Apart from the pain of a family member or close friend’s passing, settling their financial matters can be time-consuming and difficult. You may have to comb through paperwork from bank accounts to life insurance policies. Although not exhaustive, these steps can ease the process of sorting through the deceased’s finances.
1. Know who’s responsible
A will usually specifies who is to manage the estate, which includes anything of value left behind. Called the estate’s executor, this person typically has the legal authority to act for the deceased in dealing with financial services providers, government agencies and other institutions.
If there’s no will, state law generally lists who can fill the executor’s role. This list can include a surviving spouse, child or next of kin. A person acting in this capacity is known as an estate’s administrator and is generally appointed through a court proceeding.
If there are any trusts included in the will, which take effect when the person dies and are known as “testamentary trusts,” a trustee may be named in addition to an executor or administrator. A trustee, whether a person or an institution like a bank, manages the property covered by the trust on behalf of someone else, such as a minor, who is named the beneficiary of the trust.
2. Collect financial paperwork
If it’s unclear who is to manage the estate, a court will decide the issue, but before this happens, related documents, including property and debt records, must be compiled. These papers can include a will, trusts, insurance policies, investment and bank account statements, deeds, mortgages and loan or credit account statements. Also, the documentation typically covers tax returns for the two most recent years and a credit report. The returns can help identify property that might be missed otherwise, and a credit report may reveal overlooked debts.
3. Understand the estate
Once the papers showing the estate’s holdings and accounts are assembled, they draw a picture of its condition. Anything jointly owned, from real estate to bank accounts, or designated for a beneficiary, like the benefits from a life insurance policy, is generally not considered part of the estate. The deceased’s debts, including credit card balances and loans outstanding, also need to be checked and paid off from the estate’s holdings.
4. Get multiple copies of the death certificate and proof of authority
As you work with a lawyer and contact financial institutions about the death, you’ll probably be asked for proof, such as an official death certificate. If you’re managing the estate, you probably will want to check which entities require certified copies, which bear official stamps on the paper. It’s generally a good idea to get at least 10 certified copies of the death certificate from the city clerk or other local administrator where the person lived. Certain institutions, such as the Social Security Administration, require certified copies, while credit card or utility companies may accept photocopies.
Additionally, you’ll need copies of the documents that name you as the estate’s executor or administrator, which a probate court usually provides.
5. Cancel or transfer policies, accounts, memberships, subscriptions and bills
Notify financial institutions, insurers and relevant government agencies of the death, but also reach out to any organizations where the person had accounts, was a member, or received subscriptions or other services. Related bills may still come in and must be paid until cancellations take effect.
6. Claim life insurance, Social Security and retirement plan benefits
Those in line to receive life insurance and or other death benefits tend to be responsible for filing related claims. These are handled by insurers, retirement plan or pension administrators and government agencies for things like Social Security survivor benefits.
By going through these steps, you can start to organize the finances of the deceased and get through this process more smoothly. Once the person’s finances get sorted out, you may be better able to refocus on your own financial life.
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