02/28/2026
⚖️ The financial decisions in the 12 months after a spouse dies are some of the highest-stakes decisions a person will make. Most are made while grieving. Most have deadlines.
The step-up in basis is the one people miss most often. When a spouse dies, the deceased's share of jointly held assets gets a new cost basis at fair market value on the date of death. In common law states, that is half. In community property states, it is the full asset. If you sell later and cannot prove the date-of-death value, the IRS calculates gains from the original purchase price. That can mean tens of thousands in avoidable capital gains tax.
The tax bracket change is the second hit. You can file jointly in the year your spouse dies. After that, you file as single. The 2026 standard deduction drops from $32,200 to $16,100. The 12% bracket ends at $24,800 instead of $98,150. The same retirement income that was taxed at 12% can jump to 22%.
Social Security does not automatically switch you to the higher survivor benefit. You have to contact SSA and apply. Some widows and widowers go months or even years collecting the smaller of the two benefits because they assumed the switch was automatic.
The withholding one catches people at tax time. Pension and Social Security withholding set for married filing jointly will under-withhold for a single filer. Without an adjustment, the surviving spouse gets a surprise bill in April.
None of these have to happen. All five are fixable with a checklist and a conversation with a CPA or financial planner in the first 90 days.
