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 whoever 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 on 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.
2. Get Help
A lot of what goes on in 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 death, get their advice.
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.
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 the 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 decisions 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.
Spectrum Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Additional information about Spectrum’s investment advisory services is found in Form ADV Part 2, which is available upon request. The information presented is for educational and illustrative purposes only and does not constitute tax, legal, or investment advice. Tax and legal counsel should be engaged before taking any action. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchasing or selling any security.