Regardless of circumstances, the loss of a loved one is crushing.
And as the saying goes, the other certainty in life aside from death is: taxes. Not only taxes, but the mountains of paperwork often needed to go about re-structuring your finances after a spouse, partner, parent, or other family member has passed away.
Not everything must be taken care of immediately. Many financial decisions can be delayed after the loss of a loved one. In fact, making any major life changes while the grief is fresh is best to avoid, since it’s so hard to process and be present.
Take your time. The grief will never fully fade, but it will settle. Allow time to heal a little and clear your mind a bit.
Following are next steps you can take to wade through important financial details and decisions after a loved one passes on.
Most Immediate To-Dos
It can be reassuring to work through each of these with a close family member or friend by your side. Coordination of this level is hard to navigate during a time of such extreme emotions, and having someone with you to step in where needed can be helpful.
- Connect with the Funeral Home, which will complete all state-required paperwork and request death certificates. These documents are necessary for estate administration.
- Notify any employers, if applicable, of the deceased. During the conversation, ask for details about insurance policies, health insurance, retirement plan accounts, last paychecks, and any other financial-related questions that may impact you.
- Contact your financial advisor who manages your assets and investments.
- Gather the Last Will and Testament or any Trusts your loved one had, and contact your estate attorney. If you do not yet have one, seek out recommendations from friends and family, or other advisors you trust, to find an attorney experienced in administering estates.
- Work with the attorney to complete a list of assets solely owned by the deceased that may require documentation and filing with different entities. Probate, federal estate filings, and state inheritance reports will all be part of next steps.
- Connect with your Wealth Advisor to conduct a new tax cost basis for assets in the estate. If anyone inheriting the asset(s) decides to sell them, under current tax laws this can mean little to no capital gains taxes, so long as the asset has a new tax cost basis assessed.
- Contact credit bureaus to report the death, so that the major credit trackers are marking the account as deceased. Many scammers will seek out recently deceased names to apply for new credit and prevent anyone from applying for new or fraudulent credit.
Estate Administration Steps
Some of these steps should happen rapidly, while others can be over time as you meet with the estate attorney. You will work closely with both the attorney and your financial advisor.
- Contact the Social Security Administration if the deceased was your spouse and they were collecting benefits. If they were collecting benefits, there is a death benefit of $255 you are entitled to receive. It may be worthwhile to make an appointment with the Administration to discuss any benefits your spouse was receiving. As a surviving spouse, you are entitled to receive the higher of: your benefit or your spouse’s benefit.
- If you have children under the age of 18, include this notification to the Social Security Administration, as there are likely survivor benefits that may be payable to those children until they turn 18.
- Get in touch with life insurance companies if your loved one had any policies. They will likely have forms for you to complete a claim, starting the process of any benefits available to payout.
- Connect with your auto insurance to inform them of the death. They will remove the driver from the policy, and you may be entitled to a refund. You will also have an adjusted premium payment amount moving forward.
- If your loved one was on a private health insurance policy, contact the organization to report the death and stop premium payments.
- For all accounts with joint names on them, each business needs to be notified (this can include banks, investment groups, etc.) to report the death. Usually, the account will continue to function as-is, with the name simply adjusted.
- Talk with your CPA to discuss if any adjustments are needed for your personal tax obligations and filings. It’s likely, if your loved one who passed away is a spouse, your tax situation may look very different in the coming years as a single filer, possibly as a head of household if you have children living at home. They also need to know that a final tax return will need to be completed for the deceased.
- If your loved one passed away from COVID you may be entitled to apply for a Funeral Assistance payment to cover the cost of the funeral and additional expenses. This is a payment provision from the Federal Emergency Management Authority (FEMA), and can be up to $9,000. The death certificate must report the cause of death as COVID-19 to be eligible for this.
Additional Steps that can be Taken Later
There truly are so many things to work through with changes and paperwork after the loss of a loved one. But some can wait until a later time.
- Work with your financial advisor to understand your ongoing financial obligations and cash flow.
- The estate attorney may need to file a federal estate or state-level inheritance tax return. Under current law, this is not necessary unless an estate exceeds $11.7M, but there may be exceptions for state-level inheritance taxes that an attorney can help you file.
- If your loved one was your spouse, it’s important to revisit your own estate documents, including the Last Will and Testament, Financial Power of Attorney, and Medical Power of Attorney. It’s probable that you had listed your spouse in these documents and it may be necessary to make some adjustments. Speak with your attorney for guidance on these matters.
- Work through canceling services such as credit cards, cell phones, or subscriptions that you no longer want or need. You can turn off any social media accounts either with password access or through some administrative steps each social media service has designed for these purposes. You may also want to access or close down personal email accounts of the deceased.
- Think through major, life-altering decisions, such as selling your principal residence, moving in with a family member, paying off a mortgage in full, or how you invest larger payments received from life insurance claims, etc. Go about your day-to-day life for awhile, and really get a feel for what you want moving forward before making any decisions.
Surround Yourself to Help
Through all of these details, a quality financial advisor who can partner with your attorney and has depth of experience in tax planning can act as a strong guide for you to navigate these minute details. A background in tax planning and/or a CPA qualification can be key, as they will best understand complex tax law for investments, personal finances, and account types.
It may be helpful to rely on your professional advisors for an objective opinion, as you may feel overrun by advice from well-meaning people in your life – especially as others around you are grieving as well.
As you go through all these moving parts after the loss of a loved one, remember that you are not alone. Take the time you need to walk through each step as you are able, and rely on your trusted friends, family, and professional supports to help you navigate these administrative financial details.
If you’re feeling unsure or overwhelmed, please feel free to get in touch with us at Domani Wealth. We can guide you through the necessary steps after the loss of a loved one, recommend other trusted professionals to work with, and be a support for you during this time. Give us a call at 855-855-5455 or email email@example.com.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Domani. A copy of Domani’s current written disclosure brochure discussing our advisory services and fees continues to remain available upon request.