What You Need to Know About the “Widow’s Tax”

Technically, there isn’t any official rule concerning the “widow’s tax” in the Internal Revenue Code. That phrase was coined to address a potential concern that can arise at the death of the first spouse. When both spouses are alive, a married couple files a joint return and possibly receives two separate Social Security benefits, income from IRAs, pensions, and investments.

When the first spouse dies, two important things happen: First, one of the two Social Security checks goes away. The surviving spouse typically keeps the larger one. Second, starting in the year following the death of the first spouse, the surviving spouse must file taxes as a single taxpayer. And that is the reason the term widow’s tax was coined.

Tax brackets for a single person are considerably narrower than for a married couple. So even though the surviving spouse may be receiving less income (for example, because one of the Social Security checks goes away), he or she could be in a higher tax bracket than before the first spouse’s death.

It sounds like a pretty straightforward problem, but it’s not necessarily as concerning as one might think. I recently read an article by Edward McQuarrie, a professor emeritus at Santa Clara University, who argues that the widow’s tax is often exaggerated.

Professor McQuarrie doesn’t dispute the issue that the tax brackets can increase, he just claims that that’s the wrong number to focus on. The real question for him is this: “How much money will the surviving spouse actually have available to live on?”

It’s important to remember that while income often declines after the death of the first spouse, so do many expenses. Although housing costs may not be impacted, there is one less Medicare premium, food and clothing now must sustain only one person instead of two, and it’s often the case that travel and entertainment are decreased at that point in the widow’s or widower’s life.

The proper reaction isn’t to immediately change your plan because of a higher tax bracket potential, it’s to consider the needs of the surviving spouse in light of his or her income, taxes, and expenses. In many instances, despite the “widow’s tax” potential, the surviving spouse will be fine based on the current arrangement.

The widow’s tax is real. After the death of the first spouse, the surviving spouse can have less income but be in a higher tax bracket. But that fact doesn’t necessarily mean the surviving spouse is going to have a problem maintaining his or her standard of living. There is no tax imposed simply because a person becomes a widow, and the phrase “widow’s tax” can lend itself to misunderstanding.

The most important unknown in retirement planning isn’t a current or predicted future tax bracket, it’s whether the surviving spouse will have enough money to comfortably live the life he or she wants. Proper early planning can help.

Fun Fact: I was in Northern Michigan last weekend and the fall colors were fantastic. Many of the yellow and orange pigments that brighten Michigan’s fall leaves have been there all summer, hidden beneath the green chlorophyll. As the days shorten and chlorophyll breaks down, those previously hidden colors finally get their chance to shine. Autumn isn’t creating all that beauty from scratch; it’s revealing what was there all along. A nice reminder that some of our best colors show up later in life.

Are Americans Wealthier Than We Think? (And How Much Does That Matter?)

Lots of headlines are negative these days, especially in the heat of the upcoming elections. Read enough financial headlines, and you might wonder whether anyone is getting ahead.

Economist Bryan Caplan offers a different take in his September 2, 2026, article, “Reflections on Americans’ Net Worth,” published in his Substack newsletter, Bet On It. Drawing on the Federal Reserve’s 2022 Survey of Consumer Finances, he highlights the substantial wealth American families have accumulated. I don’t agree with all his conclusions, but some of the numbers deserve a closer look.

Net worth is what you own minus what you owe. It includes home equity, retirement accounts, investments, and other assets, not just money in the bank. Based on the Federal Reserve’s survey, these are median family net-worth figures in 2022 dollars: half of American families have more, and half have less.

Age of family’s reference person	Median net worth
Under 35	$39,000
35–44	$135,600
45–54	$247,200
55–64	$364,500
65–74	$409,900
75 and older	$335,600

The median for the 65–74 group was roughly 10.5 times the under-35 figure. However, the survey compares different families—not the same people followed through life. Getting older does not automatically produce that result, but age is no doubt a substantial factor in accumulating wealth. It’s also worth noting that median family net worth increased 37% after inflation between 2019 and 2022. While that describes the change in the national median, and not a gain every family experienced, it is still a substantial increase in a relatively short amount of time.

But net worth is not a paycheck, and this is where I start to part ways with Caplan’s conclusions. He suggests that most Americans could retire comfortably without Social Security. That is his assessment, not something these figures establish and not something I have experienced in my 30 years of reviewing family finances.

