North County San Diego
My spouse died. What do I have to decide this year?
Most of it can wait. A few things cannot, and this is what they are.
Most of it can wait. A few things cannot, and this is what they are.
Almost none of it has to be decided this month. Four things in the first year carry real deadlines: a withdrawal from your spouse's retirement account if they were taking them, an estate tax election that most people have never heard of, Medicare if you were covered through their job, and your Social Security claim. Everything else can wait, and for most of it waiting is the better answer.
The pressure you may be feeling to reorganise everything quickly is worth resisting. The decisions that are easiest to get wrong are the ones made in the first few months, and almost none of them are urgent.
One thing is worth knowing early, because it changes planning rather than requiring action: your tax filing status changes, and for most widows and widowers that means paying more tax on the same income within a couple of years.
Selling the house. Moving. Changing how the money is invested. Buying an annuity. Giving money to the children. Paying off the mortgage. None of these has a deadline, and all of them are easier to get wrong in the first six months than at any other time in your life.
The Consumer Financial Protection Bureau publishes a booklet for surviving spouses that makes the same point, and it also warns that widows and widowers are targeted by people selling things. If someone is telling you a decision has to be made now, that urgency is almost always theirs rather than yours.
If a creditor contacts you about your spouse's debts, you are generally not personally responsible for them simply because you were married, although community property rules can complicate it. Do not agree to pay anything before finding out whether you owe it.
If your spouse was already taking required withdrawals, the one for the year they died still has to come out. It is taken by you as the beneficiary, not by them.
Even though you almost certainly owe no estate tax, there is an election that preserves your spouse's unused exclusion for your own estate later. It is lost if nobody files.
Only if you were covered through their current employment. The window does not run from the death.
Not urgent in the sense of a cliff, but the order in which you claim can be worth a great deal, and it is easier to get right before you file than after.
Almost every article says it must be taken by December 31 of the year of death. Under the current regulation the penalty is automatically waived if you take it by the later of your own tax filing deadline including extensions, or December 31 of the following year.
For a death in 2026, that is December 31, 2027. If your spouse died in late December, the old understanding was close to impossible. The current rule gives you roughly a year longer than people think.
26 CFR 54.4974-1(g)(3), applying to tax years beginning on or after January 1, 2025. If it is missed entirely the tax is 25% of the shortfall, reduced to 10% if corrected promptly.
For the year your spouse died you can still file jointly. After that, unless you have a dependent child, you file as a single person. The income may be almost unchanged. The tax is not.
On $100,000 of taxable income.
The same $100,000. That is $5,208 more, about 45% higher, with nothing else changed.
Computed from the 2026 rate tables in Revenue Procedure 2025-32. The single brackets are almost exactly half the joint brackets, so the same income reaches higher rates much sooner.
The standard deduction roughly halves as well, from $32,200 to $16,100 for 2026, partly offset by a larger age addition for someone filing single. Several other thresholds that are set per return rather than per person compress in the same way, which can affect what you pay for Medicare and how your investment income is taxed.
The year of death is frequently the last year you will be taxed at joint rates. If there is anything worth doing deliberately at those rates, that is the year to do it, and the window closes on December 31.
That is a conversation to have with whoever prepares your return, and it is one of the few genuinely time sensitive pieces of planning in this whole page.
A surviving spouse can treat the account as their own, roll it into an account they already hold, or leave it as an inherited account. Nobody other than a spouse has the first two options.
Making it your own is usually the right answer. It becomes an ordinary retirement account in your name, with your beneficiaries and your timetable.
If you are under 59 and a half and might need to draw on it, an inherited account allows withdrawals without the extra 10% tax that applies to early withdrawals from your own account. Convert it to your own and that protection is gone.
The reverse matters too. If your spouse was much older than you, keeping it inherited can force withdrawals sooner than you want. There is no single right answer, which is exactly why it is worth ten minutes of advice rather than a form filled in at the bank.
If you are dealing with an account inherited from a parent rather than a spouse, the rules are completely different and far less forgiving. We covered those in I inherited my parent's IRA. What is the 10 year rule?
Each person can pass a certain amount free of federal estate tax. For 2026 that is $15,000,000. Almost nobody reading this will owe estate tax, which is exactly why this gets missed.
If your spouse did not use their exclusion, it can be transferred to you, giving your own estate roughly double the allowance later. But it only transfers if someone files an estate tax return electing it, and that return is not otherwise required.
