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When someone close to you passes on, not only is it a sad time, but if you're responsible for settling his or her finances, it can also be a stressful time. This is true, especially, if you're unsure what to do. There are several important things that you must address, and some pitfalls to avoid. The goal is to make the process as stress-free and easy as possible. Although many estates can take up to a year to settle, armed with a little knowledge, you may be able to get through it a bit quicker and successfully deal with the debts of a lost loved one.
Here are nine key items to focus on when you're working on settling the debts and other finances of a loved one's estate.
1. Copies of the death certificate
Having copies of the death certificate is very important for a number of reasons. Almost every entity you'll deal with in settling the estate will want one. There are short form death certificates, which is an abbreviated version, and long form death certificates, which have more detail. You'll need to obtain multiple certified copies of each. This is because most anyone requiring a death certificate will want an original, certified copy. It's recommended that you get at least 10 copies of each. Copies are obtainable, usually, through the funeral home, but you can also get them your through local clerk's office.
Make sure you have this document on hand before you try to deal with any banks, government agencies, or other important entities as, most likely, you'll need it to transact any business pertaining to the deceased person's affairs. If the person had a life insurance policy, the insurance company will require a certified copy of the death certificate before it'll pay out on the policy.
It's better to get all the copies you'll need at once. While the cost of each certificate can be as high as $20, you can usually get copies at a discount if you request them all at one time.
2. Letters of administration
When someone passes, someone close to that person typically gains appointment as executor to the estate, as named in the will. If there's no will, the role typically goes to the closest living survivor. The letters of administration, or letters of testamentary, is proof that the person has the right to handle the affairs of the estate of the deceased person.
Therefore, it's important that you obtain this proof of authority before you attempt to transact any business on behalf of the estate. If you've decided to hire an estate attorney, he or she will handle getting these documents for you. However, if you decide to try to settle things on your own, you have the ability to do so. If the person who has passed had a will that named you the executor, you'll need to take the will to the local city hall or courthouse in the county where your loved one resided when he or she passed away. In addition, you'll need to provide a certified copy of the death certificate. Once you've produced these documents, you may file a petition to the probate court.
You'll receive your letters of administration once the court has opened a probate file and validates the will. This will give you official authorization to do what's necessary to manage the affairs of the estate and get it settled. You'll need to get several certified copies in order to carry out your role as executor.
If the deceased person had no will, the court will issue this authority via letters of administration to a surviving spouse or next of kin upon production of the death certificate.
If there are multiple beneficiaries, the person name executor will be responsible for communicating openly and honestly with all beneficiaries about the estate and its assets.
3. Talk to a lawyer
It's a good idea to have a consultation with a lawyer who specializes in estate law. Having a consultation doesn't obligate you to hire an attorney, but it can help you understand the process better. However, hiring a lawyer who specializes in wills, trusts, and estates could save the estate money in the end and help get things wrapped up quicker.
In addition, a lawyer can ensure proper handling of the estate and all legal requirements. Executors have a legal and fiduciary responsibility to follow the terms set out in the will exactly, and can be liable if not done properly. In addition, an attorney can help an executor deal with multiple beneficiaries, which will take an emotional load off the person responsible for settling the estate.
It can be overwhelming to be an executor of someone's estate, especially if you're experiencing the grief that goes along with losing a person close to you. An estate attorney can be instrumental in easing that heavy burden. It's important, though, that you hire a qualified attorney who specializes in this area exclusively.
4. Gather all your important documents
One of the most difficult tasks for someone who's been put in charge of an estate is putting together all the documents needed to settle the estate. Unless the deceased was extremely organized, locating these documents can be quite difficult. This is especially true if the death was sudden and unexpected.
That's why it's ideal to seek the advice of an estate planner. An estate planner can guide you through the process of organizing your estate for those left behind so the process will be as smooth as possible. An estate planner can also provide advice on how to pass your assets to your beneficiaries in a way that's the most efficient and at the least cost to the estate.
If you're unable to use an estate planner, at the very least, compile a file that contains the details of your assets and important documents for your surviving loved ones. Include any documents that might be helpful along with account numbers to make things as streamlined as possible.
