New Beginnings: What You Need to Know About Finances

May 3, 2016 | By Steven DiGregorio

Suddenly Single

New Beginnings: What You Need to Know About Finances

A divorce or loss of a loved one is a difficult time, often chaotic and often stressful. Now suddenly single, many financial matters require immediate attention such as assessing your portfolio of assets today and your financial future to maintain a financially-healthy lifestyle.

It is vitally important that you avoid making any emotionally driven financial decisions.

You are now bringing in half as much or not as much money as before, start adjusting your expenses. List your essential expenses (housing, food, insurance, transportation, etc.) and your discretionary expenses (dinners out, vacations, clothing, etc.). Take control of your of assets by carefully considering these important aspects of your personal finances:

      1. Update Legal & Financial Records
      2. Credit Cards
      3. Un-Paid State & Federal Income Taxes
      4. Retirement Accounts
      5. Social Security Benefits
      6. Health, Life, Disability & Long-Term Care

Legal & Financial Records
When you lose a spouse, whether through death or divorce, change the registrations on any financial accounts that were owned jointly.  Your spouse’s death certificate must be provided to your financial institutions to update accounts from joint ownership to your new status.

As for a divorce, all jointly owned assets must be divided through court orders and/or divorce agreements. All signatures and guarantees required by your financial institutions must also be secured. Retain an asset manager to assess the resulting taxes levied from splitting up highly appreciated assets or loses from the markets.

Most people hold their assets jointly with their spouse, either a joint tenant with rights of survivorship or joint tenants in common. Discuss setting up a trust, especially for individuals with an estate and assets in excess of $5 million. Now that your single, re-designate your power of attorney detailing who gets what, when and where. Constantly update your designations, financial institutions change names or merge and when that occurs, a named beneficiary on file it basically becomes null and void.

Credit Cards
Now that you’re single, protect your credit — it’s one of your most valuable assets. A surviving spouse is often responsible for paying the deceased spouse’s credit card bills, regardless of if these accounts were joint or individual accounts. Consult your financial advisor or lawyer as to whether or not you are legally responsible for any legacy debt.

Jointly owned credit cards must be satisfied, as you are still responsible. Close all joint credit accounts and contact all the credit bureaus (Experian, Equifax, and TransUnion) to let them know that your spouse has passed away.

Unpaid Federal or State Income Taxes
Any past due taxes from a joint tax return must be paid. Separate tax filings are usually not responsible for their spouses taxes, however it is prudent to consult your adviser to ensure you are in good standing with the government.

Retirement Accounts
Pension and retirement account assets need to be throughly examined to determine assess penalties and fees that may be charged when setting up your new retirement accounts. Be mindful of early withdrawal penalties, contact your financial adviser to plan how to roll over assets.

Death of a spouse. Upon the death of the account owner, retirement account assets pass directly to the beneficiary(ies) (often the spouse, for those who were married) designated on the account. Beneficiary designations on all retirement accounts supersede any designations on your will. The surviving spouse is usually entitled to his or her spouse’s IRA assets, even if no beneficiary is named.

Divorce. Retirement assets are often split up as part of a divorce settlement. IRAs are divided through a one-time distribution from one spouse’s IRA into the other spouse’s IRA distributions are not tax nor penalized for early withdrawal as long as the transfers are court-approved. Otherwise, the distribution is treated as taxable to the original account owner, while the spouse on the receiving end gets the money tax free.

Social Security Benefits
Spouses of the deceased are still awarded social security benefits as long as the check is higher than their benefits. The rule-of-thumb is the surviving spouse receives a check for the higher amount, the lower amount is no longer received (must have been married for at least 10 years). In all instances of a divorce or death, the net income is less. Something to consider. A surviving spouse receives full Social Security benefits at full retirement age or reduced benefits as early as age 60.

Health, Life, Disability & Long-Term Care
Make sure you’re properly insured, or figuring out what your Social Security benefits will cover. Carefully review all the insurance options that are available to determine where you may need coverage.

Health insurance. Regardless whether your spouse passed or you are now divorced, Even if your spouse carried your family’s health insurance coverage, you can continue to maintain it for a period of time you will still be covered under the joint insurance plan. Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), health coverage continues for ups to 36 months if from a death, divorce or job loss. COBRA health premiums are typically expensive in many cases, carefully consider other insurance options available through the Affordable Care Act (ACA).

Life insurance. As a beneficiary on your deceased spouse’s life insurance policy, typically all proceeds tax free. Add additional insurance if you are But if you are caring for children, to make sure your children will be protected in the event of your death. After a divorce, consider changing the beneficiary on your life insurance if it is currently your ex-spouse, and adjusting your insurance coverage to adequately protect your children if either you or ex-spouse dies.

Disability insurance. Disability insurance protects you and your loved ones against loss of income. Make sure you select a sound policy that will cover you today and down the road.

Long-term-care insurance. Face it, nursing home stays and home health care is expensive, long-term- care insurance off-sets depleting your financial resources should you become seriously ill or injured.

To avoid any complications that from a death or divorce consult your financial planner to advise and protect your financial future.

 

About Compass Asset Management Group
Our boutique-style firm has an investment philosophy is both prudent and value driven. We combine research from the largest firms on Wall Street with three decades of market experience to provide strategic, tactical and dynamic investment management.  Compass Asset Management Group, LLC delivers personalized financial planning, estate planning and investment management advice in a private setting with a high degree of sensitivity to your concerns and objectives. Our goal is to exceed yours expectations by listening closely, understanding deeply and communicating well through frequent, personal consultations entirely focused on your financial goals.

 

Make the right choice with your financial future. Consult Compass Asset Management Group for advice & guidance that will change your life. Plan better to live better…Call Compass Asset Management Group.

Please note that the content of this blog does not constitute tax advice and is only intended for the educational purpose of the reader.  Please consult your tax advisor for specifics regarding your circumstances.

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm.  Securities offered through an affiliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.

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Source:

Dowd, C. (August 11, 2011). Suddenly Single: What Windowed Boomers Need to Know About Finances. The Boomer, FOXBusiness.

Suddenly single? How to protect your finances. (July 17, 2014). Retrieved on April 11, 2016 from https://www.fidelity.com/viewpoints/suddenly-single. Viewpoints, Fidelity Investments.

Photo Cred.

 

STEVEN M DIGREGORIO is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
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