Suddenly Single How to Cope After a Spouse Dies
By Eric Schurenberg Reporter associate: Miriam Leuchter

(MONEY Magazine) – In 1982, Patti Rosenthal, a Mercer Island, Wash. homemaker, died suddenly of a brain hemorrhage at age 34. For her family and friends it was a numbing, tragic loss. For her widower Ken, now 40, it was also nearly a financial disaster. ''As the breadwinner, I naturally had insurance on myself,'' he says today, ''but we never thought to insure Patti.'' After she died, Rosenthal realized he couldn't provide day care for his two children, ages five and 10. His irregular hours as editor of a suburban newspaper precluded commercial day-care facilities with their inflexible drop-off and pickup times, and his $20,000 salary was not enough to pay for a nanny. Fortunately, without Rosenthal's knowledge, his father-in-law had purchased a $25,000 insurance policy on his daughter's life and he gave Rosenthal the proceeds to hire full- time help at home. The death of a spouse deals an especially severe financial blow when a family loses a breadwinner. But, as the Rosenthals show, such families have no monopoly on hardship. And even when a family's standard of living isn't threatened by a spouse's death, the survivor must contend with financial tasks and decisions that would be difficult in the best of times. There are, however, steps that can be taken -- while both partners are alive as well as after one is gone -- that may minimize the financial pain. Jude Okney, 36, of Minneapolis learned those steps the hard way. When her husband Bruce, a Minneapolis lawyer and the father of their three children, died suddenly in his sleep of a heart ailment in 1986, the loss of his income was the severest problem that Jude faced -- but far from the only one. With a whole life policy benefit of a paltry $60,000, Bruce was seriously underinsured; if not for Social Security and a trust fund of less than $50,000 created after his death by a group of his friends, Jude would have been left without enough income to pay the $600-a-month mortgage on their $120,000 house. As it was, the household income plunged from the $35,000 that Bruce netted from his private practice to about $24,000. Jude, a homemaker, had always left the family finances to him. Now, in the midst of her grief, she was forced not only to handle the usual estate matters and assume financial control of the household but also to close the untidy books on her husband's law practice. ''If only Bruce had taken 10 minutes one day to write out where things were,'' she says. A routine analysis of life insurance needs, which any financial planner or insurance agent can perform, would have warned the Okneys in time to act that Bruce was underinsured. Such an analysis uses a couple's current budget to calculate the income a surviving spouse would need to live on. An insurance analysis would also have taken a homemaker's economic contribution into account, thus anticipating the Rosenthals' problem. In addition to having adequate insurance, it is also essential that both spouses develop proficiency in handling the family finances. Noting that the average wife faces a 70% chance of outliving her husband, financial planner Anne Lieberman of Larkspur, Calif. asserts: ''Any married woman who doesn't get involved in the family finances is nuts.'' Both husbands and wives should know how much it costs to run their household, how much they owe, how their money is invested and where to find important documents. Planning will help, but still nothing can prepare you for the emotional shock of your spouse's death. Judith Brown and Christina Baldwin, authors of A Second Start (Fireside/Simon & Schuster, $7.95), warn new widows to expect to have difficulty concentrating, being objective and visualizing long-term goals. Thus, if circumstances allow it, try to postpone important financial decisions for six months to a year. In the meantime, focus only on the details that require immediate attention. For example, debts the two of you assumed jointly, such as your mortgage, are now your sole responsibility; if you fail to pay, it could affect your credit rating. In the first weeks of widowhood, you should ask your attorney to start the process of probating your spouse's will. Also get in touch with your insurance agent, your spouse's employer and your local Social Security office to claim any death benefits. (For more on what to do when, see the box on page 108.) You may be entitled to money from less obvious sources, as well. For example, you might be able to claim life insurance benefits from a spouse's union or fraternal organization. Some of your spouse's debts, including the mortgage, auto loan and credit-card balances, may include an insurance rider that pays off the loan at death. If you have trouble locating important documents, look for clues by riffling through your spouse's checkbook. An entry made out to a lawyer, for example, may guide you to your spouse's will; the lawyer may have it on file. Investment assets you may not have been aware of would show up on your spouse's most recent tax return if they produced any income. If you suspect that your spouse may have life insurance policies that you can't find, you can write the American Council of Life Insurance (Policy Search, ACLI, 1001 Pennsylvania Ave. N.W., Washington, D.C. 20004), including a self-addressed, stamped envelope, and request that member companies search their files. The service, which should take six weeks, is free. Among the complicated financial questions you should postpone, however, is whether or not to sell your house. Grown children may urge you to relocate near them, or you may feel that your house is just too big or too full of painful memories. But experts say stay put for at least six months. ''You shouldn't make permanent decisions about what is probably your most valuable asset until the emotional roller-coaster ride is over,'' says New Orleans financial planner Judith Zabalaoui. You should be able to collect your inheritance in four months to three years and, in most cases, life insurance proceeds will roll in within a month. Park any excess cash you receive in the bank for at least six months. That might not be as easy as it sounds: you can expect to be bombarded with advice on how to invest the money. Be on your guard for scam artists. In a typical ploy, a salesman phones asking for your spouse and then, on hearing that your spouse - is deceased, claims that before he died he was planning to invest in whatever it is the salesman is hawking. Just as insidious as outright fraud, say planners, is incompetent advice from friends and relatives. They may tout some investment that may have done well for them but that is completely inappropriate for you. Financial planner Kathleen Muldoon of Dallas suggests one way to lock away an insurance payout: split it among four bank CDs maturing in three, six, nine and 12 months. As each certificate comes due, you can roll it over or make a more permanent investment. The gradual roll-out will encourage you to diversify and prevent you from acting impulsively. Says Muldoon: ''You can tell people, 'Thanks for your advice, but my money is tied up right now.' '' One reason widows are often so susceptible to bad advice is that they fear they don't have enough money to support themselves. Some, of course, do not, and they may have to join the work force or scale down their standard of living. But often, a widow or widower is simply too distraught or financially inexperienced to evaluate his or her circumstances objectively. The solution: track your outgo for four to six months. Compare that with your income from all sources and you will know whether to cut back or breathe easily. After six months to a year, you can begin to set long-term goals and make the financial decisions that will help you achieve them: whether to move, how to invest insurance proceeds and how to readjust an inherited portfolio. It is also time to review your will and re-examine your insurance needs. If you weren't working when your spouse died, think about getting a job. ''I strongly recommend to my widowed clients that they find work, even if only a couple of hours a week,'' says Naperville, Ill. financial planner Marilyn Capelli. ''It's healthy financially, emotionally and socially.'' Be realistic, though. If you have dreams about starting your own business with your inheritance, note that two-thirds of small businesses fail within five years. On the other hand, getting back into the world is probably the best therapy. Take heart from the example of Barbara Claussen, 50, who nearly four years after her husband's death is one semester away from a bachelor's degree in business administration from Park College in Parkville, Mo. ''I realize that my age may be a barrier to my getting a job, but I'm not worried: I know I have management abilities,'' she says. ''During my marriage, Bob was my buffer against the world. Since I've been on my own, though, my confidence has taken a big boost. From this point on, I feel that my life can only get better.''

