Married or Widowed

Filing Status
If your spouse dies in the current tax year, you are considered to be married for the entire year for tax purposes. The surviving spouse should still file a joint income tax return and claim all income earned for the year.

When a surviving spouse CANNOT file a joint return (after death):

  1. Surviving spouse remarries before end of year
  2. Either spouse was a nonresident alien during the year
  3. The spouse or surviving spouse had a short year due to change in accounting period

Children
For the two following years after the death of a spouse, the surviving spouse can claim the filing status of "Qualifying Widow or Widower," which allows the surviving spouse to utilize joint rates on an individual return – provided all of the following conditions are met by the surviving spouse:

  1. Did not remarry during the year the return will be filed,
  2. A child, stepchild or adopted child was a dependent for the year,
  3. The child lived with you for the entire year,
  4. You paid at least half of the costs of maintaining your home and
  5. You were entitled to file jointly in the year of your spouse's death.

In year four (after filing joint, and two years of qualifying widow or widower), the taxpayer might want to consider "head of household" filing status for favorable tax rates, if they still have a qualifying dependent child and they haven't remarried.

Community And Non-Community Property

Community Property
In certain states, the income and property that you and your spouse acquire during the marriage is generally considered "community property." These states include California, Washington, Arizona, Louisiana, Texas, Wisconsin, Idaho, Nevada and New Mexico (C-WALT-WINN).

*Remember the Acronym for Community Property States*

"C-WALT-WINN"
Definition of Community Property – Each spouse owns half of the community income and property, even if the legal title is only held by one of the spouses. Property acquired prior to marriage generally remains separate property, even after you marry. Gift or inheritance property during marriage will also be treated as separate property.

What happens in the event of a divorce?
Community property automatically becomes separate property.

What happens in the event of a death?
Death of a spouse dissolves the community relationship, but income earned and accrued from the community property prior to death is considered community income.

Surviving spouse receives a "step-up" in basis to the fair market value (FMV) on both halves of the property.

Non-Community Property
States that are not community property states are known as "common law" or marital property states. In a common law state, if your name appears on the ownership document, registration or title, you own it. Both spouses have the legal right to claim a fair and equitable portion of the property in divorce.

What happens in the event of a divorce?
|
Since both husband and wife have access to make full decisions on most jointly titled assets, they must come to an agreement for distribution or seek a court order for distribution of the property, if an amicable solution cannot be worked out together.

What happens in the event of a death?
Unlike community property, the surviving spouse only receives a "step-up" in basis to FMV on the half of the property that belonged to the deceased.

Inherited property is treated as long-term, no matter how long was the actual holding period.



Divorce

Related Articles
  1. Retirement

    5 Things To Consider Before Late-In-Life Marriage

    Waiting to marry has become the norm, but do you know what to consider before saying "I do"?
  2. Retirement

    How Advisors Can Help Surviving Spouses

    When someone dies, it's natural for a surviving spouse to grieve. But with a little planning, fear of an unknown financial future can be avoided.
  3. Financial Advisor

    Top Tips for Retaining Widowed Clients

    These tips should help keep your widowed clients safely in your book of business for years to come.
  4. Retirement

    Retirement Planning for the Non-Employed Spouse

    A stay-at-home spouse probably racks up more hours working than any office jockey. Make sure he or she is set up to save for retirement, as well.
  5. Retirement

    Holding Titles On Real Property

    Find out how best to claim and convey ownership on your assets.
  6. Managing Wealth

    Why It's So Important to Update Your Estate Plan

    As rules and exemptions tied to the estate tax change, so should your estate plan. Here's why updating it is so important.
  7. Investing

    Reverse Mortgage: Could Your Widow(er) Lose the House?

    A guide to determine if you're at risk that you or your surviving spouse could be evicted from your home.
  8. Financial Advisor

    How to Help Clients Navigate Survivor Benefits

    Here are some ways to help client couples do what they can to maximize any potential Social Security survivor benefits.
  9. Retirement

    When Spouses Die, Who Gets Their Retirement Funds?

    You don't automatically get your spouse's IRA, 401(k) and other accounts when he or she dies. Here's how to plan so the right survivors get the funds.
  10. Retirement

    Why You Shouldn't Let Your Partner Do The Books

    One person often deals with the finances in a relationship, but being ignorant has a cost.
Trading Center