Death of a Spouse or Loved One

The death of a spouse is consistently ranked among life's most stressful events. For CFP professionals, understanding how grief affects clients---and how to provide appropriate support---is essential knowledge tested on the CFP examination.

The Demographics of Widowhood

According to the 2020 Census, approximately 11.8 million people in the United States are widowed, with about 2,800 more joining their ranks each day:

• 11.3 million widows (almost 9% of all women)
• 3.5 million widowers (almost 3% of all men)
• Widows outnumber widowers three-to-one
• 87% of widowed persons are over age 65
• Average age of widowhood in the U.S. is 59
• 14.8% of widowed persons live in poverty

These statistics underscore why financial planners frequently encounter grieving clients and why specialized knowledge in this area is critical.

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The Kubler-Ross Model: Five Stages of Grief

Swiss-American psychiatrist Elisabeth Kubler-Ross introduced her influential grief model in the 1969 book On Death and Dying. The model identifies five emotional stages that people commonly experience when facing significant loss:

Important Clarifications About Grief Stages

Kubler-Ross herself noted that these stages are not linear or universal:

• Not everyone experiences all five stages
• People may move back and forth between stages
• Stages may occur simultaneously or in different orders
• The duration and intensity vary dramatically among individuals
• The model was originally developed for those facing their own terminal illness, later expanded to all grief

David Kessler, who co-authored with Kubler-Ross, has proposed a sixth stage: Finding Meaning---the process of discovering purpose or growth through loss.

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Three Phases of Widowhood

Financial planning researchers have identified three broader phases that widowed clients typically experience:

Phase 1: Grief (Acute Phase)

• Shock and "foggy brain" or "widow fog"
• Difficulty concentrating or retaining information
• Need help with immediate tasks (filing for benefits, estate settlement)
• Information provided often "goes in one ear and out the other"

Phase 2: Growth (Transition Phase)

• More clearheaded thinking returns
• Ready to address cash flow, housing, investments, taxes
• Beginning to establish new identity and routines
• Can engage more actively in planning discussions

Phase 3: Grace (New Beginning Phase)

• Embracing new life and financial realities
• Transformational stage with openness to change
• Ready for comprehensive long-term planning
• May pursue new goals, relationships, or activities

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The One-Year Rule

The "one-year rule" is widely recognized guidance that recently widowed individuals should avoid making major, irreversible financial decisions for at least 12 months following the death of a spouse. The rationale includes:

• Cognitive impairment: Grief literally impairs brain function
• Emotional volatility: Decisions made in acute grief often cause later regret
• Identity transition: The surviving spouse needs time to understand their new reality
• Information gaps: It takes time to fully understand the financial picture

Decisions to Delay:

• Selling the family home
• Major lifestyle changes or relocations
• Significant changes to investment strategy
• Large gifts to family members or charity
• Remarriage and financial integration
• Business sales or major business decisions

Decisions That Cannot Wait:

• Filing for Social Security survivor benefits
• Understanding pension and retirement account options
• Managing immediate cash flow needs
• Filing the deceased spouse's final tax return
• Meeting estate administration deadlines

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Common Financial Mistakes by Widows and Widowers

CFP professionals should help grieving clients avoid these frequent errors:

1. Selling the home too quickly before understanding long-term housing needs and costs
2. Taking lump-sum distributions from retirement accounts without understanding tax implications
3. Making permanent investment changes based on temporary emotional states
4. Giving away money to children or others before securing their own future
5. Ignoring their own estate plan which likely needs updating
6. Missing deadlines for benefits, tax elections, or account rollovers
7. Falling victim to scams targeting vulnerable widows/widowers
8. Neglecting their own health and the costs associated with aging

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2025-2026 Estate Tax Considerations

For high-net-worth clients, the current estate tax environment creates important planning considerations:

• 2025 lifetime exemption: $13.99 million per individual ($27.98 million per couple)
• 2026 lifetime exemption: $15 million per individual ($30 million per couple)---The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, made the increased exemption permanent with continued inflation indexing
• Portability: The surviving spouse can claim the deceased spouse's unused exemption by filing an estate tax return, even if no tax is owed

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Working with Grieving Clients: Best Practices

Communication Approaches:

• Provide information in writing since verbal communication may not be retained
• Use simple, clear language---avoid jargon
• Repeat key information across multiple meetings
• Offer to include trusted family members in discussions
• Be patient with clients who need to reschedule or seem distracted

Emotional Support:

• Acknowledge the loss before discussing finances
• Allow space for clients to express emotions
• Avoid rushing to solutions or action plans
• Recognize that grief has no fixed timeline
• Know when to refer to mental health professionals

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Divorce: Financial Planning During Emotional Upheaval

Divorce represents another profound crisis requiring specialized financial planning knowledge. Unlike death, divorce often involves conflict, negotiation, and competing interests---yet the emotional toll can be equally devastating.

