Financial Mistakes for Widows to Avoid When Life Insurance Money Is Received

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Upon the death of her husband, a widow has to take financial responsibility of a household and manage money, maybe for the first time.  With gender roles, many men have always managed the family finances and investments.   For some widows, they are left with having to handle new, complicated finances and the issue of what to do when term life insurance funds are received.  This article offers guidance as to how to avoid some initial financial mistakes.

Don’t Rush to Make Big Changes

The first few months or so after a husband’s death, a widow should not rush to make any big financial changes.  If there is sufficient life insurance, income or savings, she should have funds to pay immediate bills.   As a first step, she should figure out the basic monthly system to pay bills, understand how the family’s health insurance works and take steps to collect on any life insurance policies.   It is recommended by experts that people do not make any irreversible decisions in the first month or two following the death of a spouse, according to a New York Time blog on the topic.   It is also helpful to not that life insurance funds are received tax free so there is time to evaluate how they will be spent or invested. 

Don’t Make a Rushed Decision Regarding the House

One mistake widows make early on is too quickly using life insurance funds to pay off the mortgage on the family home, only to later need liquidity to pay bills, to have yard work or snow removal done or to pay for in-home assistance to keep them at home. 

Although it can be upsetting to live in the family home when a spouse passes away, this major asset might be a stable piece of security for most widows.  Selling a house in the current housing market can be stressful and will likely not result in the full value of the property being paid in this down market. 

Be Wary of Adult Children and New Suitors

Widows with new funds from a life insurance policy, may find themselves victims of adult children who are looking for an advance on their inheritance or suitors looking for financial stability.   Although not all adult children or suitors are a problem, widows might want to wait a few years before making any big changes in their lives to protect themselves and their future.  In the short-term, it is better that they take their advice and guidance from financial planners and find financial and emotional stability before making any major decisions.

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