How Do I Settle a Parent or Other Loved One’s Estate?
(Bloomberg Opinion) -- Growing up, my parents referenced their mortality on numerous occasions. Not in a scarring, manipulative sense, but in a practical and logistical one.
We lived as expats in Asia, with the rest of our extended family residing in the U.S., so they felt it prudent my sister and I know how to throw up a bat signal if something happened to them. In an early memory, my parents were about to leave for a trip out of the country when my mom said, “If anything were to happen to us, call your Uncle Kevin.” I was probably 11 or 12.
In an ideal world, all parents (or spouses) would be this pragmatic. They would have handled all the necessary legal documents to make settling the estate straightforward. And we would have these conversations without anxiety, stress or a suspicion that mentioning death will somehow call it to our door.
Alas, many people put off thinking about what happens when they die and don’t prepare for the inevitable. But without an estate plan — including a will and an inventory of assets, such as titles to property, investments and life insurance policies — loved ones can be left in the difficult position of needing to settle their affairs without much direction.
If you find yourself here, or simply want to prepare for the future, it helps to know where to start.
Locating a Last Will and Testament, as well as a Revocable Living Trust, which is another way people can assign who gets their assets upon their death, is the first step. Only 55% of Americans aged 55 and old have a will, according to a 2019 study from Merrill Lynch and Age Wave. The absence of one means the estate will likely have to go through probate court, which helps appoint an executor to handle the estate in the absence of one being named.
The probate process helps decide on how any debts should be paid and any assets divided between potential heirs. It’s wise to get a probate attorney to guide you through this. Even if there is a will, it won’t necessarily spare you the various tasks involved in executing it. It’s still advisable to use an estate attorney and certified public accountant for guidance.
The next step is getting information about your loved ones’ assets and debts. “In my estate planning practice, we call this the morbid scavenger hunt,” says Kristel Patton, attorney and founder of Empowered Legacy Planning. ”It’s such a difficult task to undertake.”
It means going through everything from their mail, email and other physical and digital documents. You may need to hunt down passwords for accounts. You can also reach out to current and/or former employers to locate life insurance benefits, retirement plans, death benefits and any other compensation that may be distributed on death.
If your loved one died without a will, the next step is to see if he or she named a beneficiary or “Payable on Death” on financial accounts and insurance plans. That is who would receive funds and gain access. Should there be no one named, the state’s laws would determine who would receive the inheritance during probate.
As you continue to construct a full financial picture for the deceased, you should print out recent credit card and bank statements to search for monthly charges you will need to cancel, such as subscription services, or any other payments for assets. Do not take any money out of accounts until you’ve met with a lawyer or gone through probate court.
Once you have this information, you can create a running list of all your loved one’s assets and debts. Your spreadsheet could include: retirement accounts, investments, credit cards, mortgage, bank accounts, life insurance policy, items in safety deposit boxes, deeds, car titles, and Social Security benefits. In addition, you need to secure physical assets, like computers, phones, jewelry, art, cars and keys to the home, so they can get appraised.
You’ll need to obtain copies of the death certificates — Patton recommends at least 10 — to close or claim certain accounts. But do not make quick moves about closing financial accounts or paying off debts or rolling over investments. You need to ensure everything is processed legally and that you don’t trigger any tax implications for the estate, or possibly yourself, by trying to move money preemptively. You will also still need to file the deceased’s taxes and quite possibly pay outstanding bills.
Another consideration is whether there’s any unclaimed property in any states your loved one resided in. The trustee or beneficiary should be able to claim this. It’s worth continuing to check in for a few years, as there could be a bank account or another asset that takes a while to get sent to the state due to inactivity.
All this can feel incredibly overwhelming. Even in the most organized situations, this is a lot of work at an emotionally painful time. It’s important to ask for help, not just from professionals like an estate or probate attorney or CPA, but also from loved ones.
Luckily for me, nothing ever happened to my parents while I was growing up. Now, as an adult, they are still as diligent as ever about discussing estate planning and what to do if and when a death in the family occurs. Plus, I have my own will and set up beneficiaries on all my accounts — and I was sure to let my loved ones know where everything is stored.
Being able to take some of the stress away from loved ones in a time of a grief is one of the greatest gifts we can leave them.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Erin Lowry is the author of “Broke Millennial,” “Broke Millennial Takes On Investing” and the forthcoming “Broke Millennial Talks Money: Stories, Scripts and Advice to Navigate Awkward Financial Conversations.”
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