Emotional Impact of Divorce

Divorce triggers many of the same grief responses as death:

• Loss of identity (no longer part of a couple)
• Loss of expected future
• Feelings of failure, betrayal, or anger
• Anxiety about financial security
• Depression and isolation

A September 2025 study by the Financial Planning Association emphasized that decisions made from frustration or fear during divorce "may lead to financial regret later."

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The Financial Impact of Divorce

Divorce creates significant financial disruption:

• Household income falls approximately 10% post-divorce on average
• Women age 50+ may see income drops of up to 40% in the year following divorce
• Nearly 40% of high-net-worth divorcees are forced to delay or change retirement plans
• Legal costs can be substantial ($15,000-$50,000+ for contested divorces)
• Two households are more expensive than one shared household

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QDRO: Qualified Domestic Relations Order

A QDRO is a legal document required to divide qualified retirement plan assets (401(k), 403(b), pension plans) between divorcing spouses. Key points for the CFP exam:

What a QDRO Does:

• Creates legal recognition of an alternate payee's rights to retirement benefits
• Allows retirement funds to be transferred without early withdrawal penalties
• Separate document from the divorce decree itself

What a QDRO Does NOT Cover:

• IRAs (division is handled in the divorce decree, not a QDRO)
• Non-qualified plans (may require different legal mechanisms)

Processing Timeline:

• No statutory deadline for plan administrators to process QDROs
• Processing can take 2 weeks to 6 months or even longer
• If the participant is retired, plan administrator has 18 months to decide
• Clients should not expect immediate access to funds

Critical QDRO Considerations:

• There is no way to divide qualified retirement plan assets without a QDRO
• Both parties must file the QDRO for it to take effect
• The QDRO must be "qualified" (approved) by the plan administrator
• Errors in QDRO drafting can cause significant delays and costs

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Immediate Financial Urgencies in Divorce

Unlike the "one-year rule" for death, divorce often requires more immediate financial action:

Urgent Priorities:

• Securing access to liquid assets for living expenses
• Protecting credit (removing authorized users, monitoring accounts)
• Understanding current cash flow and expenses
• Inventorying all marital assets and debts
• Establishing separate bank accounts and credit

Housing Decisions:

• Who stays in the marital home (if anyone)?
• Can either spouse afford to maintain the home alone?
• What are the tax implications of selling vs. keeping the home?

Income Considerations:

• Will there be alimony (spousal support)?
• What about child support if applicable?
• How will health insurance be handled?

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Working with the Divorce Team

CFP professionals should collaborate with other professionals during divorce:

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Rebuilding Financial Identity After Divorce

Post-divorce financial planning focuses on:

Immediate Post-Divorce:

• Update all beneficiary designations
• Revise estate planning documents
• Establish new household budget
• Implement asset division per decree

Medium-Term Recovery:

• Rebuild credit if needed
• Adjust investment strategy for single-household needs
• Consider career implications (returning to work, advancement)
• Address retirement planning gaps

Long-Term Planning:

• Develop independent financial goals
• Consider implications of potential remarriage
• Plan for single-person retirement
• Protect assets from future relationship risks

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Quiz Questions

Question 1: A recently widowed client, age 62, wants to immediately sell the family home and move across the country to be near her children. What is the most appropriate initial response?

A) Help her list the home immediately since family support is important B) Suggest she wait at least 12 months before making major irreversible decisions C) Recommend she consult a real estate agent first D) Tell her this is a bad idea and she should stay in her home

Correct Answer: B

Explanation: The "one-year rule" advises recently widowed individuals to delay major, irreversible decisions like selling a home for at least 12 months. This allows time for the acute grief phase to pass and for clearer decision-making to return. While moving near family may ultimately be the right choice, making this decision during acute grief increases the risk of later regret.

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Question 2: Which of the following statements about QDROs is correct?

A) A QDRO is required to divide IRA assets in divorce B) A QDRO allows retirement account transfers without the 10% early withdrawal penalty C) QDROs must be processed within 30 days by law D) A QDRO is automatically included in all divorce decrees

Correct Answer: B

Explanation: A QDRO allows qualified retirement plan assets (401(k), 403(b), pensions) to be transferred to a former spouse without incurring the 10% early withdrawal penalty that would normally apply. QDROs do not apply to IRAs---IRA division is handled through the divorce decree itself. There is no statutory processing deadline for QDROs, and they are separate documents from the divorce decree.

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Question 3: According to the Kubler-Ross model, which of the following best describes how individuals experience the stages of grief?

A) All five stages occur in strict sequential order for everyone B) Everyone experiences all five stages with equal intensity C) The stages may occur in different orders, simultaneously, or not at all D) The stages apply only to those facing their own terminal illness

Correct Answer: C

Explanation: Kubler-Ross explicitly noted that the five stages of grief are not linear or universal. People may experience stages in different orders, move back and forth between stages, experience them simultaneously, or not experience all stages at all. The model was also expanded beyond terminal illness to apply to all forms of significant loss.