Financial Guide to Settling the Affairs of a Loved One

Losing a loved one can be very difficult. Yet, as an executor, spouse, or family member, you need to take steps to ensure that your loved one’s financial affairs are properly settled.

Often, key preparations have already been made—a will has been created and paperwork may be in order. However, there are detailed issues to address and actions to be taken, some of which can be time-sensitive.

To help you with the process, we offer a step-by-step guide outlining key tasks; at the end of this booklet, you will find a checklist that you can use as you collect key personal and family financial information.

• Select the Executor
• Consider Your Need for an Attorney and/or an Accountant
• Locate Important Papers
• Manage Ongoing Bills and Paperwork
• Work With the Probate Court
• Change Names on All Key Accounts
• Review Benefits and Beneficiaries
• Plan for Your Future
• Checklist

Select the Executor

An executor is a personal representative, designated by the will, who acts for an individual upon his death to manage his affairs. Executors have a number of duties, depending on the complexity of the deceased person’s financial and family circumstances. The responsibilities of an executor last from nine months to three years.

The choice of an executor is an important one. The proper selection of an executor can make the difference between an estate that is settled in an orderly and harmonious manner and one that is disruptive or possibly contested. Factors to consider when choosing an executor:

• Is the person named as an executor willing to serve?
• Is the executor competent, trustworthy, with some degree of financial acumen?
• A close family member or friend with a close knowledge of the deceased’s affairs.
• A professional who may have a higher level of legal or financial expertise, may be more objective and thus avoid potential conflicts of interest.
• Co-executors should be individuals or entities who can work together.
• Identify a successor executor in the event the first choice is unable to serve.

The executor acts in a fiduciary capacity and is under court supervision, accountable to the court and to the deceased’s beneficiaries. Their decisions should be documented, and the financial liability for errors and omissions made while serving as executor may be substantial.

Many states cap the fees that executors may charge, but they vary widely. Some fees are based on a percentage of the assets that are probated, while others are framed in terms of what is reasonable. Often, family members who serve as executors waive the fees, although they are eligible for reimbursement of expenses related to their duties.

If an executor has not been named, or if the executor refuses or fails to serve, the probate court will appoint an administrator.

Key Responsibilities

• Locating and probating the will
• Inventorying, collecting, and selling (if necessary) assets
• Paying liabilities and taxes
• Filing tax returns and paying estate taxes
• Preparing and filing a budget and accounting for the court
• Distributing remaining assets

Consider Your Need for an Attorney and/or an Accountant

Settling an estate can be a complicated process. Your professional advisors are educated and experienced in the matters of probate, estate, and taxation. They can guide you in preparing taxes and provide valuable information on federal and state estate tax, inheritance or gift tax, and issues regarding the estate.

If you do not know an experienced lawyer, ask reliable sources for a referral. The local probate court will have a list of lawyers specializing in probate. Another option is using the lawyer who drafted the deceased’s will, who would be familiar with your loved one and his or her estate.

Accountant

You may also want to hire an accountant to help coordinate efforts with your attorney. Federal estate tax returns are due within nine months of the death. For the year in which the death occurs, the deceased’s income taxes would be due on the normal filing date of the next year. You can request an extension, which will be granted automatically. If you are the spouse of the deceased, you can file a joint return for the year of death as long as you have not remarried.

Estate or Inheritance Tax

You may be required to file estate or inheritance tax returns at state and federal levels. Furthermore, 17 jurisdictions (16 states plus the District of Columbia) impose either a state estate tax, an inheritance tax, or both. State estate tax exemption is typically lower than the federal exemption, meaning the deceased’s estate escapes federal taxes but may still owe state taxes.

Federal Tax

Federal tax law also allows the estate to transfer the amount of any unused estate tax exclusion to the surviving spouse, a process known as portability. If the representative of the deceased’s estate chooses portability, the surviving spouse may apply the amount toward any tax liability resulting from lifetime gifts and transfers at death.

Assets

In some cases, appreciated assets owned by the deceased at death may receive a step up in basis or a readjustment of the value for tax purposes so that the beneficiaries’ capital gains tax upon sale is minimized. Please consult your tax advisor.

Quick Reference List

• Estate tax
• Inheritance tax
• Transferring taxes

Locate Important Papers

It is important to locate the key documents. You can begin your search with the deceased’s safe deposit box. Papers may also be found in file cabinets, desks, bookshelves, and other areas. Be mindful of what you discard since some documents may prove to be important later on.

