Trust & Estate Planning: September 2020
3 Important Steps to Follow
With death comes grief and, as a result, it is easy to make mistakes and miss crucial details after the loss of a loved one. Here are some key items to keep in mind when it comes to death and finances.
Maybe you know the deceased's wishes or maybe this will mark the beginning of the paper chase. You might find funeral instructions in the deceased's will or letter of last instructions, or you may have to canvass family members to find out if anybody knows the deceased's wishes. When arranging the funeral, consider asking the funeral home for at least 10 certified copies of the death certificate, and possibly more if the deceased's financial situation was complex. These death certificates will come in handy as you settle the estate.
With the funeral arranged, a slew of other questions will arise. Is there a will? Is there a safe deposit box? What investments and bank accounts exist? Who is the insurance agent and what policies exist? Was the person receiving payments from Social Security, an employer's pension, the Veterans Administration or a reverse mortgage? If a letter of last instructions was written before the person died, that will help. It should include a list of bank accounts, insurance policies, investments, real estate, mortgages and other debts. It should also give the location of important papers such as the will and any trust documents, as well as the names and phone numbers of an attorney, tax specialist, insurance agent and financial advisor. If there is no letter of last instructions or other guide to the deceased's estate, you may have to search through drawers and filing cabinets, watch the mail, pore over old tax returns and, if you can get access, dig through any safe deposit box contents. If you find a will or a trust, it should name an executor or a successor trustee, the person who will do most of the heavy lifting from here.
Settling affairs — people to contact
Are you in charge of settling the estate? Your goal is to wind down the deceased's financial affairs, figure out what he or she owns and what these assets are worth, pay off all debts and taxes, and then distribute any money that's left over to the appropriate heirs. To that end, here's a list of people you may need to contact:
- Attorney. Keep in mind that you don't necessarily have to use the lawyer who drew up the will or trust to settle the estate. Instead, ask about the lawyer's fee and experience, and look elsewhere if you have concerns. Assuming there is a will and perhaps a trust, the attorney you hire can walk you and the other survivors through these documents.
- Accountant. If the deceased's finances are complicated, you may also need to hire an accountant. Even if the situation is relatively straightforward, you'll need a tax preparer to file final federal and state income–tax returns for the year in which the person died. These returns are due 9 months after death, but you can request an extension to file. Surviving spouses can still file joint returns. Also, you may need to pay state and federal estate taxes, although surviving spouses likely won't owe any taxes on the money they inherit.
- Financial advisor. If you are the surviving spouse, you may have been named as a beneficiary on any retirement accounts and as joint owner on any taxable accounts. It can be helpful to sit down with your Financial Advisor, review what you own and why, and discuss whether the portfolio, your insurance coverage and your estate plan are still appropriate.
- Bank. You will want to see how the accounts are titled. If you and the deceased held checking and savings accounts jointly, you can make deposits and withdrawals immediately. As you make decisions about the deceased's bank and other financial accounts, you may be asked not only for a death certificate, but also for the letters testamentary issued by the probate court that show you are the executor.
- Insurance agent. Insurance companies don't pay benefits automatically. Instead, they must be notified of a policyholder's death. If you're working with an agent, a telephone call may be all that's needed. If not, you may need to notify the company in writing. Be sure to ask for any unpaid dividends.
- Past or present employers. Ask about retirement plans, such as 401(k) or defined benefit plans. If the deceased was still working, you will also need to check about a final paycheck, as well as any company–paid life insurance and other benefits.
- Social Security Administration. Contact Social Security to stop payments to the deceased and to see if you are eligible for survivor benefits.
- Veterans Administration. As with Social Security, you should halt the deceased's benefits and see if you are eligible for benefits as the survivor.