Death is a difficult time and most people tend to shy away from its potential financial consequences until it becomes too late. Typically people shy away from dealing with estate planning issues as long as they can. Unfortunately, when the time comes, survivors have to make critical financial and legal decisions for which they may not be prepared. Moreover, for a survivor grieving the death of a loved one, the pressures of making haste decisions can be emotionally overwhelming. However, there are steps you can take today to prepare yourself for the death of a loved one.

When someone you love dies, there is a lot of confusion about what happens next for you. Below you will find financial planning considerations that you can prepare for in advance that may help you make important financial decisions when the time comes of a loved one's death, such as concerns over honoring your spouse's wishes and caring for yourself and your family.

Settle your spouse's estate

Dealing with an estate transfer and settlement can be a very complicated process and potentially can drag on for an extended period of time such as a year or more. The estate settlement process includes decisions about the distribution of your spouse's assets and how to handle liabilities such as those that come about from estate taxes. If you are named the executor of your spouse's estate in your spouse's will, you will be responsible for making all the financial and legal decisions related to the estate.

Before you make any decisions, the first step is to obtain a copy of your spouse's will and death certificate. Generally, you will be able to get a copy of the will from your estate attorney that created the document since they usually retain copies. Also, you can get copies of your spouse's death certificate through your state's vital statistics office.

Your spouse's death certificate is important to gain access to bank account information, transfer ownership of securities such as stocks, bonds, and the like, apply for Social Security benefits, and to collect life insurance proceeds and other benefits.

Expenses related to your estate such as outstanding loans, leases, or taxes lower the total value of your estate. Consider having a separate bank account to handle and monitor all of the incurred estate expenses. Make sure to monitor where the money is going and keep accurate records.

Paying off debt

As the executor for the estate, you are required to settle any outstanding debts that are solely in your spouse's name such as credit card balances and other debt. You can contact any of the credit bureaus to get copies of your spouse's outstanding debts. You should also provide the credit bureaus a copy of your spouse's death certificate so that they remove his name from their files. Also, notify all the creditors of your spouse's death to close all credit cards listed solely under your spouse's name and transfer any jointly help cards to your name only.

Distributing property

Every state has a probate process and as the executor you play a critical role in the distribution and sale of estate valuables and properties according to the will and your spouse's wishes. If the will is lacking certain information, the executor would take the responsibility in distributing the decedent's property at his/her discretion.

Paying taxes

Depending on the laws related to estate taxes at the year of death and the value of the spouse's total estate, the executor would need to handle issues related to settling estate taxes, which would be due nine months after the death.

The federal estate tax or in other words the "death tax" is a tax on the transfer of property. The estate tax works in conjunction with the gift tax, which applies to estates also that haven't made proper considerations for the distribution of properties.

However, federal estate tax laws change often. For 2009, if the estate tax on the decedent's taxable estate, plus taxable lifetime gifts, is less than exclusion amount of $3,500,000, the federal estate tax can be avoided. For 2008, that exclusion was $2,000,000 and it is set to revert to $1,000,000 going forward.

Also, depending on the state you live in, the executor of the estate would need to complete any state estate and/or inheritance tax returns. Since this is beyond the scope of this paper, speak with your tax attorney on how to properly file these documents.

Obtaining benefits

Make sure to notify the Social Security Administration of your spouse's death to determine any benefits you are eligible to receive. Survivor benefits can vary depending on factors such as your spouse's earnings, your age, and your children's ages.

Many companies provide the surviving spouse with benefits that transfer to the surviving spouse and other heirs after death such as pension benefits, retirement benefits, and the like. You may be entitles to your spouse's stock options, insurance benefits, and other compensation such as unpaid bonuses. Contact the human resources department of your spouse's employer(s) for information on any transferable benefits.

Retirement benefits

There are two common types of retirement plans that offer retirement benefits: traditional defined benefit plans or employer-sponsored plans (defined-contribution plans).

•Traditional defined-benefit retirement plan or traditional pension plan. The employer guarantees a pre-determined regular benefit to the widowed spouse.

•Employer-sponsored retirement plans include 401(k), 457 and 403(b) plans. If your decedent spouse participated in an employer-sponsored plan such as the ones above, you will need to contact the employer to determine what options are available to you for receiving benefits. You might be able to roll over your spouse's assets into your own IRA.

At this point, it may be a good idea to update your beneficiaries of your retirement plans.

Settling life insurance

Life insurance proceeds are typically the biggest source of income that is left to a surviving spouse. You should file to get your life insurance benefits as soon as possible. You should also update your life insurance beneficiaries at this time. Life insurance can have a variety of options for receiving benefits. You should speak with your financial advisor about best ways to receive the life insurance distributions and more importantly on how to invest your life insurance proceeds.

Options for receiving life insurance benefits:

•Lump sum. Receive the entire death benefit in one payment.

•Income provision. Life insurance pays you principal and interest on a specific schedule.

•Life income option. Life insurance company pays guaranteed income for life depending on the policy's death benefit and the surviving spouse's age.

•Interest income option. Life insurance company pays you interest earned from the policy, but keeps the proceeds. This option allows you to name another beneficiary to receive the death benefit upon your death.

Obtain help from your financial advisor

Upon the death of your spouse, it may seem emotionally and mentally overwhelming to tackle any issue that you face. However, you can prepare in advance and lessen the financial stress of distributing your spouse's estate.

A Financial advisor can help you address the issues that you will need to tackle both upon your spouse's death and years afterwards, such as budgeting, managing your debts, securing your retirement, investing your assets, protecting your family, and helping ensure that your estate is in order.