No one wants to think about losing their life-long partner, but avoiding the topic is not going to help prepare your finances for the inevitability of a loved one's death.
The loss of a spouse, an intensely painful event, can also have major financial repercussions. A 2006 Statistics Canada report found that in many cases it leaves the survivor more vulnerable financially and can trigger, particularly for widows, a sharp decline in income.
Couples who do not share basic financial information or prepare a financial contingency plan leave the "unprepared survivor vulnerable to a variety of risks," says Peter Lillico, a lawyer in Peterborough, Ont.
Mr. Lillico, who specializes in estate and succession planning, has these tips on how to ensure financial security for the surviving spouse:
1 Share Information
List and share detailed information about the nature and location of financial assets, such as bank accounts, investments, insurance policies and pensions.
2 Professional Advisers
Make sure each spouse has met and is comfortable working with the financial adviser, lawyer, insurance agent, banker and accountant. It is vital to establish these relationships.
3 Prepare Contingency Plans
Determine the financial realities following the death of each spouse. By how much will the pension income be reduced? Will Old Age Security be clawed back? How much extra tax will be paid because all family income is now on one tax return? If your analysis highlights shortfalls or risks, make plans or take steps now to minimize the consequences later.
4 Take Hold of Helping Hands
Don't try to do everything yourself. Your lawyer, investment adviser and accountant are familiar with the realities of clients forced to cope alone. Don't forget to share essential information with your children.
5 Assess Domestic Affairs
Each spouse should prepare a list of all the things he or she does every day, tasks the other takes for granted. Compare these, and be realistic in assessing how much of the other's list each could take over on short notice and competently handle.
6 Avoid the Ostrich Syndrome
Don't stick your head in the sand. It's short-sighted and imprudent to pretend nothing bad will ever happen, and that both spouses will always be around to work together as a team. Don't delay. Two heads are better than one.