Advance Estate Planning for a Surviving Spouse (2024)

You're never truly prepared for the death of a partner. However, while the emotional loss is unavoidable, couples can do a lot of things in advance—together—to solidify the financial standing of the surviving spouse.

"You want to prepare for all eventualities, not just the ones you think are most likely," says Austin Jarvis, director of estate, trust, and high-net-worth tax at the Schwab Center for Financial Research. "The last thing you need in the midst of your grief is unexpected financial hurdles or repercussions."

Here are Austin's top ways to mitigate financial stress on a surviving spouse.

Couples who engage in estate planning often take pains to help ensure their children thrive after their deaths—yet they sometimes fail to put in place similar protections for each other.

"Many people are under the false impression that all their assets will automatically pass to their spouse," Austin says. "However, since state laws vary in their approach to the equitable distribution of assets in the absence of a will or other legal actions, your spouse could be left with far less than you expect."

For example, if you live in a community property state,¹ all assets acquired during the marriage will transfer to the surviving spouse regardless of whether a will is in effect. However, for property acquired outside the marriage that isn't jointly owned—such as a home purchased by one spouse before being wed—the absence of a will in some states means the surviving spouse is entitled to only one-third to one-half of the property, depending on whether the deceased spouse has living children, parents, or siblings.

Even if you have a will that names your spouse as your heir, all wills must go through probate, the legal process of validating a will, which can be lengthy and costly. Instead, all relevant assets should be handled in one of two ways:

• Titled with rights of survivorship, meaning both spouses have equal ownership and the surviving spouse will inherit the deceased spouse's interest.
• Placed in a revocable trust—which isn't subject to probate—with your spouse as its beneficiary.

"In both cases, the survivor has immediate ownership of or access to such assets," Austin says.

For bank accounts in one spouse's name, you can file a payable on death (POD) form to ensure the surviving spouse can access the account without going through probate.

Also be sure to review your beneficiary designations for insurance, investment, and retirement accounts. "Beneficiary designations supersede your will," Austin says, "so you may wish to review these every few years—and certainly after the death of your spouse, since that person was likely the beneficiary on many of your accounts."

"Gather important paperwork and store it in a safe spot known to both spouses, as well as the executor of your estate," Austin says. In addition to your will and any trust documents, he suggests including a letter of intent in which you detail the recipients of particularly meaningful or valuable property. Most of the time, those things will pass to the surviving spouse, but a letter of intent can show how you'd prefer to distribute those items.

Austin also recommends creating an inventory of what you own, where it can be found, and its approximate value. The list should include the usernames and passwords for any accounts your spouse will need to access after your death—including financial accounts, cloud storage, email, your cellphone , and any relevant apps.

See Schwab's asset inventory worksheet.

"This is a big one for working-age couples," Austin says. "Losing one income can leave the surviving partner struggling to pay the bills, so be sure to have enough coverage to maintain the life you've built together, thinking about not just lost income but also lost retirement savings."

As a general rule, shoot for a policy that's 10 to 20 times your current income, depending on your outstanding debts, lifestyle, and current retirement savings. "Depending on your age, term life insurance is relatively inexpensive and can make the difference between having the space to grieve or immediately fretting about money," Austin says.

If a working-age spouse dies and the survival has relied upon that person for health insurance, buying coverage can be an unexpected—and large—expense, particularly if dependent children are involved.

Those 65 or older can turn to Medicare, but a younger surviving spouse will have to pay for health insurance, either through their employer (if offered) or their state's health care marketplace. If you're currently enrolled in a high-deductible health plan, Austin says building up an available health savings account (HSA) with pretax dollars can provide a cushion for the survivor. (In 2024, families can contribute up to $8,300 to an HSA.)

Listing the surviving spouse as the beneficiary lets them inherit the account and continue to spend the funds tax-free on qualified medical expenses. While HSA funds generally can't be used to pay for insurance premiums, they can cover copayments and deductibles.

Many couples assume the healthier partner will care for the ailing one—but who will care for the survivor? "Don't assume your kids will have the time, skill, or emotional bandwidth to do so," Austin says. "Caring for someone in old age is a huge undertaking. Long-term care insurance can take an emotional and physical weight off everyone involved."

The ideal time to purchase a long-term care policy is between the ages of 55 and 65. "Purchasing earlier means paying premiums for much longer than necessary," Austin adds, "while purchasing later means a policy may become exorbitantly expensive—assuming you aren't denied coverage altogether."

Deciding when to collect Social Security requires you to make assumptions about how long you and your spouse will live.

You can collect as early as age 62, which could potentially allow you to receive benefits for longer. However, collecting before your full retirement age—currently between 66 and 67, depending on your birth year—means accepting reduced benefits for life. Conversely, each year you wait to collect beyond your full retirement age means an 8% increase in payments—up to age 70, after which there's no benefit to delaying.

Many couples assume they should both wait as long as possible to collect, and that may be a smart strategy depending on their income needs. But at a minimum, it's best for the higher earner to wait as long as possible, since the surviving spouse will be entitled to the larger of the two benefits.²

"Social Security is guaranteed for life, so maximizing benefits is one way to help ensure surviving spouses are well protected for the rest of their lives," Austin says.

Couples often plan their estates around assumptions based on age, gender, or health. "But estate planning is all about anticipating every eventuality, not just the most likely one," Austin says, "so be sure to account for the possibility that either of you could pass first."

And remember, you should always review your estate plan after significant life events like marriage, divorce, the birth of a child or grandchild, or the death of a family member.

Even absent a big life change, Austin suggests reviewing your estate plan at least once every three years. "Estate and tax laws, in particular, are in constant flux, so you want to make sure any recent changes don't materially affect your plans," he says.

What about taxes?