What To Do After a Spouse Passes Away

January 12, 2017

One of the most difficult experiences to live through is the death of your spouse. In addition to dealing with grief, there are a host of financial and legal matters to attend to. To help relieve the stress during an already difficult time, here is a checklist of items to take care of:

Get an inventory of assets, debts, insurance policies and bills. This is particularly important (and challenging) if your spouse primarily handled financial affairs. You can use this Financial Organizer to record the information.

Request a copy of your spouse’s credit reports from each bureau so you can see all the debts owed. (You can get free credit reports every 12 months at annualcreditreport.com.) Don’t forget to contact their former employers for accrued but unpaid salary, bonuses, and vacation/sick pay, pension survivor benefits, and life insurance policies. You should also see if they had any life insurance through their credit cards any any lost policies here. Finally, you’ll want to ask the funeral director for at least one copy of the death certificate for each account, life insurance policy, any real estate property with their name on it.

Close or re-title accounts. Here is a breakdown of how to deal with various types of assets:

Annuities and life insurance policies: After presenting the insurance company with a death certificate, the death benefits (which may be different from the cash values) will be paid out to the designated beneficiaries.
Assets solely in the spouse’s name: These will have to go through the probate process and will pass on to the person designated in the will or if it’s not in a will, according to state law.
Assets jointly owned with rights of survivorship: These assets will pass to the joint owner(s) when you present the bank, investment company, or county records office and mortgage company (in the case of real estate) with a death certificate. If there’s a mortgage on the real estate, you may want to wait until the other affairs are settled since there’s a risk of the mortgage being called.
Assets with a beneficiary (living trust accounts, qualified retirement plans, 529 plans, HSAs, bank accounts with “payable on death” registrations, investment accounts and vehicles with “transfer on death” registrations, and real estate with beneficiary deeds): After presenting the financial institution holding the account, the DMV (in the case of vehicles), or the county records office and mortgage company (in the case of real estate) with a death certificate (and trust documentation or notarized trust certification in the case of a living trust), the asset will pass on to the beneficiary. An IRA can stay in the name of your spouse as an inherited IRA and the beneficiaries would only need to take required minimum distributions according to their life expectancy. Other qualified plans may need to be paid out to the beneficiaries over 5 years but the beneficiaries can avoid this by rolling the accounts into inherited IRAs, which can be stretched over their lifetime. Finally, as the spouse, you have the unique option to roll any inherited retirement accounts into your own IRA to defer the taxes as long as possible.

Make sure the bills are paid on time. Otherwise, you can get hit with late charges and a lower credit rating for late payments on any bills with your name on them. If you do get assessed late fees, ask to see if you can have them waived due to the circumstances. Cancel any services or subscriptions that are no longer needed (you may be able to get refunds) and put the rest in your name. Don’t forget that your spouse will still owe income taxes and while the federal estate tax return is due 9 months after their death, state estate tax return deadlines can be earlier.

Apply for benefits. If you or your children were receiving health insurance through your spouse’s employer, you may be able to qualify to continue it under COBRA. You may also be able to qualify for Social Security survivor benefits if you’re taking care of a minor child or are at least 60 years old and for VA benefits if your spouse served in the military. If you have a child in college, contact their financial aid office to see if you can qualify for additional aid. Finally, you may receive benefits from any unions your spouse was a member of.

Review and update your financial and estate plans. Re-assess your new income and expenses and make any adjustments that may be necessary. You might also want to run a new retirement calculation and consult with an estate planning attorney to see if you need to update any of your estate planning documents like an advance health care directive, will, durable power of attorney, and living trust. If your spouse owned a business, you’ll also want to consult with the business’ attorney on next steps.

Nothing here can ever make the loss of a spouse easy. Hopefully, it can make it a little less difficult though. Sometimes, that’s the best we can hope for.

How Can You Avoid Probate in Your State?

October 27, 2016

One of the most common estate planning goals is to avoid probate, which is the process by which the court processes your estate. That’s because probate is public, can cost thousands of dollars, and can take months of time before your heirs inherit your property. Contrary to popular belief, having a will does NOT avoid probate. Having a living trust can help you avoid probate in most states, but these can thousands of dollars for an estate planning attorney to draft. Here are some lower cost way to avoid probate that may be available in your state:

Titling assets jointly with rights of survivorship: When you pass away, these assets will immediately pass on to the joint owner. However, be aware that this is essentially a gift to the joint owner, which means they (and their creditors) will have full legal access to it. In addition, the asset will go through probate when the joint owner eventually passes away as well.

Adding beneficiaries by contract: When you have a living beneficiary on a retirement account, life insurance policy, annuity, 529 or Coverdell education savings account, or health savings account, those assets will not go through probate. Unlike with joint ownership, the beneficiaries do not own the account until you pass away and you can designate contingent beneficiaries in case the beneficiary passes before or at the same time as you. In some cases, the beneficiary can also continue the tax benefits of these accounts. The downside is that this option is not applicable to other types of assets.

