When a spouse dies, the surviving spouse is often left to deal with financial surprises that were never anticipated. Inaccessible bank accounts, surprise tax obligations and outdated beneficiary designations are just a few of the challenges, as reported by the article “Charles Schwab warns Americans on major estate planning problems” in The Street.
Many couples in Columbia, Missouri and elsewhere make the mistake of assuming assets automatically transfer to their spouses. Without advance planning, the surviving spouse has a long road of dealing with financial institutions and going to court to gain access to assets. Here’s what needs to be done to prevent this scenario.
Understand how estate planning and asset transfers work. Assets do not automatically transfer unless the person lives in a community property state. If the spouses don’t have wills, state intestacy laws dictate how assets are divided. In many states, separately owned property is divided between the surviving spouse and any biological children or living relatives. A widowed partner could lose a big portion of the family’s wealth because no will was prepared.
If there is a will, it needs to be reviewed. If the couple relocated upon retirement, the will may not be valid in the new state. Even if there is a will, assets not owned in a trust or jointly with right of survivorship must go through probate, which could tie up cash flow for months.
Beneficiary designations on retirement accounts, pensions and life insurance policies override the directions in a will, creating another series of problems for spouses. They need to be checked regularly, especially in light of marriage, divorce, or a new child in the family.
Having all documents properly prepared by an estate planning attorney, keeping them organized and knowing where they are located are critical to managing the post-mortem process. In addition to a will and trust document, a letter of intent is critical for clarifying how personal possessions of value, whether sentimental or financial, should be distributed.
Life insurance should be in place, something people overlook when planning for the surviving spouse. Losing a spouse also means losing income, whether from a job or Social Security. If there are outstanding debts, the survivor may struggle to maintain their standard of living.
Purchasing long-term care insurance should be on the family’s financial schedule relatively early in their lives. Many partners assume their spouse will provide care, but when one spouse passes, the other is vulnerable, especially if adult children don’t live nearby. Long-term care insurance premiums are tax-deductible if the policy is “tax qualified” and total medical expenses exceed a certain percentage of the family’s AGI and if the household itemizes deductions on its federal tax return.
Decisions made before the first spouse dies will have a major impact on the surviving spouse’s life. Talk with an estate planning attorney to ensure that everything is in place, so the widowed spouse can be protected and grief doesn’t have to be mixed with financial stress.
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Reference: The Street (June 1, 2026) “Charles Schwab warns Americans on major estate planning problems”