Unfortunately we all go through the loss of a loved one. When a family member passes away, the most immediate decisions involve how to arrange for services, the memorial, addressing visiting family, and dealing with grief. But then comes the much longer phase of settling the estate with all of its financial ramifications. In a marriage situation, this falls onto the shoulders of surviving spouse and an executor, if one was appointed ahead of time. Outside a marriage, it falls on the executor or whomever was the next of kin legally. And then begins at least a year of work unraveling the financial details of the deceased. Here are 10 steps how to go about the process, reducing your frustration along the way:
1. Avoid Emotions
Any time you have to make a decision emotionally, it will likely be a poor one for the situation. Instead, delay the decision until you can approach it objectively, weighing all the alternatives. One of the traits of a good financial advisor is his or her ability to take mitigate the emotional decision making process for their clients.
2. Get Help
A lot of what goes on settling an estate is extremely technical and legal. You will need assistance from someone who understands this process well. If you know a friend or relative who has already dealt with a death, get their advice as a starting point. Once again lean on your own financial advisor to help guide you through this process.
3. Secure Death Certificate and Power of Attorney
The death certificate is the only thing agencies and entities recognize as legal authority that someone they dealt with is dead. You will also need to show you have the power of attorney to address the deceased’s property, so make sure that’s available as well.
4. Notify Employers
If the relative was still working, the employer needs to know he or she has passed. This triggers various benefits the employee paid for while alive. They can include a survivor’s death benefit, life insurance through work and similar, which can help offset the costs of burial. But only the employer can trigger these claims, so they need to know as soon as possible to approve the paperwork. Don’t forget, there’s also likely an employee retirement account as well. If there is a retirement account be aware of your distribution options and the tax consequences of those distributions.
5. Confirm and Secure Any Kind of Will, Estate Plan or Trust
And legal estate plan document is essential for legally determining the distribution of property. In most states, a spouse has automatic ownership of some of the property, but not all. The will or trust will designate the rest. If there is a will or no will, the property has to be legally settled in probate court. If a trust was established, the executor handles the property distribution because the trust became a legal entity on its own with all property it included.
6. Track Costs in Detail
Settling an estate as an executor can be a long, costly process. Your costs as well as the estate’s costs have to be paid from somewhere, but you can only defend them if documented clearly and carefully. Record everything and be meticulous. This will be your solid defense if another family member tries to assert you hid property or the probate court wants an accounting before making a final estate decision.
7. Locate Critical Financial Documents
These documents include things such as:
- Final bank records
- Any investment statements
- All loan liabilities and mortgage accounts
- Insurance policies
- Retirement accounts
- Prior year tax returns
- Any recurring bill statements for account information (utilities, credit cards, services)
The executor prepares and files the final tax return for a deceased. This only works with all the information present. In addition, the package will also include an estate tax return to define distribution for the tax agencies.
9. Keep a Log
It’s a smart idea to get a log journal and write down all critical issues and decision with a date on a log. This will help you remember what you did months later, and why. Just carry it with you during every meeting and situation, and write down a quick paragraph with a title. You’ll thank yourself later when trying to remember details for a response or secondary decision.
Lastly, use the experience resolving your relative’s estate for what you should do with your own estate. Wherever there is ambiguity, it will create a mess, and then a probate court process has to resolve it. Don’t put your family in that situation.
The old expression still holds true, " The only two things certain in life is death and taxes". However we spend so little time preparing for the former especially compared to the time we spend on preparing to pay our taxes. In reality, who wants to discuss the topic. It is uncomfortable to say the least. However if you sit down and apply the time required to plan out your estate, you would be leaving your family so much the better for it. Meet with your advisor and have those conversations, you will be much richer for it and your family will be also.
Photo by Ryan Nicolay
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved.