, it becomes time to address their broader financial situation.

While the specifics of what a widow faces financially depends on their situation, there are two things most widows will face that should be addressed during less stressful times.

1. Your income may drop.

Your income may be impacted quickly. If both spouses were receiving Social Security, the surviving spouse generally keeps the larger benefit. The smaller one is eliminated. Depending on the amounts of the payments, this could result in a notable decrease in income.  If the deceased spouse had a pension, income from it may change as well, depending on the pension plan. If it includes survivor’s benefits, their amount could be lower than what you were receiving. Or there could be a lump-sum payout upon death with no further payments going forward.

Although a single person such as a widow may well spend less than they did as a couple household expenses do not drop by half when one spouse dies.  Insurance, utilities, and taxes will stay the same and will need to be continually paid.

It is wise, if possible, to prepare for a potential drop in income well before it happens. A financial professional or family member may be able to provide advice for these situations.

2. Taxes will likely increase.

Widows should at least be aware of a changing tax situation. In the year a spouse passes away, they can still file a joint tax return but in subsequent years they will typically be taxed as a single filer (except in the unlikely event of a dependent child).

Single-filers face less favorable tax brackets, smaller standard deductions, and lower-income thresholds for certain other tax breaks. Put simply, even if your income does not change that much, you could find yourself in a higher tax bracket.

Working with a financial professional and tax expert may help you prevent or limit the impact of a significant tax increase that will likely occur if your husband passes away before you.

Preparing for Widowhood: The Final Word

For women, whose husbands exclusively manage their investments and finances, the time to plan for a likely period of widowhood is long before it occurs. The correct time is right now.

Start by collaborating with your husband to build a comprehensive financial document including investments, insurance, debts, and other accounts. Stress your concerns about being left vulnerable should something happen to him. Have a trusted family member emphasize this as well.  As a next step, suggest working with a knowledgeable family member or financial professional. They can provide the advocacy and support you need to make it through this challenging and emotional transition. Find out more about how you can get the help you need.