The return is due nine months after the death, with an automatic six month extension available. If no return was otherwise required, there is a simplified late election that runs until the fifth anniversary of the death, which is unusually generous for a tax election.
Form 706, Part VI. The late election is under Revenue Procedure 2022-32 and requires specific wording at the top of the return.
Whether it is worth doing depends on what you own and what you expect to own. For a household well under the threshold with no prospect of approaching it, the cost of preparing the return may not be justified. For anyone within reach of it, or who may inherit or sell a business later, letting it lapse is giving away a very large allowance for nothing.
A great deal of material written before mid 2025 says this exclusion was about to fall by roughly half at the end of that year. That did not happen. The figure for 2026 is $15,000,000. Any calculator or article still describing that reduction is out of date.
Assets you inherit take a new tax basis equal to their market value on the date of death. The gain that built up during your spouse's lifetime simply disappears for tax purposes.
In California there is more to it. Property held as community property gets that new basis on both halves at the first death, not just the half belonging to the person who died. A couple who bought a house decades ago and held it as community property can have the whole gain erased on the first death.
A home held in joint tenancy gets only half the step up. Many California couples hold title as joint tenants because that is what a title company put on the deed years ago. How the deed reads at the moment of death determines the outcome, and it cannot be changed afterwards.
If you are considering selling anything your spouse owned, find out what its basis is now before you sell. It is frequently far higher than you expect, and the tax far lower.
California has no estate tax and no inheritance tax. For deaths since 2005 there is no California estate tax return to file at all. Whatever you may be told, that part does not exist.
Where property passes to a surviving spouse, California offers a spousal property petition, which is a far shorter process than full probate. There are also simplified procedures for smaller estates: for deaths on or after April 1, 2025 an affidavit can transfer personal property up to $208,850, and a simplified petition covers a primary residence up to $750,000.
California Probate Code sections 13100 and following, with thresholds adjusted by the Judicial Council under section 890. Anything held in a living trust or passing by beneficiary designation is outside probate entirely.
If your spouse had a trust, most of this is already handled and the work is administrative rather than judicial. If they did not, the spousal petition is usually the route, and it is worth asking about before anyone files a full probate.
This one carries a permanent penalty if it is missed, and the trap is in the timing.
If you delayed Medicare because you were covered by a group health plan based on your spouse's current employment, you have a special enrolment period of eight months. It runs from the month the employment ends or the month the coverage ends, whichever comes first. Not from the death.
Those are frequently different months, and the clock may already have been running before you thought about it. If you miss the window you wait for the general enrolment period in the first three months of the year, and the Part B premium rises by 10% for every full year you could have enrolled and did not. That increase is permanent.
If you are being offered continuation coverage rather than coverage through someone's current job, confirm with Social Security whether your special enrolment period still applies before relying on it. Getting this wrong is expensive and cannot be undone.
One piece of good news. The surcharge that higher earners pay on Medicare premiums is based on a tax return from two years earlier. The death of a spouse is a recognised life changing event, so if your income has fallen you can ask for it to be recalculated rather than waiting two years for the old figures to drop off.
The line only matters against your own figures. Our planning tool projects your income year by year, so you can see which years sit under it, which do not, and what it costs either way.
Worth connecting to what you just read: the year you claim Social Security changes where your conversion ceilings sit. A larger benefit is more income. Half of it counts toward the threshold that determines how much of your Social Security is taxable. Starting earlier means a smaller benefit but more years of it, and usually more pressure on your IRA in the meantime. We cover that in detail on do I pay taxes on Social Security?
Real testimonials from real clients, pulled straight from our Google Business Profile.
You can also read our reviews on Google.
The testimonials shown on this website and RED Seven Wealth Management’s Google Business Profile reflect the individual experiences of the clients who wrote them. These testimonials may not be representative of the experience of other clients and are not a guarantee of future performance or success. No cash or non-cash compensation was provided in exchange for any testimonial. RED Seven Wealth Management is a Registered Investment Adviser.
We would rather tell you now than waste an hour of your time.
Our comprehensive wealth management service is generally best suited to households with $1 million or more in investable assets. Our stated account minimum is $250,000, which may be waived at our discretion.
Answer a few questions and we’ll confirm whether you qualify for a complimentary retirement plan, prepared by a CFP® professional and including the tax planning side of your retirement income.
