How to manage a loved one's finances after they die
By the time my mother-in-law died after a long struggle with cancer, my wife had already taken over payment of her bills, so she knew where the money was. Her mother's trust, of which she was trustee, made it easy to settle the estate. And yet, it still took a tremendous amount of work over many months to tie up all the financial loose ends.
This year, more families than usual have to grapple with the challenge of holding finances together while mourning someone they love.
When someone dies suddenly, the family doesn't always have time to prepare. Elder law attorney Jeffrey Gaffney has witnessed firsthand the pitfalls that families can face after a death. He shared some tips to help you get through this difficult time if you have lost someone you love.
The first thing to determine is who will do the work of settling the estate. If there is a will or trust, it will be the executor and/or trustee named in those documents. When there is no will, "You have to figure out who's in charge then," Gaffney said.
When one member of a married couple dies, the surviving spouse is a natural choice. Otherwise, Gaffney advises picking the family member who lives closest to the person who died. That person may need to get documents from the court and to monitor the home until it's sold, so proximity is a plus.
In an ideal world, the person would have made these decisions long before they died. Gaffney calls this "preparing the bench." In fact, being stuck at home is a good opportunity to prepare your will and advance directive.
When you choose an executor or trustee, Gaffney said, "Make sure you talk to all these people first to see if they want the jobs." Don't appoint someone to be guardian of your children if they don't like kids. "Make sure you prepare these people and they know what they're doing," he said.
Grief can sit heavily, especially if the death was unexpected. It can be hard to move through your daily life after someone you love dies. It may be even harder to embark on the complex tasks required to put their financial affairs in order. But you can't afford to put that off.
"Get through the funeral and get to work," Gaffney said. "I wouldn't wait more than 30 or 60 days at most." This is true whether or not your loved one had a will. Your work may become complicated and messy if you put it off, particularly because people who have died make tempting targets for criminals and fraudsters.
If you've never managed the winding down of someone's estate, you might find it hard to believe how many copies of the death certificate you will need. "Get at least a dozen [certified] copies because everybody is going to want one," Gaffney said.
Expect to present the death certificate to banks, brokerages, phone service providers, and many other institutions. You might also need a death certificate for things like taking control of the person's Facebook page to turn it into a memorial page. You won't need to provide a certified copy of the death certificate every time; sometimes a copy will do.
The first agency to notify after someone dies is the Social Security Administration if the person received Social Security payments. "If they're going to keep paying you money, it's a nightmare to get it paid back to them," Gaffney said.
If there are other recurring payments, such as VA benefits or a pension, those entities should also get a notification right away. In addition, you'll want to tell any banks or insurance companies that your family member died.
"Credit cards are also one of the first things you want to grab," he said, because "fraud on the deceased is pretty common." When a notice of death is published, criminals look for that person's credit card and Social Security numbers on the dark web. You'll want to act quickly to nip any potential criminal activity in the bud.
If you didn't live with the deceased, you should secure the house right away. Check if there are plants that need to be watered or pets to be cared for.
"I worry about theft and fraud and squatters and your cousin Betty walking in there and taking something," Gaffney said. "Take a camera, take inventory, change the locks." If the house will sit empty for a time, make sure you take precautions to prevent mold from growing or pipes bursting.
If the person who died had tenants or housemates, "I'd evict them as quick as you can and sell the house," Gaffney said. "Take all the valuables the first time you enter the house."
Gaffney does volunteer work on elder abuse, so he is keenly aware of the problems that can arise from unsupervised tenants or housemates. To protect the property, he suggests assuming the worst will happen and protecting against it.
As executor, paying bills may be a big part of your job. "You have to hunt down where the money comes from and goes to," Gaffney said. "You can look up the old 1099s and see where the money comes from."
You'll need to figure out what accounts need payment, including utilities, phone, cable, and more. You may need to present a death certificate to get access to online account records, to change passwords, and to close accounts.
Certain accounts get distributed directly to beneficiaries. These include pay-on-death or transfer-on-death accounts such 401(k)s and other retirement funds. In addition, joint bank accounts and real property held in joint tenancy will pass directly to the joint owner or owners. Your role will be to inform the institutions of the death, but you won't distribute the funds.
When someone dies, the IRS still collects.
"As the executor, you have to do their final taxes," Gaffney said. "Make sure you find all the paperwork for that one." The final federal tax return is due on April 15 of the year after death. In addition, if the person hadn't filed taxes for any prior years, you will also have to complete those.
Administering an estate can be a lot of work. I witnessed this firsthand when my wife wound down her mother's trust. Even though my mother-in-law had arranged her affairs to make it as easy as possible for her children, it still amounted to a part-time job for several months.
"It's a miserable job," Gaffney said. "Nobody wants to be executor."
"If you're really overwhelmed and you can't handle it, turn to someone who has done it 100 times," he said. That could be "your nearest friendly probate lawyer." Or you could hire a fiduciary to administer the estate.
Either a lawyer or a fiduciary will take a fee that is usually a percentage of the gross value of the estate. The cost can be worth it, especially if no one in the family is able to take on this job.
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