Death certificate

The funeral home or the state or county vital records department where the death occurred can provide death certificates. You may want to request several dozen certified copies—there will likely be a charge for each certificate—since you will need to provide a death certificate each time one acts on behalf of the deceased or makes a benefits claim.

Marriage certificate

If you are the spouse or partner of the deceased, you will need a copy of your marriage certificate or domestic partnership agreement to claim benefits. If you cannot find these papers, you can request a copy from the county where you were married.

Birth certificates of dependent children

You will need the birth certificates of dependent children to apply for potential survivor’s benefits and submit claims for Social Security benefits. If you are unable to locate them, copies of birth certificates are available from the county health department where the child was born.

Will and trust

If the deceased had a will and/or trust, you will need to locate the original will and any trust documents. These may be found in the safe deposit box, filed with other important papers in the deceased’s home, or with the attorney who drafted them. These papers identify the executor, trustee, or person(s) responsible for managing the deceased’s affairs, such as paying bills and taxes and administration costs and collecting and distributing the estate’s assets.

Insurance policies

You will need copies of all insurance policies pertaining to your loved one. Check home files and the safe deposit box. You may consider reviewing the deceased’s checkbook and bank statements for records of premium payments to any insurance companies. Keep in mind that in addition to individually purchased life insurance policies, there may be insurance policies with the deceased’s employer, a professional group or association, or the Veteran’s Administration.

Tax returns and financial statements

You may need federal and state tax return statements for both the current year and the year prior to death and the prior three months’ bank and brokerage account statements.

Veterans’ discharge papers

If the deceased was a veteran, a certificate of discharge from the military is needed to claim veterans’ benefits. For in-service death, a military casualty officer should assist you.

Social Security numbers

The funeral director will typically notify the Social Security Administration of the death. You should also contact Social Security at www.socialsecurity.gov or call +1 800 772 1213 to inform them of the death and, if eligible, apply for Social Security benefits. You will need to know the Social Security numbers of the deceased, spouse, and dependent children. Divorced spouses may be entitled to benefits on the deceased’s record, which will require a copy of the divorce decree.

Key documents such as titles to property and investment certificates; birth and marriage records; and family heirlooms, jewelry, and other valuables are commonly stored in a safe deposit box. However, if the safe deposit box is rented only in the name of the deceased, you will generally need a court order to gain access to it. It is recommended that copies of important documents be stored in the safe deposit box and the originals be left with an attorney or trusted family member.

Quick Reference List

• Death certificate
• Marriage certificate
• Birth certificates of dependent children
• Will and trust
• Insurance policies
• Tax returns and financial statements
• Veterans’ discharge papers
• Social Security numbers

Manage Ongoing Bills and Paperwork

It is important to keep paperwork organized. You may want to make copies of essential documents and keep track of all incoming mail, including bills, checks, and other paperwork. If the house or residence is vacant, you do not want mail to pile up. Forwarding the mail to you, a relative, or the executor can make it easier to manage.

Credit cards, bills, insurance

Cancel any credit card that is held solely in the name of the deceased. Review and monitor incoming mail and check bills for dates of merchandise orders, credit card or debit transactions, or evidence of services or products never ordered or delivered.

Cancel the deceased’s health insurance by notifying the insurance company, employer, or Medicare. Be sure to cancel any Medicare supplement plan. Before you do so, however, check health coverage for yourself and other dependents, and make necessary notifications and changes.

Contact the home and vehicle insurance companies to inform them that the policy holder has died. This is a time-sensitive task since you are often given only 30 days to alert the companies. You will want to continue paying premiums until the insurance is no longer necessary.

Online, social media accounts

It is also important to monitor and eventually cancel email and website accounts to avoid identity theft and fraud. If you do not have the deceased’s user ID and password, each website will instruct you how to gain access to or cancel an account. This process may require a death certificate. Contact the internet providers directly.

If you have access to email, consider forwarding the deceased’s email to your own email address. This is important for timely payment of any online invoices.

If the deceased had a social media account such as Facebook or LinkedIn, consider asking for the company’s assistance in retrieving personal information, pictures, and videos. Facebook, for example, has specific guidelines (available online) to access a loved one’s account, which vary depending on the privacy settings on the account.

Driver’s license, election board

Be sure to notify the election board to prevent any chance of voter fraud. You will also need to contact the department of motor vehicles to cancel the deceased driver’s license.

