One of the most emotionally vulnerable times in your life is also one of the times when you’ll need to do the most financial paperwork. The good news is that there are plenty of resources to help. Don't be overwhelmed by the tasks ahead of you. Seek support from other family members as you deal with the financial implications of a death in the family. When you take things step by step, you'll make it through everything in the end.
Gathering financial paperwork
After a death in the family, you'll need many types of legal and financial documents to sort out the deceased's finances and how they might impact those immediately around them.
The major documents needed include 10 to 20 copies of the death certificate, the original birth and marriage certificates. Find the deceased's will, if there is one and any life insurance policies. You will also want the most recent financial statements for all bank accounts, credit cards, mortgages, auto loans, and investment accounts. In addition, you will need tax returns from the last couple of years and applicable Social Security statements.
This information might be difficult to find if you were not responsible for the management of the deceased finances. Often, they are stored in filing cabinets at home or in a safe-deposit box at the bank. Check with those closest to the individual to see where they might have kept this type of documentation.
Assessing the financial situation
Once you've collected all of the documents, the executor of the will can begin sorting out the financial situation of your loved one. The first step is to file a probate petition in court to get legal authorization to handle the finances. The executor will then need to log all liquid and property assets, and identify any debts secured against them, such as a mortgage or auto loan. Other debts, called unsecured debts, are also logged. In general, assets left over after paying debts are distributed to heirs as outlined in the will.
If it was your spouse who passed away, you'll also want to assess your immediate financial situation and cash flow. Your deceased spouse will no longer receive paychecks, Social Security benefits, and other payments, which may leave you in a tough financial spot. Take a look at your immediate expenses and plan where you will get the money to pay for these. If you do not have any liquid funds or income, you'll quickly need to collect benefits and transition assets to be able to continue paying your bills.
You'll need to contact many institutions to notify them of the death and request benefits for which you are eligible during the weeks and months following your loved one's death. First, contact the Social Security Administration to report the death and collect death benefits if you are eligible. You also may be able to get ongoing survivor benefits. If your loved one had a life insurance policy, you would need to contact the insurance company to report the death and arrange for dispersal of benefits to the beneficiaries.
There are also other potential organizations to reach out to regarding death benefits. If the deceased was a member of the military, the Veteran's Administration would issue benefits. Employers also may have benefits available, including a separate life insurance policy and payouts of accrued sick time, vacation time, and bonuses. When receiving all of these benefits, put them in a safe bank account or investment account to use them as needed, planning for your future rather than spending them rashly while you are grieving.
The last major stage to go through is to transition assets to their new owners, as outlined in the will. You will need to call all of the financial institutions at which the deceased held accounts and notify them of the death. Then you'll need to either withdraw the assets to transfer them to new owners or change the name on the account to the new owners. When handling retirement accounts, such as an IRA or 401k, you may want to roll over funds to your account rather than withdrawing them. Cancel insurance policies, memberships, and subscriptions you no longer need.
Your last step is to file an estate tax return within nine months of the death. In addition, you are responsible for filing a tax return for the deceased in the year of the death, presuming there was income during that year. When you have completed these steps, you'll be done handling the finances and be ready to move forward on your own.