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Managing Finances Through the Loss of a Loved One

The loss of a loved one, whether unexpected or due to a long-term illness, can have a significant emotional and financial impact on surviving family members. The average funeral can cost over $7,000. If you have not made arrangements ahead of time, a death can take an intense toll on your family. Fewer than 40% of Americans could pay for an unexpected expense of only $1,000. This makes proper preparation for the unexpected critical.

First financial steps

When someone passes away, making important financial decisions are the last thing you want to do. Although some can be put off until you have had time to process and are thinking more clearly, there are a few actions that need to be taken immediately to meet government requirements. To help mitigate the stress, it’s important to know these items ahead of time so that you are not overwhelmed researching during a time of distress.

  1. Survivor benefits – If you have lost your spouse, you will need to identify what, if any, survivor benefits you are entitled to. These are usually continuations of pay from pensions or Social Security benefits.
  2. Will and Estate – If your loved one wrote a will, you will need to locate it and contact the executor. This will determine who the decedent intended to receive which of their belongings. If minors are involved, contacting a lawyer to represent their interests may be needed.
  3. Notify their employer and insurance – Alerting the employer and the insurance company may help you receive survivor benefits from any retirement funds or life insurance policies. This is a key step in properly wrapping up the financial affairs of the decedent.
  4. Property titles – To ensure that property is transferred to you correctly, if you’re a surviving spouse, you will need an affidavit of survivorship. This is a legal document used to remove a deceased owner from the title of a property. This states that you are now the sole owner.
  5. Change titles on all accounts – If you are the surviving spouse, you will need to contact all banks and investment firms in order to remove your spouse’s name from all accounts and ensure that they are now in your name. This will guarantee that you have access to all entitled funds.
  6. Credit bureaus – You will need to send a letter to each of the three major credit bureaus – Experian, Equifax, and TransUnion – in order to freeze their credit and minimize the risk of identity theft. This will also help minimize the risk of their assets being lost to fraud.
  7. Notify the IRS – Either you or a representative you hire will need to file the final tax return for the deceased. The IRS has tools to help guide you through the process and to avoid the risks of identity theft.

The role of the executor

The executor of the estate is legally responsible for making the final arrangements to settle the deceased’s property, debts, and assets. If the decedent’s assets are not handled according to the law, there can be criminal charges.

In most cases, the executor does not become responsible for outstanding debt unless he/she was a cosigner of the debt, such as a mortgage for their house. However, the executor is responsible for the following:

  • Filing a petition with the probate court, requesting that the written will be probated
  • Identifying all assets (cash, investments, or property) and debts, including taxes owed
  • Applying for an Employer Identification Number (EIN) from the IRS to identify the deceased’s accounts during the account transfer and estate settlement process
  • Paying all debts and taxes
  • Distributing assets to the heirs as described in the written will or identified next of kin

When you experience the loss of a loved one, managing the responsibilities when emotions are high can feel overwhelming. However, proper planning is key to making the situation as stress-free as possible.

If you have questions on ensuring your finances are prepared to manage the unexpected, contact your Allegiance banker.

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