At some point in our lives, we are going to undertake the overwhelming responsibility of closing out a loved one’s life. It’s a topic most of us want to ignore, but when it happens and the burden of responsibility falls onto your shoulders (either as executor or personal representative), understanding how to navigate through the legal and financial challenges will not only reduce the stress, it will save money.
No matter how orderly a loved one’s affairs maybe be in, there are going to be tasks and items with zero instructions. It is not to say this is beyond your comprehension or abilities, just not what most of us typically do on a daily bases. If mistakes are made during this process, or steps are missed, it can result in delays and financial difficulties for all involved, so don’t be afraid to ask for help.
Given the limitless amount that could be discussed, I will stick to only those matters that have financial implications to the family. Even still, the topics will be limited to those first-hand experiences while assisting with the closing of my grandfather’s estate. I believe his estate assets (cash, home residence, investments, other tangible property etc) should be applicable to most people’s situations; however, there may be additional steps your family will need to address to properly administer a loved one’s estate. Hiring an attorney, who specializes in probate and estate administration, is the best way to ensure your loved one’s affairs are handled in a timely and efficient manner, for a price. When in doubt, consult a licensed professional.
ASSEMBLE YOUR TEAM
The most important lesson is to find a balance between not going at it alone and having too many people involved. It’s an emotional time for everyone, so be sure to limit your delegates to those who are most reliable and provide them with clear instructions. Between organizing the funeral arrangements to cancelling the local newspaper subscription, delegate wisely.
Regarding everyone else who would like to be involved but are really only interested in what’s coming to them (hate to say it, but it happens), simply provide them with periodic updates. Communication is, sometimes, all that people need to feel involved, because let’s face it, they don’t really want to be bothered with things. Lack of communication usually leads to suspicion, resentment and ultimately litigation.
ORGANIZE & EXECUTE
Obtain the death certificate. It is the responsibilty of the funeral director to create and file the death certificate. Within a couple of days, the family will meet with the funeral director and be handed copies of the Short Certificate. A Short Certificate is a legal document that shows the decedent’s name and date of death. It will also show the name of the Executor/Executrix who has been named to handle the affairs of the estate. Additional copies of the Short Certificate can be obtained at the “Register of Wills” office in the county court house. Above any other document, this is the most requested to initiate and execute the asset transfer process.
Collect and inventory critical documents. For some, being involved with the funeral arrangements helps them through the grieving process. I, personally, saw this an opportunity to slip away and gather all the documents that are going to be necessary in executing the wishes of the will without disruption. The documents most commonly used/asked for were:
- Short certificate,
- The Last Will & Testament (confirming the executor/executrix) or Trust,
- Driver’s license,
- Social Security card,
- Birth Certificate,
- Marriage license or divorce certificate, as applicable
- Spouse’s death certificate, if applicable
- Deed and title to the home
- Life insurance policies,
- Investment account statements (401(k), IRAs, annuities etc)
Probate. A highly debated topic, but filing the will with the Probate Court does have it’s merits. Basically, the Probate Court is a arbitrator, should the will be contested, and will make certain the wishes and desires of the will is carried out. Make a copy of the will for yourself, beforehand, and then file the original with the court.
Post Office. Visit the post office and have all mail forwarded to the Executor’s or Administrator’s household. First off, when you think you have everything in front of you in terms of bills, subscriptions and notifications, something new and unexpected drops in.
Secondly, theft can be an issue. Believe it or not, there are people in this world who look through obituaries or pick up on someone passing in the neighborhood and see it as an opportunity to burglarize the home. Be sure to secure all assets.
And finally, going over to the deceased’s home every day to pick up the mail can be quite taxing. Just because one person’s life has stopped, doesn’t mean your daily responsibilities do as well. Make it easy on yourself and have it forwarded.
Notify Social Security. Typically the funeral director will notify Social Security of your loved one’s death, but it is always good to stop by the local office to confirm or call 1-800-772-1213.