POD or TOD: By adding a “payable on death” (POD) designation on a bank account or a “transfer on death” (TOD) designation to an investment account, you can avoid probate on these assets as well. Some states will even allow you to add a TOD designation to a vehicle registration and to real estate (often known as a beneficiary deed). However, many institutions may charge a nominal fee or not even allow it at all. This also can’t be used for most tangible possessions like furniture, jewelry, artwork, etc. For those, you might need a trust.

Your choice isn’t just between paying thousands of dollars for a living trust or allowing your estate to go through probate. Check to see what other options are available in your state. It may not benefit you now, but your heirs will thank you.

A Basic Estate Plan in 7 Simple Steps

July 15, 2016

What does your current estate plan look like today? If you said you don’t have an estate plan, you’re not alone. LexisNexis says that 55% of adults in the U.S. don’t have a will in place, but you’re also probably wrong. Here’s why: the state you call home has a plan for your estate if you die without a will, trust, or other legal documents.

If your line of thinking about your estate is “What estate??? I don’t have anything left after my bills are paid” or “I’m single with no kids” or “I’m young and just getting started in my career,” understand that everyone has an estate (regardless of wealth) and should have an estate plan to make sure your individual, family, and financial goals are met. There are a few simple steps that can help you maintain control and protect the people (and organizations) that matter most to you. Here is a simple estate planning “to do” list to get you started:

Step 1: Set goals that matter to you. What do you want your estate plan to accomplish? Are you concerned about choosing a guardian for your children or protecting your kids’ inheritance from your spouse’s next spouse (remarriage happens!) after you’re gone? Is charitable giving in your future plans? Give your estate plan more purpose and meaning by asking yourself these questions and writing down a list of the things that are most important to you!

Step 2: Evaluate your financial situation. Start by completing a net worth statement that includes a list of your assets and liabilities. Once you’ve compiled a list of your financial resources, you are in a better position to determine who should receive your assets after you pass away. This step also involves reviewing your life insurance to cover your family’s needs for income, education costs and estate expenses. Reviewing disability insurance is just as important because it provides income protection for you and your family during your lifetime. For more information on life and disability insurance coverage, including needs calculators, visit LifeHappens.org.

Step 3: Have basic documents created. Here is a list of important documents that should be part of almost every estate plan:

Will
Advanced healthcare directive (living wills)
Medical power of attorney
Durable power of attorney

This is where your estate plan gets really personal. These important documents help you state your wishes for how to distribute assets when you die, name guardians for your children, and nominate someone to speak on your behalf if you can’t in a medical emergency. Get them done before you need them because by then, it will be too late.

Step 4: Update your beneficiary designations and title assets appropriately. Many people think that once a will has been created their estate planning work is done. That’s far from the truth, especially considering the fact that your will controls ONLY the distribution of assets that are subject to probate (the formal process of paying off debts and distributing property through the courts).

Not everything transfers through probate though. Any account with beneficiary designations such as insurance policies, retirement plans, IRAs, and annuities won’t go through probate. Any jointly owned property or accounts bypass probate as well as accounts designated as payable on death (POD) or transfer on death (TOD).

Step 5: Get organized. Have you ever been late for something and spent time frantically searching your house for your keys, only to find them in your hand? Not fun! Imagine searching for a family member’s bank account information, investment and retirement account statements, will, or key to a safe deposit box without any instructions or guidance during a time of grief.

It always makes sense to get your financial affairs organized. It’s also important to keep a list of online account passwords and digital assets in a convenient location for loved ones to access just in case something happens to you. I have a red folder in my desk labeled “When I’m Gone” with that list, and my kids and a few friends know where it is. Here’s a quick resource for what to consider about your online presence as it relates to your estate plan.

Step 6: Communicate your plans to those involved in it. Discussing your intentions in advance can help avoid family conflicts and also minimize the potential for any confusion or questions regarding your true intentions. If you have a plan in place but nobody is aware of it, then your wishes may be ignored. If your plan is in place but no one knows about it, is it really a plan?

Step 7: Review your plan regularly and as major life events occur. Life will undoubtedly throw a curve ball or two our way so it’s essential to review and adapt your plans periodically. Some situations that may require updates to your estate plan include marriage, the birth of a child (or grandchild), disability, the loss of a loved one, divorce, a financial windfall, or the creation or dissolution of a family business. If any of those life events occur, be sure to break out your documents, give them a quick read and highlight areas where a change is needed.

Let’s be honest. Estate planning isn’t always the most exciting topic (it’s quite morbid actually), but it is an important aspect of every personal financial plan. Be sure to personalize your goals and take action NOW so that you have a basic plan, at a minimum, to protect your family and people you care about the most. Some of these other steps are just good solid financial behaviors (not just for estate planning) to allow you to take control of your financial life.

Lessons From a Tragedy

August 28, 2014

If you’re like me, you were shocked and horrified when you found out about Robin Williams’ death. I can’t tell you how many interviews I listened to and movie clips I watched of him in the days after the horrible news. Buried in all that media coverage, I also saw this article pointing out that unlike so many other celebrities with untimely ends, at least Williams spared his family additional stress and grief by taking care of his estate planning with a revocable trust. Continue reading “Lessons From a Tragedy”