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The surviving partner should ensure they have a good understanding of their investments, if any, and any other assets or income sources.Getty Images/iStockphoto

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Death, while inevitable, is not often predictable, and this can leave many people financially unprepared if their spouse suddenly dies – especially if the deceased was the one that took care of the household balance sheet.

This is why it’s important for financial advisors to prepare clients with the steps they need to take before the death of a partner, as well as what is required after the event occurs. It may seem cold, but it’s a life event, and like other life events it requires financial planning.

“Having a financial plan is like the blueprint to your wealth plan,” says Mark Slater, senior wealth advisor and portfolio manager at Slater Financial Group at CIBC Wood Gundy in Toronto.

“I think everyone should have a financial plan and understand where all their sources of income are coming from before and after the death of a spouse.”

Mr. Slater gives his clients a basic spreadsheet to fill out so they know exactly what their financial picture would look like before a spouse passes and after.

This also helps to know what questions to ask to fill in any gaps, such as: What health benefits does a spouse have? Is the living partner entitled to those benefits after death? Should the client make certain accounts joint accounts prior to death to make it easier to access upon death? What are the household investments and do both parties have access after death?

“There’s no magic,” says Mr. Slater. “It does come down to simple math. They need to be able to look at the ins and outs and make sure their income covers their expenses.”

It’s definitely better to do the planning sooner rather than later so that it’s not something that needs to be addressed while clients are going through the grief of losing someone, he adds.

However, the unpredictability of death means that many people do find themselves in the situation of having to tackle their financial situation after the death of their spouse and this can be made much more stressful if the living partner doesn’t have a good handle on the household financial picture.

For the most part, women are the ones in this situation as not only do they live longer than their male partners, but according to Statistics Canada, almost a third (31 per cent) of women don’t consider themselves “financially knowledgeable.”

“If they have not been involved in financial matters of the family, in the financial and retirement planning, et cetera, when something like the death of a spouse happens, it’s obviously incredibly emotionally trying, but can also be financially very daunting,” says Kathryn Del Greco, senior investment advisor at Del Greco Wealth Management at TD Wealth Private Investment Advice in Toronto.

The steps to follow after a death

She echoes Mr. Slater’s first steps by saying that a plan, if there isn’t one set up, needs to happen immediately, especially when it comes to items that might need to be taken care of right away such as paying off any debts, as this could impact one’s access to assets and capital.

“If clients have joint accounts with rights of survivorship, they will still have access to that capital,” says Ms. Del Greco.

“However, had that not occurred, they may have to wait until the spouse’s estate goes through the probate process. Particularly, if the spouse still has debts that are outstanding and has taxes owing, it can take a while to access some of these assets and income sources.”

In this instance, clients may need to look at a bank loan or credit to help with that gap.

After the cash flow situation has been established, the surviving partner should ensure they have a good understanding of their investments, if any, and any other assets or income sources.

“Most likely, a partner has named their spouse as the beneficiary on their employer pension benefits, and if there is a life insurance policy either through work or externally that they have purchased,” says Ms. Del Greco.

“There’s also RRSPs (registered retirement savings plans), tax-free savings accounts, any non-registered accounts that may have been set up, additional investment accounts, and of course, bank accounts as well.”

At this point, Ms. Del Greco says the surviving spouse should explore any government benefits available to them that might boost any lost income, like the government death benefit (a one-time payment) or a survivor’s pension (monthly) – both through the Canada Pension Plan.

There’s also the lesser-known, Allowance for the Survivor benefit, which is a monthly payment for those aged 60 to 64, who have not remarried after the death of a spouse, are Canadian citizens, have resided in Canada for more than ten years since age 18, and their annual income is less than $27,240.

What happens when there’s no will

This may all be made simpler by the existence of a will, but, like financial plans, there are many people that don’t have one.

“We know that several families in Canada don’t have an updated will, and even if they do have an updated will, they might not even know where it’s actually held,” says Jamie Keenan, wealth advisor and portfolio manager at Keenan Wealth Management with BMO Nesbitt Burns Inc. in Toronto. “People don’t necessarily understand that aspect of not having a will.”

This is also called the rules of intestacy, meaning that if a person dies without a will, the law decides what happens to a person’s estate, and the amounts can differ from province to province.

For instance, if a married person dies without a will in Ontario and leaves behind a spouse and two kids, the surviving spouse is first entitled to the $350,000 preferential share, assuming that the entire estate has a value that is at least that amount.

“Then the partner gets a third [of the remaining estate] and the balance is then split up between the kids… This may leave the spouse with a lot less of the overall net worth of the family,” explains Ms. Keenan. It could also result in a change in income for the surviving partner.

Ms. Keenan adds the surviving spouse may receive assets in other ways such as if they are the surviving joint tenant with right of survivorship of an asset co-owned with the deceased spouse.

The last bit of advice from all of the experts is for the client to update their own financial papers as it was likely that the deceased spouse was their beneficiary.

“Reviewing the beneficiary designations after a major life event, like losing a spouse or even after a divorce, making sure those beneficiary designations are up to date, is important,” says Ms. Keenan. “Clients want to make sure it’s what they want.”

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