Debt and death: What every widow needs to know

There are few more devastating events in life than losing your spouse. Unfortunately for Canadian women, this excruciating loss is becoming the norm. Whether it's genetics or just bad luck, more and more women are following in the footsteps of Jackie Kennedy Onassis and Yoko Ono, living a life of sudden independence. But unlike their famous counterparts, Canadian widows are facing increasingly tougher economic challenges. From major debts - like mortgages, car loans and lines of credit - to standard bills, taxes and everyday expenses, the death of a life partner can open the floodgates to a staggering world of financial woe.

Preparing for the inevitable
For female seniors, the likelihood of finding themselves suddenly single at some point during retirement is extremely high. Not only do women tend to marry older men, but we also live an average of five years longer. Throw in the nation's rising divorce rate, and it's hard to imagine a situation where elderly females aren't left to manage their final years alone. [More: Elder financial abuse: How to spot the signs and provide help]

But widowhood can happen long before that. According to Census Canada data, the average age of widowhood in Canada is just 56. What's more, a staggering 43 percent of Canadian seniors are single. And that's just the beginning. According to a study by the UN Platform for Action Committee Manitoba, half of single women over the age of 65 live in poverty. Of those elderly women who are currently married, nearly half would be forced to live in poverty if suddenly left without their husband's income.

As the baby boomer generation creeps closer and closer to retirement age, it's becoming more and more critical for women to prepare for the impending loss of their partner. And yet, we're not. According to Kelley Keehn, author of The Woman's Guide to Money, even highly professional women tasked with managing the family finances rarely stop to think about the financial consequences of widowhood.  In 2010, close to 58 percent of baby boomer women had reportedly saved less than $10,000 for retirement, leaving themselves open to major financial hardships during their final years.

What elderly women need to know about their finances
Widows are often confronted with an overwhelming mix of emotions following the death of a partner. Beyond the sadness and despair, many women also feel the need to take swift action in order to tie up loose ends and start the healing process. Unfortunately, making hasty decisions when under emotional duress can result in financial disaster. [More: You can't live on love: Wealth building tips for couples]

If you or someone you love finds yourself in this devastating situation, consider heeding this advice:

  • First and foremost, continue to pay any bills that come in directly following the death of your spouse. This includes any quarterly tax charges. You'll need to look into these eventually, but not right away.
  • Make sure you take the time to review your health insurance and any life insurance policies. These may have time sensitive deadlines, so it's important that you deal with them as soon as possible.
  • As difficult as it might be to avoid decisive action, it's important that you avoid making any irreversible decisions immediately following the death of your partner. What seems like a good idea now could come back to haunt you after a few years of widowhood have passed.
  • If you're having trouble resisting the temptation to invest or pay off debt immediately, at least take the time to consult with an independent financial planner. A non-biased second opinion will help you to identify the pros and cons of the situation.

  • Learn about liability. If you're the executor of your husband's will, it's important that you understand the responsibilities associated with your role. Failure to comply with the rules and regulations could leave you personally liable.

Debt doesn't erase debt
When it comes to dealing with debt, most Canadian provinces have a process that involves advertising for creditors of the deceased in the local newspaper (the process differs slightly in Quebec). [More: Sexy, single and 60: The 'grey divorce' trend]

To protect against liability, an executor should follow these formal steps closely, including the following:

  • The executor will also need to obtain a Clearance Certificate from the Canada Revenue Agency that shows all taxes have been paid on an estate. While this isn't required prior to distributing the assets, it is strongly recommended.
  • Also consider obtaining indemnification from the beneficiaries (this is recommended if you plan to release funds to the beneficiaries without advertising or obtaining tax clearance), as well as consulting with a legal representative concerning debt repayment.
  • If you have the sense that the estate may not have sufficient funds to pay all of the outstanding debts, don't wait to seek professional advice.

Don't wait until it's too late
There are a number of things that women can do in order to prepare for eventual widowhood ...

  • First, consider making all accounts jointly held (though also understand that there may be tax consequences involved, so seek professional tax guidance first). By having joint access to accounts, assets are less likely to be walled off and subject to a lengthy probate process.
  • Along the same lines, make sure you're aware of all accounts, investments and debts. Keep account numbers and the contact information for any financial advisors handy.
  • It pays to be cautious: widowed women are prey for cunning salesmen, scams and, occasionally, misguided children. Don't let others talk you into a decision you're not comfortable with.   For example, there have been occasions where offspring push emotional buttons in order to sway decisions and take advantage of the widower's situation. How to handle this? If you have a financial planner (and you should), let him or her handle any uncomfortable confrontations concerning money. Better yet, make sure both your will and your spouse's will leave no room for disputes. The last thing your deceased partner would want is for his estate to tear the family apart.

Start talking about it now
Widows have enough to worry about following the death of a partner; don't let finances become one of them. Talk to your spouse about your financial situation today, because ultimately — no matter your age - you never know what tomorrow might bring.  [More: The Duchess of Alba gives $4.9 billion away for love: 5 tips for creating a pre-inheritance plan] is a free personal finance and education site for women.

Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.

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