The loss of a spouse or partner can be one of the hardest challenges in life.
Alongside the grief and upset, there are often myriad practical matters to organise, such as probate, the funeral, and your finances.
Whether you or your partner managed the money or you shared the responsibility, being the sole decision-maker in an entirely new financial situation can feel overwhelming.
From rethinking your income and spending to understanding your entitlements, there’s a lot to organise. But taking small, steady steps can help you regain control and plan for what’s ahead, and a financial planner can help you throughout the process.
Read on to discover five ways to take control of your finances after losing your spouse.
1. Use inherited money or life insurance to pay off your mortgage
If you had a joint mortgage, let your lender know about your partner’s death as soon as you can.
With only one income coming in, it might be harder to keep up with repayments. However, depending on the structure of your partner’s estate, you may be able to use inherited assets or life insurance proceeds to clear some or all of the outstanding balance.
Many couples choose to set up life insurance specifically for this purpose. If you do this, it’s a good idea to write it in trust so it doesn’t form part of the estate and risk triggering Inheritance Tax (IHT).
If no provisions were in place and you can’t pay off the mortgage in full, responsibility for repayments will fall to you, so it’s worth reviewing your wider finances at this stage.
A financial planner can help you explore options for paying off your mortgage or create a plan that ensures you can keep up with the repayments. If you’re unable to do either, they can work with you to find a new mortgage that suits your circumstances.
2. Rebuild your household budget
Losing a partner often means you’ll experience a shift in your household finances. You might see a drop in income if your partner was earning, or you could inherit a pension, savings, or other assets that could increase it.
On the other side of the equation, your outgoings might change too. While some costs may go down as there’s only one of you, others, like household bills, might remain broadly unchanged. There may also be outstanding debts your partner held that will now become your responsibility.
Whatever your situation, it’s important to review your income and outgoings and then build a new budget.
A financial planner can help you balance your needs and priorities. They can use cashflow modelling to map out your income and expenses, including any outstanding debts left by your partner, while accounting for uncertain variables like inflation, market volatility, and life expectancy.
This can help give you a clear picture of the financial path ahead, and what changes (if any) you’ll need to make to your budget to ensure you remain on track to achieve your long-term goals.
3. Access pensions and other entitlements efficiently
If your partner had a defined contribution (DC) pension and named you as the beneficiary, you may be able to take over the pot through beneficiary drawdown.
You can choose to leave the money invested, take a regular income, or a combination of both. The most efficient way to access an inherited pension depends on your personal circumstances and income, and there may be tax advantages based on the age at which your partner passed away.
If they died before 75, withdrawals are usually tax-free. If they were 75 or older, you’ll be taxed at your own marginal rate of Income Tax, but the pension won’t count towards their estate for IHT purposes. However, this rule is set to change in 2027 as pensions will be considered part of the estate and liable for IHT, though the exact details are yet to be confirmed.
For defined benefit (DB) pensions, the scheme’s rules will dictate how much you’ll receive.
If you haven’t done so already, it’s a good idea to make sure your own pensions have up-to-date nomination forms so they are passed on efficiently and according to your wishes.
You may also be eligible for certain spousal allowances, such as an Additional Permitted Subscription (APS). APS allows you to inherit your partner’s ISA allowance on top of your own, meaning you can continue to benefit from the tax-efficient growth their ISA offered.
A financial planner can help you understand how to access any pension entitlements and allowances you inherit efficiently.
4. Review and update any insurance policies
It’s common for couples to share insurance policies or to rely on cover held in one person’s name. But some of these policies may no longer be valid following a death, even if they were held in both names.
So, it’s important to contact each insurer to check the status of your policies and make any updates to ensure you still have the right level of cover. This could include home, car, health, or life insurance.
5. Revisit your long-term plans and update your will
Once the initial admin has been handled, take some time to think about your longer-term financial picture.
For example, you may have inherited a considerable amount, which could change your retirement plans or enable you to pursue different goals.
It’s also important to update your will so that it reflects your current situation and your wishes. Doing so can give you peace of mind and help protect your loved ones in the future.
A financial planner can work with you to re-envision your goals, set new targets, and ensure all your own estate planning documents are up to date.
Get in touch
Losing a partner is one of the hardest things anyone can go through, but when it comes to financial decisions, you don’t have to face it alone. A financial planner can help you understand what’s changed, explore your options, and make informed decisions at your own pace.
If you’re dealing with the aftermath of a bereavement and want support with managing your finances, we’re here to help.
Email admin@stonegatewealth.co.uk or call us on 01785 876222.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Production