Jerod C. Fenton reviews every request personally and will reach out within one business day to arrange a short introductory call. A CERTIFIED FINANCIAL PLANNER™ professional and co-founder of the firm, he has spent his career helping North County families protect what they’ve built.
Want to see your own numbers first? Try the Retirement Readiness Check, it includes a Social Security block that models when to begin benefits. Or call (760) 705-3517.
Seven quick questions, about a minute. Then pick a time with Jerod.
No cost and no obligation.
RED Seven Wealth Management is an SEC-registered investment adviser serving North County San Diego families since 2011.
Far fewer than people expect in the first months. Four things carry real deadlines: taking your spouse's final required retirement account withdrawal if they were already taking them, the estate tax portability election, Medicare enrolment if you were covered through their current employment, and your Social Security claim. Selling the house, moving, changing investments and repaying debt have no deadline and are usually better left for later.
Yes. You are treated as married for the whole year and may file jointly for the year of death, provided you have not remarried before the end of that year. In later years you file as a single person unless you have a dependent child, which allows qualifying surviving spouse status for a limited period.
Because the brackets and the standard deduction for a single filer are roughly half those for a married couple. On $100,000 of taxable income in 2026 the tax is $11,504 filing jointly and $16,712 filing single, which is about 45% more on identical income. The standard deduction falls from $32,200 to $16,100, partly offset by a larger age related addition.
Yes, and this is frequently worth a great deal. Survivor benefits were not affected by the 2015 rules change that eliminated file and suspend and the restricted spousal application. Social Security's own operations manual confirms deemed filing does not apply to survivor benefits. You can take a reduced survivor benefit from age 60 and switch to your own at 70, or take your own from 62 and switch to a full survivor benefit at your full retirement age.
You have three options nobody else gets: treat it as your own, roll it into an account you already hold, or leave it as an inherited account. Treating it as your own is usually best, but if you are under 59 and a half and may need the money, leaving it inherited avoids the extra 10% tax on early withdrawals. The final required withdrawal for the year of death still has to be taken, and the penalty is automatically waived if you take it by the later of your filing deadline with extensions or December 31 of the following year.
It transfers your spouse's unused federal estate tax exclusion to you, which for 2026 is up to $15,000,000. It only happens if an estate tax return is filed making the election, and that return is not otherwise required for most families, which is why it gets missed. The return is due nine months after the death with a six month extension available, and where no return was otherwise required there is a simplified late election available until the fifth anniversary of the death.
No to both. For deaths since January 1, 2005 there is no California estate tax and no California estate tax return. The inheritance tax applies only to deaths before June 1982. Probate is also frequently avoidable: a spousal property petition is available where property passes to a surviving spouse, and simplified procedures cover personal property up to $208,850 for deaths on or after April 1, 2025.
If you delayed Medicare because you were covered by a group health plan based on your spouse's current employment, you have an eight month special enrolment period. It runs from the month that employment ends or the coverage ends, whichever comes first, not from the date of death. Miss it and the Part B premium increases by 10% for each full year you could have enrolled, permanently. If you are offered continuation coverage instead, confirm with Social Security before relying on it.
You have two benefits, and you do not have to take them together
As a widow or widower you may be entitled to a survivor benefit based on your spouse's record and a retirement benefit based on your own. You cannot collect both in full. You can, however, take one first and switch to the other later, and that is where the value is.
Earliest for a survivor benefit
Age 50 if you have a disability. Taking it at 60 gives about 71 and a half percent of the full amount.
Percent at your full retirement age
A survivor benefit reaches the deceased worker's full amount and stops growing there. There is nothing to gain by waiting past that point.
Where your own benefit peaks
Your own retirement benefit keeps growing to 70, which is what makes the sequence worth planning.
This strategy was not eliminated, whatever you have read
The 2015 rules change closed down two strategies for married couples, file and suspend and the restricted application for a spousal benefit. Survivors were never part of that change. The Social Security Administration's own operations manual states plainly that deemed filing does not apply to survivor benefits.
So both directions remain open. Take the survivor benefit early and let your own grow to 70, or take your own early and switch to the full survivor benefit at your full retirement age. Which is better depends on whose benefit was larger and on your health.
There is also a one time payment of $255. It is small, it is easy to miss, and you have two years from the date of death to claim it.
We wrote about the underlying claiming arithmetic in Should I take Social Security at 62 or wait?, though the survivor rules above change the answer in ways that page does not cover.