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After a family member or loved one’s death, the amount of paperwork and decision-making can feel overwhelming, particularly the prospect of organizing finances after someone dies. Knowing who to contact and what to do with the information presented could go a long way toward ensuring you’re making the most beneficial financial decisions.
What work has already been done?
One of the first things to determine after a death is which decisions have already been made and are clear, and what needs to be clarified. In many cases, when someone has done a lot of pre-planning and has created their own will, they have already created documents that lay out some of the financial steps that should take place.
Who should you be looking to?
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There will be lots of decisions to be made after a death. Knowing who’s responsible for dividing assets and tracking inheritance will give you information about how to proceed.
An Executor and/or Trustee Named in a Will
If there is a will, there is likely to be an executor or a trustee already listed to care for the estate. There is a clear process for this person to go through to ensure any money goes to the right places, so if someone prepared their will and advance directive before they passed, it will be much easier to stay organized.
The executor is the one who ensures your wishes are followed, so choose someone that you trust to do just that. Don’t forget to discuss the role with them beforehand, making sure they know what being an executor entails in general and that they feel able to fulfill that role if they must.
Surviving Spouse or Children
If someone’s spouse dies, and they have not left a will – referred to legally as dying “intestate” – generally, the spouse inherits any property that has only their two names on the deed. If only the deceased is listed on assets or the home, it may have to go through the probate process.
If the decedent is single with children or living parents, the estate may automatically pass to them. However, any intestate death may require probate to resolve.
In the case of an intestate death, or if, for any reason, the will cannot be executed as written, the execution of the estate may pass to probate court. Probate is the process of the court determining the outcomes of the estate, and it happens after any death.
The difference in probate between having a will and lacking one is that the will essentially describes to the court how to process the assets. Without these governing documents, probate may be expensive and can take a long time. A probate lawyer can assist you in navigating that process.
Power of Attorney
In some cases, the last person to have had power of attorney will be chosen as executor. If the deceased granted durable power of attorney, that person was able to make decisions for them if they were incapacitated and unable to make healthcare or financial choices for themselves. This power only applies until the point of death, but sometimes, if there is no executor named in the will, this person may also be chosen to fulfill that role.
What financial information already exists?
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Whether there’s a will or not, the decedent may have left some information about their financial accounts, including who to contact and how to access them. Without a will, though, probate will still decide how these assets are divided. It’s a good idea to store such information in a safe deposit box at the bank.
Joint bank accounts will automatically pass to the survivor(s), but an individual account will need to be allocated. Check for automatic drafts and bills being paid from these, because when you close accounts, you may otherwise inadvertently cancel payments that need to be maintained.
If the decedent has credit cards or personal loans, these debts usually do not simply vanish upon death. Rather, they would be paid from the estate before the remainder gets allocated to heirs. It’s useful to know how much is owed and to whom so that you can calculate what’s left after you pay off credit cards.
If the deceased owns investment products like stocks or bonds, these could be liquidated and the assets distributed. However, it’s also possible that the full investment accounts pass to the heirs, who can decide to continue with these financial products, running the accounts themselves, or sell them.
Contact a financial professional to get investment advice and determine the best financial future for these sorts of investment products. A tax advisor or other financial professionals can assess whether cashing in on securities offered would have a negative effect on your financial situation according to your individual circumstances around the investment.
Social Security Benefits
Depending on whether or not the deceased was of full retirement age, heirs may receive all or a percentage of benefits from the Social Security Administration. Contact the SSA to have such accounts transferred to the appropriate beneficiary.
Life Insurance Policy
If the decedent had life insurance, these insurance policies can pay directly to the beneficiaries. Contact insurance companies to learn how to file a claim. If life insurance companies don’t have any reason to deny or dispute the claim, life insurance policies will pay the appropriate claimant.
Insurance products can be confusing, particularly during the stressful time surrounding a death, so contact the insurance providers to clarify exactly what documents the insurance company needs to process the claim as quickly as possible and get the money to the right people. Many policies can pay for funeral costs, so be sure to check on that possibility before paying from the estate or out of pocket.
If the deceased person had another retirement plan, separate from social security, the remaining benefits are usually paid to the beneficiary and can be paid in a lump sum or over time as an annuity, depending on the terms of the plan.
If the spouse dies, the survivor may contact the human resources department at the spouse’s employer to determine the process for claiming this money. Some people don’t consider this source of funding, but the deceased has been working on this investment for years, so it’s wise to make use of it if possible.
As with credit card debt, a home loan would usually be paid from the estate before those finances are released to the heirs. The bank or financial institutions that govern the mortgages can describe to the executor what they need to wrap up that debt. Consult a trusted financial professional to decide if you’d like to take over the mortgage, either living in or selling the home, or have it paid off from the estate.
What do you need to do to resolve assets?
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Once you’ve determined what the estate entails and who’s in charge of distributing it, how does the executor actually go about doing that? The main thing to know is that they will handle a lot of important documents and want to have a plan for their organization.
The executor will want to get multiple copies of the death certificate. A certified copy will likely be required by the bank or other financial institution, service providers or subscriptions, mortgage lenders, the VA if veterans benefits are on the line, and even the three major credit bureaus, which will need to mark the credit report as sealed.
The death certificate is created by the funeral director and a medical professional, but certified copies come from the state or county office of vital records. You may try a zip code search to figure out where to secure the death certificate. Be prepared to wait weeks or even months for the appropriate papers.
Taxes – The Other Certainty
After someone passes away, the executor must still file their final tax return. Income tax for the decedent’s final year of life must be filed. A tax adviser can assist in filing differences between this type of return and the typical annual filing. Be sure to check with a tax professional for tax advice.
What about everyday things?
Financial accounts aren’t the only consideration when someone dies. You may need to check on all sorts of physical assets too:
- plants may need watering
- pets need feeding and, potentially rehoming
- lock the house and cars if they aren’t being used
Rely on the Experts
Navigating complicated financial matters is made all the more overwhelming when experiencing grief for the loss of a loved one. Information like that provided above can be useful for planning purposes before a death as well as quick suggestions for where to start after a loss. However, consulting with professionals in the industry can be a valuable resource.