The so-called “great wealth transfer” is often framed as billions of dollars passing from baby boomers – born between 1946 and 1964 – to Gen X and their millennial heirs over the next two decades.
But one of the biggest transfers of wealth gets far less attention: the billions of dollars that pass from husbands to surviving spouses.
A new report by the LIMRA Retirement Income Institute estimates that nearly $54 billion will pass from one spouse to another by 2048, and more than 95% will ultimately go to women.
Women have lived longer than men on average, making them more likely to be widowed later in life. According to the National Center for Health Statistics, women live five years longer than men.
At the same time, as the US population ages and millions of baby boomers enter their retirement years, researchers say demographic trends are poised to accelerate the transfer of wealth between spouses.
However, inheriting does not mean financial security. While some widows will receive large inheritances, others will face lower take-home wages, reduced Social Security benefits and difficult financial decisions during the grieving process.
Today, about 11.7 million widows live in the US, and the poverty rate for widowed women age 65 and older is 15.5%, compared to 10.3% for all adults that age, according to the LIMRA report.
Why acquiring wealth can be difficult financially
For many surviving spouses, the biggest challenge is not inheriting assets – figuring out what comes next.
“A life insurance check or brokerage statement can make the picture look clearer,” TL Turnipseed, head of personal trust at Alta Trust Co., tells Money. “That’s rarely the case.”
A spouse’s assets do not all transfer in the same way. Retirement accounts, life insurance policies, joint ventures, jointly managed accounts, trusts and beneficiary designations may have different rules – meaning a widow may need to sift through a complex web of accounts while adjusting to life after her spouse’s death.
“Assets can pass through beneficiary designation, joint title, trust, probate, business agreement, pension election or retirement plan law,” Turnlipseed said. “Those plans don’t always point in the same direction.”
The financial crisis also brings with it a drop in income. A surviving spouse may lose one Social Security benefit (for the deceased spouse), see a change in pension benefits or face higher costs related to health care, taxes or long-term planning.
Although surviving spouses may be eligible to receive Social Security survivor benefits, they typically receive only the maximum retirement benefit and the survivor benefit — not both.
“A big check feels like it’s safe, but the family may still be dealing with a small income,” he said.
The LIMRA report also points to another challenge: Grief itself can make financial decisions difficult. Losing a spouse can affect concentration, memory and the ability to make complex decisions – making it a particularly vulnerable time for big financial decisions.
Grief can make surviving spouses more vulnerable to financial exploitation. Older adults will lose more than $5 billion to scams by 2024, according to the FBI, making it even more important for people dealing with grief to have trusted people or advisors involved in major financial decisions.
What married couples should do before making big financial decisions
Experts say that one of the biggest mistakes people can make is rushing into permanent decisions before they have or understand the full picture of their financial situation.
“In the first six to 12 months, delay anything that is too expensive, in your opinion, or difficult to postpone unless a legal, tax, safety, health or cash flow deadline forces the issue,” Turnlipseed says.
“That’s not because widows or widowers can’t. It’s because grief disproportionately affects focus, memory, risk tolerance and the ability to weigh trade-offs.”
In practice, that means withholding decisions such as:
- Selling a home or moving
- Making large gifts or loans to family members or friends
- Dramatically changing investment strategy
- Buying complex financial products, such as annuities, long-term care or life insurance
- Making major changes to the housing system
But waiting also doesn’t mean ignoring important tasks. Some decisions require immediate attention, including claiming benefits, filling out insurance paperwork and understanding tax or housing deadlines.
Turnlipseed says the first priority is to build a clear picture of your home finances. That includes:
- Identifying sources of income, recurring debt, default payments and short-term debt
- Collecting important documents, including wills, trusts, insurance policies, retirement account statements and tax records
- Notifying Social Security, pension administrators, insurance companies and financial institutions to understand available survivor benefits and important deadlines
- Meeting with trusted professionals, such as a financial advisor, CPA or real estate attorney, to help navigate time-consuming decisions
Before making big decisions, Turnlipseed says cohabiting couples should make sure they can afford everyday expenses comfortably.
The question is simple: Can the survivor pay the normal expenses for the next 90 days without selling assets or making quick decisions?” he adds.
A financial plan couples should create before they need it
The best time to prepare for this change is before it happens, says Turnipseed.
One of the biggest risks is when one spouse handles most of the household finances. If that information is not written down, the surviving spouse may be left trying to figure out the financial situation during an already difficult time.
Turnipseed recommends creating a “road of survival” that includes account information, key advisors or contacts, recurring bills, passwords, safe deposit box details and a place for important documents.
“A survivor-friendly strategy shouldn’t just dictate who gets what,” he adds. “It should answer Monday morning’s questions: Where is the money? How are the debts paid? Who are the advisors? What happens to the income when one spouse dies? What assets pass automatically, and need probate or trust administration? What tax election or deadline will be important?”
Ultimately, Turnlipseed says every couple should ask themselves one question:
“If one of us died tomorrow, the survivor would not know what to do next Monday morning?”
If there is uncertainty or the answer is no, he says, “the plan is not finished.”