Below are some of the key documents an executor will need in order to settle an estate:
- Last will and testament or trust documents
- Death certificates
- Statements for any retirement accounts
- Statements for any investment accounts
- Banks statements for checking and savings accounts
- Insurance policies
- Most recent mortgage statement
- Most recent statements for credit cards
- Tax returns for two years prior
- Marriage and birth certificates of the deceased and beneficiaries
- Social security numbers of the deceased and beneficiaries
- Most recent credit report
You'll likely need other documents to settle the estate, but if you can gather these documents initially, you'll be well ahead of the game.
5. Contact creditors, banks, and government agencies
A very important step is to notify all entities pertinent to the estate that the loved one has passed on. These entities include:
- All creditors
- Insurance companies
- Credit bureaus
- Social Security
The reasons for these notifications vary. You should contact the Social Security Administration to see if a surviving spouse or children might be eligible for benefits of some sort. In addition, the agency does offer a small one-time death benefit of $255. When contacting the SSA, be sure to have it add the deceased to the agency's Master Death Index. This is to protect the deceased's loved ones' information and potential benefits.
Notifying creditors right away is important, to keep them from continuing to pursue payments and charging for services. As far as debt goes, in most cases, beneficiaries are not responsible for unsecured debt such as credit cards. However, they may be responsible for debt such as medical bills. The executor also needs to continue to pay any mortgages and auto loans.
Forward any mail to the executor so he or she can address any important matters. It would also be wise to opt out of any future credit card offers by contacting the Direct Marketing Association.
Insurance companies that hold life insurance on the deceased should receive notice immediately, so the process of paying out on the policy can start right away. Each insurance company will have forms, statements, and document requirements, so be sure to follow up on providing those documents in a timely manner.
6. Close or transfer accounts
If there's a surviving spouse, it's important that utility accounts such as water, power, phone, and cable transfer into his or her name. If there's a home involved, it's important that the property transfer to the surviving spouse or beneficiary in order for title insurance to remain in effect. It's important to know what your state requires, so be sure to research this or consult an attorney about any property the deceased may have owned.
Close all credit accounts and bank accounts that'll no longer be in use, and cancel any insurances, memberships, or subscriptions that are no longer necessary, to help save the estate money.
7. Apply for death benefits for beneficiaries
If the deceased had any insurances policies that protected accounts such as mortgages, cars, or credit cards, the beneficiaries will have benefits due to them. This is important to determine, as carrying mortgages and car payments can be difficult for survivors until the house or vehicle is disposed of. If the deceased carried life insurance, as stated above, file for those benefits right away so the payout can occur as quickly as possible, especially if there are ongoing expenses to meet, such as mortgage or car payments.
Inquire to current or past employers of the deceased about any pensions, 401(k), or other monies due the deceased such as unused paid leave or vacation. If the deceased is part of the military, there may be other benefits.
8. Protect the estate and its heirs against fraud and theft
There are predators out there that prey upon people who are in a state a grief and may not be paying attention. Below are some ways you can protect against those who would take advantage of survivors and beneficiaries.
Don't include things such as age, date of birth, or any information in an obituary that may aid identity thieves. In addition, many thieves will case the obituaries for funeral details knowing the residence will likely be unoccupied during the services. Have a neighbor or someone who isn't attending keep a watch out for suspicious people.
Don't broadcast the news of the death on social media. While this is a good way to reach a lot people simultaneously, it also provides would-be thieves with information on the deceased.
When disposing of old documents that the deceased may have, be sure to shred them, especially anything that may carry a social security number such as old tax returns.
Be sure to secure sensitive documents, especially in the last days of someone's life. Unfortunately, these documents can be subject to prying eyes by home health care workers and others coming into the home.
9. Pay important final bills
Bills such as final income taxes and property taxes need to be paid, as well as any utility bills that were in the deceased's name. Tidy up the last details so you can be sure that you have fulfilled your obligations as the executor of the state. If you need help with income taxes, be sure to seek the services of a CPA.
At some point in your life, you may be asked to settle the final affairs of someone close to you. If so, it's a difficult and stressful experience. Don't hesitate to get the help you need from friends and family or a professional. In addition, use the experience to gain a better understanding of the things you should be doing now to make settling your affairs easier for those you leave behind.