Losing a loved one is one of the most difficult things any of us will have to endure in our lifetimes. The experience is made all the more difficult by the myriad of paperwork and red tape that the survivor must wade through at precisely the moment in their life when they’re most ill-equipped to deal with it.
With that in mind, here’s a brief checklist that covers what a survivor needs to do in order to navigate this emotional time.
- Call your trusted advisors. They are there to help. Even if the death is expected, you will probably be in a state of shock. Your advisors can gently help you prioritize what needs to be done.
- Make funeral or memorial service arrangements. Sometimes people set up pre-paid and pre-arranged instructions. See if there are any such directives. If not, work with the funeral home or spiritual institution you choose to make all the arrangements including submitting the obituary, setting a time for a service, and making burial or cremation arrangements.
- Gather relevant documents. If you’re lucky, someone will leave you a “Financial Bridge” to help you know where everything is. Start by locating all essential papers that may include the following:
- A copy of the will, and if applicable, trusts
- Recent statements for any IRAs, 401(k)s, investment accounts, bank accounts, and pension plans
- Insurance policies
- Social Security numbers
- Military discharge papers, if applicable
- Marriage license
- Divorce decrees from previous marriages, if applicable
- Children’s birth certificates
- Death certificate (plan on needing two dozen or so copies)
- Company benefit records
- List of all user names and passwords, if available
- Inventory all digital assets. Digital assets may include the following:
- All electronic devices that you use to store or access data—computers, smartphones, tablets, etc.
- Back-up media, whether local (e.g., external hard drives), or remote (e.g., the cloud or storage providers)
- All financial accounts that are accessed on-line such as bank accounts, credit card accounts, utility bills, or other accounts paid on-line
- Digital provider accounts including email, as well as social media (e.g., Twitter, Facebook, LinkedIn, Instagram), commercial (iTunes, Amazon), on-line photo archives (Flickr, Google Photos, Shutterfly)
- Proprietary websites, domains and blogs
- Personal and family photographs and videos
- Creative works and intellectual property (e.g., manuscripts, music, photography, videos, patents or trademarks, etc.)
Once you have an inventory, you can determine which items you’ll need to access, which need to be closed and what, if any, personal data needs to be deleted. Make note of user names, passwords, or pass codes.
- File for life insurance benefits. Most insurers will pay out a death benefit within a week or so of receiving a copy of the deceased’s death certificate. In most cases, they’ll place it in an account earning a nominal amount of interest, which will allow you to focus elsewhere for the time being.
If you cannot find the insurance policies, MIB Solutions, an insurance membership corporation (www.mib.com), will help you find it for a fee. Alternatively, the American Council of Life Insurers (www.acli.com) offers tips on finding a missing policy.
- Contact the deceased’s employer. Employers will quickly pay any wages owed and unused vacation or sick time. If they died on the job, you may also be eligible for accidental death and dismemberment benefits.
You should also talk to the human resources department about health insurance benefits, if you were enrolled through the deceased’s employer. At a minimum, spouses may be able to retain the coverage for up to 36 months through COBRA
- Check your cash reserves. Between funeral costs and a host of other unexpected expenses—you can find that you’re burning through cash more quickly than you anticipated, so it’s a good idea to make sure you have a bit more in your cash reserves than normal. Six-to-eight months of living expenses should be sufficient to buy you the time you need to get your legs under you. To fund this, you might transfer a portion of the life insurance benefits to your savings account. Some insurance companies will even provide you with a debit card you can use to draw on the benefit.
- Consider government death benefits. Widows or widowers may be eligible for Social Security at age 60. Families with dependent children under 18 are also eligible for survivors’ benefits. Visit www.ssa.gov to determine what you’re eligible for.
Military veterans are eligible for a free burial in a national cemetery. The Veterans Administration will also provide a flag, headstone, and financial assistance. If you choose to have burial in a private cemetery, the VA will also arrange to have a military funeral conducted at the gravesite.