Consider a hypothetical couple with $400,000 in net worth, consisting of $250,000 in home equity and $150,000 in investable assets.

A 4% first-year withdrawal from that investment portfolio would provide $6,000 a year, just $500 a month, before any taxes. Their home is valuable, but it does not pay the grocery bill.

The picture also works in the other direction: the Fed’s net-worth measure excludes the value of future Social Security and traditional pension payments. Those income sources belong in the retirement-planning picture, too. I often remind clients that Social Security and pensions have a present value that adds substantially to what I term “effective net worth.” The same traditional view of net worth can support very different retirements, depending on spending needs and other income.

My takeaway:

I find these numbers encouraging, but not a reason to dismiss anyone’s financial concerns. People and businesses have lots of financial challenges these days, but financial challenges and financial desperation are two different things.

It’s a good idea to review your net worth periodically, if for no other reason than to get a handle on every asset you have. It will help you and help your family to have that list in times of emergency.

But the real issue isn’t your net worth. It is: “Can my resources support the life I want, with room for surprises?”

A healthy net worth is a satisfying achievement, but understanding what it can, and cannot, do for you is where financial planning begins.

Fun Fact: The seminal book that opened the eyes of Americans to “quiet” wealth was the bestseller The Millionaire Next Door. It all started with a printing of just 15,000 copies, a small publisher, and a modest promotional budget. Co-author William D. Danko certainly wasn’t expecting a blockbuster. He told the Albany Times Union: “I figured we had a better shot of getting hit by a meteor than making the best-seller list.” Instead, the book landed on The New York Times bestseller list and went on to sell more than 4 million copies. Its central message—that building wealth often involves living modestly rather than looking rich—clearly struck a chord.

Dolly Parton and the Estate Plan That Couldn’t Prevent Everything

Dolly Parton apparently did a lot of estate planning right.

When she died in August, most of her estimated $450 million estate reportedly passed outside of public probate through trusts or business entities. At the beginning of the administration process, things went smoothly.

But a few weeks later, her estate administration landed in court.

The dispute involves Parton’s nephew, Bryan Seaver, who had worked for many years as part of her security operation and was a beneficiary under her estate plan. After Parton’s death, the company managing her affairs terminated his security company. Litigation and a temporary restraining order followed.

For estate planning purposes, who is right really doesn’t matter.

The interesting lesson is that Seaver apparently wore two hats: he was both a family member expecting an inheritance and a person earning his living through Dolly’s massive family business. That combination can be dangerous.

I see versions of this situation all the time in ordinary families. One child works in the family business. Another manages the rental property. A daughter keeps the books. A son maintains the cottage. Everyone gets along while Mom or Dad is alive because there is one person clearly in charge.

Then that person dies. Suddenly a trustee, successor manager, or sibling is making decisions, including decisions about somebody else’s paycheck and/or living arrangement.

That is where an estate plan can be perfectly valid and still leave plenty of room for a family fight.

A few planning lessons come out of the Parton story:

• Separate employment from inheritance. If a child or other relative works for the family business, there should be a clear employment or service agreement. Their right to inherit should be completely separate from their right to keep their job.
• Decide who has authority. The plan should make clear who controls the business after the founder dies and, importantly, who has the authority to hire or fire family members. The same holds true for things like the family cottage.
• Be careful with verbal promises. “I’ll always take care of you” or “you’ll always have a job here” can take on a very different meaning after someone dies. Important promises should be put in writing.
• Plan the transition. If a family member has access to bank accounts, computers, passwords, buildings, or confidential information, decide ahead of time how that access changes after death or retirement.

The larger lesson is one I see frequently in estate planning: documents can transfer assets, but they cannot automatically transfer authority, relationships, and family expectations.

Sometimes the most important estate-planning question isn’t simply, “Who gets what?”

It is also: “Who will be in charge—and what happens if someone in the family doesn’t like the answer?”

Fun Fact: My favorite Dolly Parton song is Mule Skinner Blues because of her powerful voice and fantastic yodel. That song became her first solo Top 10 country hit, reaching No. 3 on the Billboard country chart. It also earned her first solo Grammy nomination.