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 Canaccord Genuity Corp.

After Death or Divorce: Supporting Your Own Finances

Eric Brown - Mar 07, 2022
Complicating matters, it is also a time in which new tasks and responsibilities will need to be assumed, especially as they relate to your finances. During this difficult time, certain steps should be undertaken to navigate the transition.

The loss of a spouse – whether as a result of death or divorce – can be one of life’s most challenging events. There are similar emotions that can emerge in the aftermath of either situation: grieving a loss, the fear of uncertainty and feelings of being overwhelmed. Complicating matters, it is also a time in which new tasks and responsibilities will need to be assumed, especially as they relate to your finances.

During this difficult time, certain steps should be undertaken to navigate the transition. As a starting point, we recommend seeking help from others if needed. After a divorce, it may feel overwhelming adjusting to this new normal. After the death of a loved one, it isn’t uncommon for an individual to feel incapable of dealing with everyday routines. Family members, trusted friends or even professionals can provide support for activities in which immediate assistance may be required.

As you move forward, here are six considerations to help you manage your own financial wellbeing through the transition, so that you can look ahead with confidence:

1. Know Your Finances – Establish a baseline of your current financial position. If a detailed financial inventory doesn’t exist, start by creating a list of all of your financial accounts and financial interests. This should include the financial institution or provider name, general account information as well as an estimate value of each account, where applicable. Begin with your assets, such as bank accounts, investment accounts, registered plans, retirement accounts and company pension plans. You should also list any real estate. Then, list any liabilities and credit accounts, including mortgages or other loans, as well as recurring bills or expenses such as utilities, property expenses and credit card bills. You should also list any insurance policies (life, automobile, home, health, etc.). Once a high-level inventory has been created, you can then gather and protect the related paperwork and documentation, which will likely take some time. When all documents have been accounted for and centralized, be sure to notify a trusted loved one of the location of this information.

2. Carefully Close Joint Accounts – In the event of divorce, all joint accounts should immediately be closed. In the event of the death of a spouse, consider maintaining joint accounts over the short term to provide access under the deceased’s name to items received in their name (e.g. deposit cheques).

3. Update Beneficiary Designations – As you go about gathering financial and legal documents, consider making changes to your personal information where needed, with a focus on updating your beneficiaries (where applicable) to take steps to protect your assets and your heirs. Consider also the importance of updating other documentation, including your will, powers of attorney and other estate planning documents, such as any trust agreements.

4. Build Your Team of Professionals – Depending upon your situation and your financial proficiency, the support of professionals may be beneficial. This may include legal, tax and/or investment professionals who can help provide advice throughout the transition. One common error is to delay financial planning until after a divorce has been finalized or an estate has been settled. However, in doing so, you may not fully understand the financial options available to you, or the potential consequences that may result from making certain decisions. By fully understanding the alternatives before you agree to anything, you can make well-informed choices with greater confidence.

5. Reevaluate Your Budget – The loss of a spouse often results in changes to cash flow. Bills that were paid by your spouse may now be your responsibility, which may unexpectedly increase your expenses. There may also be changes in income that may not have been anticipated. For instance, in the case of a spouse’s death, a pension from the deceased’s workplace may continue, but it may be at a reduced rate. Government benefits may no longer be paid or survivor benefits may be less than expected. As such, if you do not already have a budget in place, it may be beneficial to put one together to understand your new inflows and outflows and devise a plan to account for any changes. Having this visual map can also help you to better balance different spending priorities.

6. Revisit Your Financial Plan – While changes to income and cash flow may feel daunting, it is important to remind yourself that the new challenges aren’t insurmountable. Having a financial plan to account for these changes can help to remove the feeling of uncertainty and provide a road map to better understand the path forward. There may also be tools or strategies that can be put in place to provide additional support, such as tax or insurance planning. As such, it is important to revise any existing financial plan or create a new one to ensure it reflects your current circumstances. Remember that we are here to provide support by developing tailored investment strategies based on your personal circumstances and goals, while balancing your risk tolerance levels and unique investment values.

 

Don’t Rush to Make Major Decisions

Adjusting to any loss can take time and everyone grieves at a different pace. Allow yourself the necessary time to cope with the many changes. Where possible, consider delaying any major permanent or consequential decisions, such as selling a home, property or business, or cashing in retirement assets. In time, you may feel better equipped to approach these decisions. If you do need to make a major decision immediately, consider discussing this with a trusted friend or seeking the advice of a professional advisor.

 

Seek Support

As always, remember that we are here to be a resource and provide support. Our goal is to help our clients manage this difficult transition and feel empowered. We can walk you through the key steps you should be taking to get organized and help protect your financial wellbeing. We can also work with you to develop a plan for the path forward. During this very challenging time, please know that you can call on us for assistance.