PREPARING FOR WIDOWHOOD, part I
Icky subject! We don’t want to need this kind of information. We wish death was not a reality, but people do die. ALL of my ancestors are dead. I think my time will come, too.
When one does, the spouse may be left to pick up the pieces. Younger adults should have life insurance policies to protect the family, but life insurance becomes financially burdensome by retirement age. You may be tempted to buy a “whole-life” type policy to “solve” this problem, but that comes with serious risks. In our state, maybe others, if you need Medicaid assistance (about 1 in 4 people over 65 will) Medicaid will force you to SPEND the cash value of your whole life insurance on medical care leaving NO life insurance for your spouse. Plus, you’ll spend up to 3X as much on the policy over a lifetime as you would for similar benefit term insurance.
We all want to know how to prepare for the future. Coat, gloves, umbrella, or snacks thrown into a purse … are several ways we prepare for the known hazards of travel. In this life-journey there are also KNOWN risks. Maybe we should do a bit of preparation!
{NOTE: I am not a licensed tax or financial advisor. Please consult a professional. I have discussed the following with my spouse; she may need to know, as might I.}
First, give thanks that you ARE the spouse (#see next paragraph). It would be far more difficult if you weren’t married. In most states the spouse automatically inherits the assets tax-free and some of the debts even if there is no will (but you should have a will). The house that was in her name becomes his. (Let me say here that I knew one lady who, after the death of her co-habiting partner, kept making loan payments and kept up the taxes and insurance on the house and only found out that it WASN’T hers when she went to sell it. There was no will and he had no spouse or other close kin, so it went to the state.)
[# In my state it is a very bad idea to bequeath your home, car, and bank balances to a co-habiting partner. Your partner will be taxed up to 18% on that wealth transfer. You’d be better off willing your stuff to your children (no tax for them) and having a life insurance policy for your live-in partner.]
Being married at least 10 years gives you the right to select the higher Social Security income, too, (his or hers)… you will lose ONE benefit, but you can receive the greater of the two even if you divorced, but haven’t remarried.
Aside from losing one income from Social Security, there are the tax downfalls … like the “widow tax” the year AFTER a spouse dies. Here’s how that works: There were 2 of you, but when one dies, you get to do taxes as “Married filing Jointly” for that year, but the next year you will file as “Individual”.* (*If you have a dependent child you are allowed a special filing option, called Qualified Surviving Spouse, for 2 years which counts you as a couple). As an individual filer you lose ~$15,000 in standard deductions. That means you may pay ~ $1,800 – $3,300 more in federal taxes every year thereafter (depending on your federal tax rate).
Then, the point at where your income is taxed at the next higher federal tax rate will be half what it was as a couple. For instance, as a couple, you could earn up to almost $97,000 without jumping to the 22% federal tax rate, but as a single filer that point is around $48,500. If your annual taxable income was $80,000 before the death, after the death you would owe an additional $3,150 in taxes because the income above $48,500 would be taxed at 22% instead of 12%.
Can you see how it would be good to know these things ahead of time? With two tax laws you’ve just increased your federal tax liability by about $5,000 with the same taxable income. This, at the same time your income dropped by one Social Security benefit.
BIG QUESTION: ^^ What should you do to give the greatest benefit to yourself or your spouse after a death? ^^
PAY OFF DEBT. One of the two Social Security benefits will be lost AND the survivor will be taxed at a higher rate than you were as a couple, you should not leave a spouse (or yourself) with a “debt overload.” Since it will be harder to make ends meet as an individual, the survivor should not have to make loan payments on top of that.
PUT ASIDE A FUND. End of life is expensive … there are funeral and end of life expenses! Speaking of those, the average American family incurs about $80,000 in costs for funeral and medical care in a person’s final year. How much should be set aside in a non-IRA fund? At least half the average. You don’t want to be pulling money out of an IRA to cover those costs and, thus, adding to the tax burden of the surviving spouse. Begin years ahead, when you are still working, to create an emergency fund that protects you. Then when you retire set that money aside for an end-of-life fund. (You don’t need two funds. When the second spouse dies the estate will handle the expenses.) What doesn’t get used for end of life costs will remain to smooth the losses of income and increased taxes.
SET UP AN ESTATE PLAN. Oh, yes! We are talking here of more than a Will. Every state has different inheritance laws. With or without a Will your estate inheritances will be decided by a court and the deceased person’s bank account may even be frozen until the court decides. That can take many months. Therefore, bank accounts and the house should be in a trust (most states) to avoid Probate and keep funds free. Your IRAs, life insurance policies, and other investments should have chosen beneficiaries (don’t make them part of the estate). [See an estate lawyer to set this up. Don’t do an “online forms” thingy. Your lawyer will be up to date on all laws, whereas the online thingy might be a couple years out of date (and how would you know?).]
By the way, if you made an estate plan, then moved to another state, you need to revise it.
A BOOK with USER NAMES & PASSWORDS. ’nuff said.
(Part II next time)
Copyright 2026 Donald Whelpley
[PLEASE NOTE that Don is always open to discussing the thoughts and opinions he shares here and welcomes comments as shared in the comment section. He doesn’t use other social media platforms and won’t see whatever you’d like to share with him if you post it elsewhere.
ALSO, Don is always open to offer his thoughts on various topics. If you have a specific request, you can let him know in a comment; he reads – and replies to – them all. ~ Sherry]
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