I wrote this article because I have worked with many of the individuals described below over the course of my career and quite a few recently.
My spouse handled all of the family finances and just passed away, so what do I do now? You have started sifting through different bank, investment, and IRA statements. There is a life insurance policy or two, you think. What about income sources like a company pension and social security? Where do I start? Believe it or not it is possible to sort out your finances and meet your financial goals, with the proper plan. Most people don’t know where to go or who they can trust.
The short answer is that there is no rush on any of these lingering issues. There is plenty of time to first sift through all of financial and estate documents and then start making decisions on your best course of action. Any professional, especially a financial planner, will want to get a holistic view of all the different moving parts before giving any guidance.
I have literally had clients come into my office for the first time with a gym bag full of statements from 18 different places. They had three or four banks relationships. They had joint, individual, and IRA accounts spread around to several different investment firms. There are old insurance policies dating back to the 1940’s where the insurance company has been bought out several times over. In a perfect world many of these items would have been consolidated and there would be a plan and a go to person in place so that this process is easier to handle.
When you are ready to start dealing with the financial aspects after your loss here are some important steps to take.
1. Estate Settlement – The will and/or trust will indicate how assets should be disseminated. Assets with specific beneficiaries and joint with right of survivorship bypass the probate process and will be smoother to get to the recipients. Other assets will need to be settled through the estate. An estate attorney can be extremely helpful in making sure the proper documentation is filed.
2. Gather important documents – Locate your will and any trust documents. Get a minimum of 15 certified copies of the death certificate. Find all of the bank, investment, and IRA statements. Keep them all in a centralized place.
3. Contact life insurance companies – They will send out paperwork outlining what is needed and your options. Most insurers will send you a check relatively quickly but, don’t feel like the money needs to be invested right away. If you are the primary beneficiary then the money bypasses probate and doesn’t need to be included in the probate estate.
4. Contact the deceased’s employer – There may be a company sponsored retirement plan and/or survivor pension that you would be entitled to receive. Their paperwork will have some different options to consider.
5. Contact Social Security – You will want to determine what your social security benefits and options will be moving forward and for minor children if applicable. www.ssa.gov
6. Retirement plan options - There are two different sets of rules for spousal beneficiaries and for all other beneficiaries. Simply put, the spousal beneficiary has far more options available. A surviving spouse can roll over money from the deceased spouse's retirement plan into his or her own traditional IRA and in many instances that makes the most sense. You can also designate yourself as the account owner on the IRA that is being inherited. Age of the deceased spouse and you are critical factors in determining the best alternative.
7. Other considerations – Going through a safe-deposit box, retitling ownership on your home, car, accounts, credit cards and other property will ultimately need to be done. Real estate assets can potentially create some conflicts as it is not liquid and if there are multiple beneficiaries there can be some internal strife between the different parties and what they want to do with their portion.
The emotional strain a death can cause a family is tough to deal with and leaves most spouses struggling with the idea of what to do next. One major key is to not make any rash decisions that could have a dramatic impact and tax implications. Once you have gathered everything you and your financial planner can start to map out a strategy for the next phrase of your life. A good planner can help alleviate some of the burdens that go along with estate settlements and bring in other resources such as a tax and estate professionals if applicable to make sure all of your bases are covered.