Living

A woman's darkest fear

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A woman’s darkest fear
Widowhood: have a financial plan in place in case it happens

By Gail Vaz-Oxlade
First published in Chatelaine’s October 2000 issue.
©Rogers Media Publishing Inc.

Life was perfect for Leanne R. At 32, she had a loving husband, a beautiful three-year-old son and a baby on the way.

Then, in a split second, her life changed. On his way back from a meeting, her husband, Charles, was fatally injured in a car accident. “The baby was due in just eight weeks and my best friend in the world was gone. All I could do was cry,” she says. The weeks to come would bring a funeral and a birth but it didn’t take long for her focus on worry to shift to finances. Charles had some insurance but Leanne was left with credit card debt, “a whopper of a mortgage” and no way to earn an income in the short term.

Having to think about money when your world’s been shattered is a harsh reality for which we don’t want to prepare. Although we tend to cast older women in the role of the widow, that’s not the way it is. Leanne’s story can help all of us learn that the best way to deal with the worst is to be ready for it.

Leanne made a smart move and allowed the people around her to help. “My sister-in-law, Stacie, asked if I’d let her look after the funeral for me. I was happy to. I told her how much I thought we could spend and she did everything.” A trusted friend or family member is the perfect person to do the hard work of comparing prices, picking a funeral home, obtaining a burial plot and handling the obituary announcements and calls to family and friends.

The next big thing was to find a way to keep paying the mortgage, which was not life-insured. “I couldn’t even get at the money in Charles’s account because it was frozen when he died,” Leanne says with an exasperated sigh. This is an important lesson: had the account been held jointly, Leanne could have easily transferred the money to an account in her own name. Now, she would have to wait until Charles’s estate was settled, often a lengthy process. In the meantime, Leanne came up with a solution. She found a roommate with whom she could share her large house, cutting her expenses almost in half.

Leanne also had to cut other expenses and increase her cash flow. Her sister-in-law called the credit card company and explained what had happened. They offered to transfer the balance to a less expensive card. Other expenses you may be able to trim: cancel the deceased’s disability and medical coverage and check to see what’s being automatically debited from your bank account (life insurance premiums, club memberships) that could be stopped. Also, apply for overdraft protection: the last thing you need is to ruin your credit history with NSF cheques.

Leanne’s mom had a hunch that Charles’s contributions to the Canada Pension Plan (CPP) might mean Leanne qualified for widow’s benefits. She was right. CPP, old age security (at age 60 and up) and the Workplace Safety and Insurance Board may each have money to see a widow through. However, there’s an 11-month limit on the payment of retroactive benefits, so file the paperwork as soon as you can. And remember: that income is taxable.

Leanne also applied for the monthly orphan’s benefit from CPP, which is paid for children under age 25 (as long as they are in school). “I consider that money to be the kids’ educational fund,” she says. (Call Human Resources Development Canada at 1/800/277-9914 for more information.)

Leanne isn’t the only woman I’ve spoken to who, at a tender age, has found herself bereaved and financially vulnerable. Each time I listen to one of these stories, I cry and count my blessings. As a woman with small children, I know I have a huge responsibility. Putting the details in place when everything’s perfect is the best way to do it. Waiting until your world is shattered is just too hard.

damage control
What to do if you (or a friend or family member)
lose a spouse
  • To make legal or financial changes–everything from changing the licence plates on your car to making an insurance claim–you’ll need to provide proof of death. Ask your funeral director for 10 copies of the death certificate.
  • If your spouse had RRSPs or RRIFs, the assets can be transferred to you. You won’t have to pay any tax on the money, provided you roll the funds directly into your own plan, referred to as a “refund of premiums.” You could also use the funds to buy a life annuity or a fixed-term annuity to age 90.
  • Book an appointment to change your will, power of attorney and any other documents in which your spouse was named..
  • If you have young children and haven’t named a guardian for them, do so now.
  • Find the money: talk to the deceased’s stockbroker, insurance agent, accountant, lawyer and employer. Look at old tax returns to see if capital gains were declared on investments that might now belong to you. Look in the safety deposit box, the desk at work, computer files–everywhere.

Gail Vaz-Oxlade’s latest book is Divorce: A Canadian Woman’s Guide (Prentice Hall). She can be reached at www.gvomoney.com.