- Consider retirement plan options. If you were the primary beneficiary of your spouse’s IRA, and he or she was the original owner, you may transfer the plan’s assets into an IRA in your name. Doing so will prevent you from having to take any distributions from it until you turn 72. If your spouse was not the original owner, or if you do not want to transfer it to an IRA in your name, you may be able to take a distribution from it without having to pay any early withdrawal penalties. You will owe income taxes on any distribution, however. You’re also able to roll your spouse’s 401(k) plan directly into an IRA in your name. Some employers will permit you to keep the assets in the company’s plan, if you choose. Doing so may allow you to tap those assets earlier if you are considerably younger than your spouse while avoiding early withdrawal penalties.
If you are the beneficiary of a retirement plan, but not the spouse, you cannot roll over the plan to your own IRA. You can set up a beneficiary IRA account and you will have to take required minimum distributions (for both traditional and Roth IRAs). You can also “cash out” the plan, but then you would owe tax on the whole distribution.
Consulting with a trusted financial advisor may help you determine which option is best for you.
- Settle the estate. The will names an executor, who will handle the administrative duties of distribution the estate, and you’ll be working very closely with them during this process. You should also consider enlisting an estate attorney to help you file any estate tax returns and final income tax returns that are required. Here are some things to consider:
- Get a Tax ID number (EIN) for the estate. Your attorney or CPA can easily set up the EIN number.
- Determine the need for probate
- Determine if you need or want to file an estate tax return (Form 706). The deadline is nine months after date of death. You may not need to file if under federal and state thresholds, but you may want to for “portability.”
- File income tax returns (prior year and partial year if necessary). Your accountant will need the last two years’ tax returns. The final income tax return is due April 15th of the year following the date of death.
- If decedent was over 70 1/2 prior to 2020, take last required minimum distribution from IRA if required.
- File any state death tax returns
- Prepare an inventory of all assets and liabilities to settle the estate. You’ll need date of death values for all bank and brokerage accounts.
- Determine if you need to have any appraisals done on house, jewelry, valuables
- Inventory the safe deposit box.
- List all expenses of the estate.
- Distribute the estate. Hold back enough to pay attorney, accountant, and final expenses. Be careful to get the correct titling for new accounts to receive the assets. Your attorney can help.
- Take care of the miscellany. You’ve now taken care of the most immediate needs, but a few more issues remain. At some point, you’ll have to re-title all of your assets, such as your house, car, savings accounts, etc. You’ll also want to change the names on your checking accounts and credit cards. In each case, you’ll need to make your request in writing, and enclose a copy of the death certificate.
You should change the beneficiaries on your own life insurance policies and retirement accounts if the deceased was previously named on these. Now is also a good time to revisit your own will and any trusts, to make sure that they’re up-to-date.
You can also circle back now to all the digital assets in your inventory. Make sure to close accounts no longer needed. It’s also a good idea to check that personal and confidential data has been properly deleted if needed.
- Take a fresh look at spending needs. You’ve been through a lot. Once you get past the first several months, it may make sense to meet with your advisor to re-evaluate how much you can spend going forward. It may be more or less than you did in the past. Your advisor can help you understand what you own, what you owe and how to make your money last throughout your lifetime.
- Create a memorial. Sometimes one of the most healing things to do is create a small memorial in their honor. It needn’t be anything lavish; something as simple as a garden in the corner of your yard or a small paver in the walkway with their name on it can serve as a tangible tribute to their life, and to the role they played in yours.
- Tips for maintaining your Estate Inventory. Consider the following as you continue to update your information for your heirs:
- Security. Keeping your information secure is critical. You can store the printed document in a safety deposit box or protect an electronic copy with a password. Make sure to leave instructions on how to access the electronic copy.
- Back Up Your Assets. It’s always a good idea to protect your digital assets by backing them up to your server or in the cloud. Anything you want your heirs to have access to should be backed up.
- Write It Down. Put your instructions for your heirs in writing. Note which accounts you want deleted, transferred or saved. Letting them know specifically how you want your digital assets to be handled will help them carry out your intentions.
- Refresh. Passwords, usernames, accounts can change from time to time, so make sure you keep your Estate Inventory updated. You can also keep a list of websites that you use during the month (that require login credentials) and then make sure those websites are included in your current inventory.
Above all else, recognize your own emotional needs throughout this process. You’re going through one of the darkest phases of your life, so by all means enlist the help of your friends and family as you negotiate your way through the things that a loved one’s death makes necessary so that they can help you get back on your feet. It will help both you and them get through this difficult period.
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The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.