Advisors For Life: Organizing Finances After a Death in the Family

Losing someone close to you can be a sad and traumatic event for anyone.

It’s tougher than anything an individual will encounter in his/her lifetime. But even in times of extreme grief, it’s incredibly important to address all the financial issues that arise after the departure of someone you love. In unfortunate situations like this you can look to a trusted financial advisor to help you in addressing these issues.

Whether the person you lost is a spouse or a parent, you’re going to have some decisions to make regarding your future financial security. So those final arrangements are crucial to your future and your family’s future. In all honesty, no one can truly prepare for this kind of event, but there’s a way to manage it in pieces — and your accountant or trusted financial advisor can help you along the way. These tips are broad strokes, but they’re critical to helping you avoid some of the pitfalls. And whether you’re the executor or someone else handling the details, it benefits to be prepared and rely on the guidance of professionals.

1. Get Your Documents In Order

The first thing you’ll need to do is make several copies of the Death Certificate. That’s because you’ll need to produce the Certificate to government agencies, financial institutions, and other organizations in order to take action. It’s like notifying the authorities. After you’ve got a small collection of these official documents, you should begin gathering the series of documents that follow, which includes:

  • Will or trust
  • Insurance policies (life, homeowners, health, disability, auto, etc.)
  • Most recent credit card statements
  • Investment accounts (IRAs, 401(k) plans, mutual funds, pensions, etc.)
  • Last checking and savings account statements (including CDs and money-market accounts)
  • Last mortgage statement
  • Last two years’ tax returns
  • Marriage and birth certificates (of the deceased’s spouse and children)
  • An up-to-date credit report of the deceased

We understand that most people are not diligent record-keepers or incredibly organized in their paperwork, but starting to plan now will save you some of the headache when you’re in time of grief.

2. Assess the Payout

Next, find out whether insurance premiums were paid on accounts. That includes insurance policies and financial contracts like car loans, mortgages and credit card agreements. You also may be entitled to pension benefits, 401(k) funds, unused vacation time, holiday time, bonuses earned, or general income from the deceased person’s employer.

3. Pay Last Bills

When paying the final bills, don’t forget about addressing property taxes and/or income taxes. Your accountant can file a final 1040 for the deceased individual and, if required, a Form 1041, an estate income tax return.

4. Pay Debts

This might come as a surprise, but a debt does not go away when the debtor dies — the estate of the deceased person owes the debt. But if there isn’t enough money in the estate to cover the debt, it usually goes unpaid. You may be responsible for the debt if you:

  • Co-signed the obligation
  • Live in a community property state, such as Louisiana
  • Are the deceased person’s spouse and state law requires you to pay a particular type of debt, like some health care expenses
  • Were legally responsible for resolving the estate and didn’t comply with certain state probate laws

Going through a loved one’s personal items and economic affairs after their passing can be incredibly painful. So get the support you need from family and friends and professionals like attorneys and accountants.