When a husband or wife passes away, it is a difficult time filled with uncertainty. The surviving spouse often feels overwhelmed and wonders what to do to get affairs in order. In most cases, the first thing that needs to be addressed are financial matters. The following outlines what a surviving spouse needs to do as soon as possible in regard to finances after a spouse dies.
Collect Financial Records
Start to gather all financial records and put them in one place. The items you need to collect include your spouse's Social Security number, their will and any trust documents. You will need to obtain certified copies of your spouse's death certificate from the funeral director or local government office. You are going to need to give this document to various organizations, so be sure to request multiple copies.
Did your spouse have any retirement accounts? If yes, then you need to access beneficiary designations forms for retirement accounts. In addition, you will need to gather all real estate deeds, military records and statements for investment, bank, credit card and other accounts. This is often a challenge since very few statements are being mailed, but rather are available online.
Once you find your spouse's will, you need to determine who they have named as their executor. Is it you or another individual? If your spouse had a trust, you will need to determine who is named as the successor trustee.
If your spouse had no will or trust, you will have to petition the courts to be named as personal representative or executor. At this point, you will need to hire an estate attorney to assist in the probate process or administration of any trusts and a tax professional to help you prepare tax returns.
Did Your Spouse Have Life Insurance?
If you are unsure about whether your spouse owned any life insurance policies, check bank statements for evidence of premium payments. Note, however, that premium payments may not have been required in recent years for some policies. It is important to check because, in many cases, the surviving spouse believes their husband or wife did not believe in getting life insurance, only to discover a policy in a drawer or safe deposit box after they die.
To claim life insurance benefits, you will need to provide a certified copy of the death certificate. Benefits typically pass to beneficiaries income-tax-free. You may want to consult with your tax advisor to determine whether, from an estate planning perspective, you should consider disclaiming any benefits so that they will pass to the policy's secondary beneficiary.
Update Joint Accounts
It is also important to update your joint account registrations for assets held at banks and brokerage firms, as well as for titles to other property, by providing a certified copy of the death certificate. This is why you are going to need multiple copies of the death certificate. Accounts registered in your spouse's name only may require additional paperwork to prove that you are the rightful heir or are acting as the personal representative or executor of your spouse's estate. This will require a court-certified copy of your spouse's will. For assets that were held in a trust, only the trustee can direct what happens to them, which is based on the terms of the trust.
For retirement accounts such as IRAs or 401(k) plans, the beneficiary designation form (not the will) determines who inherits the assets. IRS rules govern how these assets can pass from one person to another, and these rules are complicated, so be careful. Any decisions you make are irrevocable and could trigger taxes and penalties.
What About My Finances Moving Forward?
Be sure to update your documents after your loved one has died. If you have any retirement accounts or life insurance policies, be sure to update your beneficiary forms. It is also a good time to have your legal documents reviewed to make sure everything is in order for you.
This might be a good time to talk to your children or someone you trust to make sure they know where all your assets are located. This is what I call leaving them a roadmap of your assets. Though this is often a difficult conversation, you must remember that once you die, the person that you have designated to take care of your finances cannot ask you questions. Leaving this roadmap of your finances and what your final wishes are, as to who will inherit your assets, will give you peace of mind that everything will be taken care of after you have passed. It will also help to avoid confusion, disputes and hard feelings among family members.
How to Avoid Mistakes
Making major financial decisions while grieving the loss of your spouse can lead to costly mistakes and regrets. Ask a family member or friend to act as a sounding board and to help with the legwork. And, be sure to consult professional advisors. Do not be afraid to ask questions. Remember, you and your spouse worked hard throughout your lives and want to ensure that you and your family are cared for.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