BOX: What to Do When a spouse dies -- After a partner's death, the widowed spouse must attend to numerous financial details, including these principal ones.

In the first days after the death -- Try to find directions for the funeral. They may be in the will or a separate letter. -- Order a dozen certified copies of the death certificate from the county clerk's office or the funeral director. Cost: about $5 each. You will need them to claim death benefits and Social Security, and to retitle joint assets. -- Have someone stay at home during the funeral. Burglars read obituaries to learn when a house will be unoccupied.

Within the first two weeks -- Have your attorney review the will and file it in probate court. -- Collect the documents needed to claim death benefits and to value the estate. These include bank, employee-benefits and brokerage statements, your marriage certificate and both of your birth certificates. -- Apply for death benefits. Call your insurance agent, your spouse's employer and your local Social Security office.

Within the first month -- Keep a record of your cash flow. This will help determine where you stand financially. -- As insurance and other benefits come in, set aside the money in short-term bank certificates of deposit. That will buy you time to think about how to invest the money ultimately.

Within the first six months -- Review your own will and change beneficiary designations on insurance policies or retirement plans that name your spouse. Also change names on joint billing accounts or credit cards. -- If you are executor or administrator of the estate, notify creditors and satisfy debts. Be careful: sending phony debt notices is a favorite con game. Check bills and refer suspicious claims to your lawyer.

Between six months and a year -- If you are executor or administrator you must pay any taxes the estate owes. File federal estate taxes within nine months of the death if the estate is larger than $600,000. You must also pay the estate's income taxes, due April 15, every year the estate is open. -- Start to plan for your future. Begin to make decisions you have postponed, including whether to sell your home and how to invest your inheritance.