Credit Bureaus

Notify the three credit bureaus (TransUnion, Equifax and Experian) of your loved one’s passing to protect against theft of their identity. Having each credit report marked as deceased will help prevent someone from applying for credit or filing fraudulent tax returns in your loved one’s name. You may also want to request a copy of the deceased’s credit report from each bureau which may provide important information about any credit card balances or other outstanding debts. Report any suspected fraud found on the credit report.

Quick Reference List

• Credit cards
• Bills
• Health insurance
• Home insurance
• Vehicle insurance
• Email address
• Social media accounts
• Driver’s license
• Election board
• Credit bureaus

Work With the Probate Court

Probate is the legal process of administering the estate of the deceased, paying all bills and claims, and distributing assets as stated in the will. The probate court appoints the executor, generally named in the will, who will have legal power to manage the deceased’s estate.

If there is a will, the original document needs to be delivered to the local probate court. If there is no will, the probate court has authority over the estate. In this case, you may need to hire a lawyer to file a petition to become the administrator of the deceased’s estate.

The duties of the administrator are similar to those of the executor—paying bills, settling claims, and distributing assets. If more than one person wishes to serve as the administrator, each individual files a petition with the probate court, which will then determine who is best suited to the task. Once all the claims are settled, most state laws allow the administrator to distribute the deceased’s assets according to the order of distribution per state intestacy laws.

Not all assets go through probate. Regardless of what is stated in the will, property jointly titled by the deceased and another individual with right of survivorship passes to the co-owner. In addition, transfer on death (TOD) and payment on death (POD) also transfer automatically on death. Property titled to the deceased in his or her revocable trust at death is distributed to the beneficiaries named in the trust. Proceeds from life insurance policies, retirement annuities, individual retirement accounts (IRAs), etc. are paid directly to the beneficiaries and also avoid probate.

Change Name on All Key Accounts

After death you may need to change the title of ownership on property or modify documents. If you plan to open an account for the estate, the estate will need its own tax identification number. Your attorney can help or you can apply online at www.irs.gov.

House

If you own a house with the deceased and there is an outstanding mortgage, you are responsible for the liability. If there was debt-canceling life insurance on the loan, check with the insurance company on paying the balance of the debt.

Credit cards

Cancel credit cards held only in the deceased’s name. Any outstanding balances should be paid by the estate. If the credit card accounts are insured, balances will be paid once you notify the insurance company of the account holder’s death.

If you are the spouse of the deceased and had credit cards in both your names, notify the credit card companies to change the listing to your name. In the meantime, continue making payments to maintain your good credit rating.

Bank accounts

Joint bank accounts usually pass automatically to the surviving signature holder on the account. However, in some states, joint accounts are frozen once notified of a death. Check with a bank representative about having funds released and changing the title and signature card on the account. Bank accounts solely in the name of the deceased must go through probate.

Insurance

Evaluate your existing insurance policies to determine if you need additional or less coverage depending on your circumstances, and if the deceased was named as your beneficiary, designations will need to be changed.

Automobiles

You will need to change the title of the car owned by the deceased. Contact the department of motor vehicles in your state for information on changing the title. In addition, you may need to change the name on your auto insurance and update coverage.

Will

Depending on your relationship to the deceased, you will want to update your will. If you left property to the deceased in your will, you will want to reassign the bequest. If the deceased was named as an executor or trustee of your estate, or had power of attorney for your healthcare or financial affairs, or had a position of guardianship, you will want to reassign those positions and powers.

Stocks, bonds, and other non-retirement accounts

If you shared investments with the deceased, depending on the titling of the assets, they may pass directly to you. Your wealth advisor will need a copy of the death certificate to make title changes on investments and a copy of the will and/or trust and to confirm a beneficiary’s right to assets.

Quick Reference List

• Mortgage
• Credit cards
• Joint bank account
• Insurance policies
• Title on automobiles
• Update will
• Shared investments

Review Benefits and Beneficiaries

You can claim survivor benefits for life insurance, retirement or employee plans, Social Security, veterans, and other programs. Either you or a lawyer can submit the claims.

Life insurance

The deceased may have individually purchased life insurance policies. He or she also may have been covered by a group life insurance policy, especially if employed at the time of death. Contact his or her employer for details. Professional groups and associations also offer members insurance, typically under group policies. If the deceased was a veteran or a member of a professional group or association, contact a representative to ask whether life insurance was in place.

