Losing a loved one is a devastating process no matter if it is expected or not. Unfortunately, even when you should be taking the time to grieve, you will need to make some financial decisions to protect your loved one and their assets that they worked so hard to acquire throughout their life. When I work with my clients I recommend that they have updated estate planning documents reflecting their wishes to make sure the process can run as smoothly as possible. This includes updating all beneficiary designations on retirement accounts, investment accounts and bank accounts. This will make sure that assets move as expected and may help avoid probate. In addition, I recommend that my clients have open conversations with their loved ones about their wishes while everyone is in good health, so that there is no doubt about them at a later date. Planning upfront will make the process more bearable at a time when you need to grieve. If you have recently had a loved one pass, it is important to address the financial decision below sooner rather than later as a first step in the process.
Obtain Letters of Administration
When a loved one passes, you will need to obtain what is referred to as a letter of administration or letter testamentary. These letters will give a person authorization to handle the financial accounts and documents of someone who has recently passed away. This will be necessary so that financial accounts can be settled, any necessary bills or outstanding debts can be paid, and affairs that were in the deceased name can be settled. You can obtain these letters by taking a copy of the death certificate and your loved one's will to the local courthouse where they most recently resided and open up a probate file. Once opened, you will be able to handle financial issues on the behalf of the deceased. You can also hire an attorney to perform these duties.
Close or Reassign Any Necessary Financial Accounts
You will want to make a list of all accounts that will need to be either closed or reassigned to someone such as a spouse or other survivor. (Creating this list and recording current passwords is something you should do while your loved one is still present.) Proper titling of accounts and beneficiary designations prior to death are very important for financial assets and your estate planning attorney or financial advisor can help with this process. For transactional type accounts (credit cards, bank accounts, etc.) you may also want to make a note of what the policy is for the closing or transfer of each account. Some credit card companies will require a payoff and closing while others may be reassigned to another person. If you have banking accounts, make sure that the loved one's name is removed and anyone else who needs to have access to the account will be allowed. Some of the accounts you will need to consider include:
- Bank accounts
- Credit cards
- Safety deposit boxes
- Insurance policies
- Phone, internet, and utility bills
- Financial accounts such as stocks, bonds, and retirement.
Notify Government Institutions and Financial Companies
It is important to provide notification of a loved one's death to the government as well as any insurance companies and financial institutions. This will be necessary to collect on any benefits for survivors that there may be as well as serve as a way to prevent the risk of your loved one's identity being used for fraudulent purposes. Companies that should be notified include:
- Social Security Administration - Depending on the age of your loved one, there may be social security survivor benefits that will need to be filed for. Even if there are no benefits to transfer you should call SSA immediately to prevent your loved one's social security number from being used for fraudulent reasons.
- Insurance companies - You will need to call any life insurance companies to begin the collection process on any policies your loved one may have had. You will also need to remove them from auto and medical insurance policies they will no longer be using.
- Post office - While it may not be on the top of your list, making sure the post office is aware of the death is an important step in notifying government authorities.
- Credit bureaus - Notifying credit bureaus of your loved ones death will help prevent fraud and prevent others from using their name for credit.
- Utility companies - The utility company will need to be called and changed into the name of someone who will be managing the property to prevent any difficulties with handling the account in the future.
- Creditors - A lender should be notified so you can begin the process of settling your loved one's debts and if there are any policies regarding the loan in regards to the event of death, it will go into effect.
- Credit card companies - You will either want to cancel credit cards or remove your loved one's name if it is a joint account. If there is the only account holder, you might want to check to see if they had a payoff policy in the vent of the cardholder's death.
By taking care of financial decisions after the death of a loved one, you will be able to make sure all of the final obligations are taken care of as well as their final wishes. Of course, depending upon how complex someone's estate and affairs, it may be helpful to have an advisor work with you to make sure all the i's are dotted and the t's crossed. Each state has slightly different probate laws and estate tax rules, so it is important to have someone on your side that understands these issues. Taking time upfront to update financial records, estate planning documents and gathering other important financial documents is a great way to reduce stress at a very difficult time.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.