Transfer of Assets. This part of the endeavor will, undoubtedly, take the longest because of the amount of paperwork involved, record keeping and processing times. Don’t underestimate the process of transferring and handling of assets. Read every piece of paper, understand the implications of what you are signing and chip away at your list, one bit at a time. If it doesn’t register with you the first time around, ask. Repeat back what was explained to you in your own words to confirm your logic is correct. Create a record of everything.
Home Expenses – all the ‘nice-to-haves’ such as TV, magazine and newspaper subscriptions and other memberships that are not critical can be cancelled immediately; while necessary utilities like electric, water and garbage can be maintain until the home is sold or transferred. Every dollar saved, is a dollar in the beneficiaries pocket.
Cash – as noted above, it is best to get all the cash into one account from which you can pay all debts, expenses and distributions associated with the closing of one’s life. For those who live in a state with inheritance tax, if any of the beneficiaries of the will are on the account at the time of passing, your portion of the cash is technically excluded from taxes. This was pointed out to us by the bank and saved us quite a bit of money.
Life Insurance – inside the policy should be the contact information of the insurance agent and the beneficiary of the policy’s death benefit. Contact the agent’s office and have them walk you through the policy options.
IRAs/Annuities – the general rule here is that the beneficiary must take distributions during their lifetime or within five years after the date of passing. I would advise against cashing out of any plans immediately until you have consulted 1) a financial planner to understand what type of account it is and 2) a tax expert regarding the various distributions and tax consequences of each. Don’t shortchange yourself by selling off a valuable asset, coupled with a hefty tax bill.
Pension – similar to the life insurance, pensions should have contact information inside the paperwork files. In rare circumstances, where no paperwork is found, you may contact the human resources department of the deceased’s company to obtain more information, especially if the pension has survivor payments.
Physical Stock Certificates – finding these little gems is a blessing and curse. You are holding a piece of history that is rarely seen in today’s world. And, at the same time, are now encumbered with transforming these archaic scrolls into electronic form. Don’t panic, move down this list and keep moving:
- Research the company and find out if it still exists, has been acquired and who acquired it,
- If it still exists, on its own or under a new company, contact the company to obtain the information of their transfer agent. Usually, the transfer agent is a bank or trust company,
- Visit the transfer agent’s website (or call) to obtain the appropriate paperwork to transfer the stock to direct registration. This simply means that the new owner will be able to hold their shares in book-entry form (electronically) instead of the paper stocks, and
- Send the physical stock certificates along with the paperwork back to the transfer agent, but before you do, the following must be done:
- Fill out of the back of the stock certificate,
- Sign the back of the stock certificate and get a medallion signature guarantee. A medallion signature guarantee is a special signature verifying the identity of the parties involved, specifically for financial documents involving the transfer of money and securities. Whereas a notary stamp is used to verify the parties of legal documents. Your local bank will be able to provide the medallion signature,
- Fill out the paperwork from the transfer agent and get notarized, and
- Finally, make copies of everything before mailing (by certified mail and insure, don’t cheap out!)
Bonds – take right to the bank where the estate account is setup and hand to the manager. They will process and deposit the proceeds into the account. Retain all paperwork for the CPA because the interest is most likely taxable.
Personal Residence – at the time of death, the house will need to be appraised for tax purposes, assuming the person lived in a stated with inheritance tax. Call a local realtor to complete the appraisal and hand to your CPA for taxes purposes.
Veterans Administration – if the deceased served in the armed forces, financial benefits may be available to the spouse and/or the children. As there are complicated rules to navigate, it’s best to call the VA and have them determine if you qualify.
TAKE TIME FOR YOURSELF
Once the estate has been whittled down to just the cash in the bank, waiting to be distributed to beneficiaries or held aside for tax purposes, you need to step away and allow yourself to grieve. Whether alone or with loved ones, the grief and sadness that has been built up over time needs to be released.
How about your experiences? Would anyone like to share their financial missteps or helpful suggestions I may have overlooked when closing down a loved one’s life?