Employee benefits

If the deceased was employed at the time of death, contact the employer to determine if he or she was covered by health, accident, or life insurance. Also, an employee’s health insurance may be continued for a surviving spouse or dependent children. Ask the employer about any payment due for unused vacation or sick leave.

If the deceased was not employed, you may still want to contact previous employers to check if you are entitled to any benefits. Determine whether the deceased belonged to any unions or professional organizations that may offer death benefits for their members.

Retirement plans

Retirement accounts held at death will pass automatically to the named beneficiary without going through probate.

Retirement accounts are either employer-sponsored (such as a 401(k) plan), or are IRAs. Death benefits may also be available under a company pension or annuity plan. If the deceased was already receiving retirement pension or annuity payments, survivor benefits depend on the income option that was previously chosen.

When you inherit a retirement account, you will have different payout options depending on the type of plan and your relationship to the deceased. Spouse beneficiaries generally have more options than non-spouse beneficiaries.

Investments that remain in a retirement plan will continue to grow tax deferred until a withdrawal is made. Withdrawals from most retirement plans are subject to income tax. Taking a lump-sum distribution may result in a significant income tax bill.

IRA rules may require the beneficiary of a retirement plan to take required minimum distribution (RMDs), and the starting date depends on your relationship to the deceased. It is advisable to understand your withdrawal plan and talk to your accountant about your payout options.

Distributions from an inherited Roth IRA or Roth 401(k) are usually free from income tax if made at least five years after the first contribution. Your payout options will again depend on your relationship to the deceased.

It is important that you understand how retirement accounts must be distributed. The rules governing inherited IRAs and employer-sponsored plan accounts are complex, and failure to take distributions according to these rules can result in significant penalties.

Social Security

If your loved one was receiving monthly Social Security benefits, you need to contact the Social Security Administration to stop payments to avoid a complicated repayment process. Even if a payment was made during the month your loved one died, it may need to be returned.

A spouse or dependent children may be eligible for increased personal benefits such as a lump-sum payment or monthly payments. Social Security offers survivors a one-time death benefit paid to the spouse or dependent children. You can contact Social Security at +1 800 772 1213 or consider making an appointment at the nearest Social Security office to address all your questions and review possible benefits.

Veteran benefits

As with Social Security, you will need to notify the Veterans Administration if your loved one was receiving monthly benefits. The VA may also provide certain benefits and medical and educational assistance for dependents of deceased veterans or deceased active duty military. Information on veterans’ benefits is available at www.va.gov or by calling +1 800 827 1000.

Loyalty programs

As loyalty programs grow in popularity, balances may increase to the level that they can hold significant value. Your loved one may have accumulated reward points for airlines, hotels, or credit cards. Some programs clearly state that points are not transferrable upon death, while others are not as clear, or have complicated transfer policies. If there is evidence that the deceased was a dedicated program customer, contact the rewards sponsor to understand your options.

Quick Reference List

• Life insurance
• Employee benefits
• Retirement plans
• Social Security
• Veteran benefits
• Loyalty programs

If you will be receiving benefits from both life insurance and retirement plans, consider claiming the insurance benefits first. The payment choices, processing, and tax requirements are often less complex. When receiving your inheritance, you will need to consider your immediate and long-term financial situation, tax liabilities, and other factors.

Plan for Your Future

It is often advised that with any significant change in circumstances, you review your personal financial situation. Understanding your income and cash flow, preparing a monthly budget, and reevaluating long-term financial goals can be a timely and valuable exercise.

Consider working with a wealth advisor who can help you review your finances and offer guidance for your future. William Blair wealth advisors work closely with the firm’s wealth planning professionals to develop an investment strategy and a comprehensive financial plan that considers your current financial situation and long-term goals and objectives.

A Record of Personal Financial and Family Information

Having access to the right information when you need it is essential to managing one’s estate. William Blair’s booklet, “A Record of Personal Financial and Family Information,” will help you organize your family’s personal and financial information.

Disclosure

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions. The factual statements herein have been taken from sources we believe to be reliable, but such statements are made without any representation as to accuracy or completeness. Opinions expressed are current opinions as of the date appearing in this material only. These materials are subject to change, completion, or amendment from time to time without notice, and William Blair is not under any obligation to keep you advised of such changes. This document and its contents are proprietary to William Blair & Company, L.L.C., and no part of this document or its subject matter should be reproduced, disseminated, or disclosed without the written consent of William Blair & Company, L.L.C. Any unauthorized use is prohibited. “William Blair” is a registered trademark of William Blair & Company, L.L.C.