There is so much to manage when faced with the passing of a loved one. The emotional toll is difficult enough, but what do you do financially? Below are some of the most common issues an heir might face upon the death of a loved one.
Plan For Final Expenses:
• Even before your loved one passes, it’s a good idea to plan for the payment of final expenses (when possible) as assets may be frozen temporarily upon their death. You may not be able to get to the funds as readily after death.
• Final expenses can range from $25,000 to $50,000 including the funeral, final resting place, luncheon, and miscellaneous medical expenses.
• Some options include pre-payment at a funeral home; a payable-on-death bank account or joint bank account that can easily be transferred to your joint owner and allows you to avoid Probate or delays in accessing the funds. Ask your bank or funeral home about these options.
Notify Important Parties
• Employer: If your loved one was employed, you should notify the employer and Human Resources Department (especially if benefits are involved)
• Financial advisors or brokers: Your financial advisor(s) will assist in the process of transferring ownership of all investment accounts and will require an original death certificate. The process will differ depending on the types of accounts held by your loved one. Some common scenarios are:
- An IRA account, Retirement Account (i.e.: 401k, 403b), Annuity or Life Insurance policy can be directly distributed to individual beneficiaries if designated and are not subject to probate delays.
- An Individual non-retirement account will require the opening of an Estate account utilizing a tax i.d. number, which can be obtained from an Estate/Probate attorney or accountant, along with Letters of Testamentary.
- A non-retirement account with a TOD (Transfer on Death) designation will transfer ownership directly to the beneficiaries without the need of an Estate account and circumvent the probate process.
- A Joint non-retirement account typically transfers ownership directly to the surviving account owner
• Accountant/Tax Preparer: You will need to file a tax return for the individual and their estate (when applicable). You should also inquire about any required minimum distribution (RMD) from the individual’s IRA (if they had one). Not taking the appropriate distributions can result in a penalty. Your accountant (or financial advisor) can advise you accordingly.
• Banks and Credit Agencies: To transfer ownership of bank accounts, you will need to bring original death certificate(s) and determine if they will need additional paperwork to change ownership as this is dependent on the bank registration. Be sure to notify all (3) major credit agencies (Equifax, TransUnion, Experian) of your loved one’s passing
- You will want to consider hiring an Estate/Probate lawyer depending on the need for Probate and the complexity of the Estate.
- Oftentimes, the attorney who wrote the Will (or the Estate Planning documents) will also manage the Probate process for the family.
- Probate is the legal process of transferring assets without a named beneficiary. This could include physical property like a home, or investment account(s). Banks and other financial institutions:
• Insurance Companies: contact all insurers, especially if your loved one had life insurance
• Social Security, Medicare and/or the Veterans Administration: contact these agencies to advise that your loved one has passed; this will affect their benefit status and potentially the benefits of a surviving spouse
• Colleges/Universities: if there is a child in college (whose tuition may be impacted by the death of your loved one), you should contact the school and advise them of the situation.
• Social Media Companies: close or delete any social media accounts associated with your loved one to prevent fraud.
• Cell Phone Providers: at the appropriate time, you may want to cancel service, but in the short term it’s recommended to keep the account active if you need to receive text authentication to settle affairs.
Gather Necessary Documents
• Locate the Will
• Request copies of the death certificate; you will need between 5-10 originals depending on the number of financial institutions and accounts your loved one had open. Your funeral director can assist you in ordering them or they can be ordered directly from City Hall.
• If the Estate/Probate process is required, and the deceased’s assets cannot be transferred outside of Probate, the Executor will file the Will in the Probate Court where the deceased resided at the time of death, to obtain Letters of Testamentary.
• Letters of Testamentary are required by all financial institutions as legal proof that you are the Executor and have authority to manage the estate.
• Often, financial institutions require that these court documents be dated within the last 60 days for acceptance, so do not delay the process of transferring ownership of financial accounts.
Retitle Real Estate After Death
• If real estate was owned, the transfer of it will depend on how the property was owned. You may want to consult your attorney.
- Sole ownership: If there was no Living Trust or TOD deed, the property will need to go through Probate and transferred by Will or state law. The heir must gather the original title, death certificate, notarized affidavit of death and change of ownership form to retitle property
- Joint Tenants with Rights of Survivorship (JTWROS): If co-owner is still living, they automatically become sole owner of the property. Nothing needs to be done, but best practice would be to file an Affidavit of Survivorship to remove the deceased from the title.
Transfer Title or Sell a Vehicle
• Whether you are the surviving spouse, joint owner, or beneficiary, you have the legal authority and obligation to transfer the title of the vehicle once the owner passes (if the vehicle is to be used)
- If the vehicle title was in the individual’s name, you will need to determine if the Estate is being probated. If it is, you should contact the Executor of the Will to confirm that Probate is complete, and transfer of ownership can commence, or the Executor can opt to sell the vehicle if tasked to do so.
- Documents vary from state to state, but you should gather: Probate Court order to transfer, Certificate of Title, Odometer disclosure statement, Death Certificate
- Visit the Title office/DMV to complete the transfer
- If estate is not being probated, you should only need the death certificate and title to complete the transfer
- You do not have to transfer title if you know you don’t intend to keep the vehicle. You may simply sell the vehicle and sign the title with your name and role (i.e., Executor or beneficiary) and then the new owner can transfer the title.
The death of a loved one can be overwhelming and you should take the time you need to sort things out. When possible, major financial decisions should not be made immediately. Things like selling a home or making a lump sum investment are important and require clear thought. It’s easy to get pressured into making decisions and emotions may be in control shortly after a loved one passes. Whenever tax or legal issues are concerned, you should seek advice of a qualified legal and/or tax advisor.