Settling Financial Affairs When A Loved One Dies—Part I

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By Steven J. Weil, Ph.D.

Losing someone close is not only a sad and confusing experience, but for the person who must deal with the financial and legal matters, it carries heavy responsibilities.

Overview

The saddest decisions come quickly. The attending doctor must sign the death certificate and decide whether an autopsy is required. Although the state may not require an autopsy, one may be desired if, for example, the cause of death may relate to a hereditary issue.  The time to decide is limited.  Similarly, if the deceased was an organ donor, time is of the essence.

It is also important to find out about specific wishes regarding funeral arrangements and to coordinate with family and friends.

Next, financial and legal decisions will be required to settle the estate (see the general and tax steps below). Remaining net assets must be transferred to legal heirs. This is the probate process,* which may include filing various federal and state tax returns on behalf of the deceased. 

(* A probate court must approve and validate the legality of a will and “grant probate to the executor.  Part II of this article will provide more detail about the dreaded probate and inheritance process.)

A “Final Accounting” verifies legally that the net assets have been distributed properly after all allowable expenses are paid.

General Steps

  • Make necessary hospital decisions quickly, e.g. autopsy or not, retrieve personal belongings, donate organs, and get copies of the death certificate.  Purchase from the funeral home or hospital copies of death certificates needed to submit claims for insurance and employer benefits, transfer of assets, etc. 
  • Locate the will and safe deposit box.
  • Contact an attorney, tax accountant and other needed financial advisors.
  • Arrange for funeral/memorial; notify friends and family.
  • Contact decedent’s employer for details on death benefits. Locate life insurance policies; apply for proceeds. Arrange for continuation of payment of decedent’s bills.
  • Notify Social Security, Veteran’s Administration, et al. for possible benefits and the post office if there is an address change.
  • Contact the decedent’s banks, mortgage holders, retirement plans, people who owed money to the deceased, insurance companies, the DMV and credit card companies.
  • Arrange for the change and/or shut off of utilities, services and deliveries.
  • Dispose of decedent’s assets and belongings according to the will.  Create a detailed list of charitable donations, and get a receipt for tax deduction purposes.

Tax Steps

  • Begin the inventory process of recording the values of assets at date of death and any debts/liabilities the deceased had.
  • Apply for needed federal and state tax identification numbers for the estate.
  • Prepare federal and state Succession/Inheritance tax returns.
  • Handle accounting reports for probate.
  • Prepare outstanding tax returns for the deceased and for the estate.
  • Do the final accounting to close the estate.

Will and Safe Deposit Box

Search diligently for the will, which may contain burial and funeral instructions.  It identifies the executor — the one who handles all the legal and financial matters.  It also may list locations of life insurance policies and safe deposit boxes.  If the will is inside the safe deposit box, legal authority will be needed to open the box. If you can’t find the box, a lawyer can help do a search of local banks, and you can obtain lists for all participating banks from the American Safe Depository Association.  The majority of Americans die without a will (intestate).  When someone dies intestate, the courts appoint an executor, and all net assets from the estate are distributed according to state laws.

Professional Advisors

It is a mistake to assume the lawyer handles everything in the estate process. This is rare. You should also contact the professional who will file various tax returns.  While most lawyers will handle filing the Succession (“Inheritance”)Tax Returns, they do not usually handle the Income Tax Returns or the Fiduciary Tax Returns that may be required if the estate is yielding income during probate. These returns must be filed on a timely basis and should be coordinated by the tax accountant and the attorney.  Since the courts hold the executor responsible for the proper and timely filing of various tax documents, it is essential to do this correctly and on time.

Dr. Weil, an Enrolled Agent, operates several businesses, including RMS Accounting (1984) and its division, Bookkeepers Now (1986).  With his wife, Theresa, he oversees a staff of 16 full-time, year ‘round employees in their Fort Lauderdale offices.  They consult clients on all tax matters, including tax preparation and planning, bookkeeping, payroll, estate planning, audit representation, and other financial services.    

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