Reorganising family finances after spouse’s death

File insurance claims, repay loans, and synchronise investment portfolio with altered risk profile

Koel Verma’s (name changed) life changed dramatically in May when her 43-year-old husband, Chandran (name changed), a chartered accountant, died because of Covid-19 complications. Verma, a principal at a private school, is struggling to cope with her grief. But with a couple of loans and two young kids, she now needs to take charge of her finances.

Take stock: Those in a similar situation must first gather all the financial documents in the house (see box) and get a clear picture of assets, liabilities, insurance policies they can claim, and bank accounts that need to be transferred to their name.

Says M Barve, founder, MB Wealth Financial Solution: “Look into money matters within a month. Give priority to making a claim on your spouse’s life insurance policies. You also need to change the ownership of financial assets.”

Emergency funds: A single parent should hike the standard emergency fund equal to six months’ expenses to at least 12 months.

Loans: Check available documents to ensure any claim made on you is genuine. Says Priti Rathi Gupta, founder of LXME, and managing director and promoter at Anand Rathi Share and Stock Brokers: “If you are the guarantor, co-applicant, or legal heir, banks and other lending institutions will want to recover the loan via mortgaged assets or collateral, or they will claim it from you.” She adds that those who are not in a position to repay should discuss restructuring with the lender.

Use the life insurance claim received to pay off the home loan. “It will ensure you have a roof over your head,” says Barve. If any money is left, put it into the children’s education corpus or your retirement fund.

Life insurance: If you don’t have dependants, you need not buy life insurance. But if you do, then buy a term cover equal to 12-15 times your annual expenses, or 8-10 times your annual income plus debt obligations.

Medical insurance: If you are a family of one adult and two kids, have at least a ~15-20 lakh medical cover over the group cover provided by your employer. Inform your insurer about your spouse’s demise so that it can recalculate the premium for your family floater policy.

Investments: If your family’s profile has changed from doubleto single-income, your risk-taking ability has reduced. Says Barve: “Your responsibilities will also increase and you will have less time to monitor your portfolio.” Consider liquidating direct equities and moving to mutual funds.

Estate planning: Change the nominees in different instruments. Says Manish P Hingar, founder, Fintoo, a wealth and tax advisory platform: “Your spouse may have been the nominee for all your investments. Now appoint your children.”

Finally, create a Will. Says Anjan Dasgupta, partner, DSK Legal: “This will safeguard your children’s future. Going through this process will also force you to identify and name a guardian for your minor children.”