I sometimes have the responsibility of coaching my clients through the very sad process of closing accounts and tying up financial loose ends when a spouse dies. There’s a to-do list of official tasks, paperwork and financial obligations one must go through when a spouse dies. This bereavement checklist is best accomplished with guidance from a team of loved ones, trusted advisors and legally appointed representatives. Here, I offer some of the advice I give my clients to help ease the bereavement process and avoid making costly mistakes.
With planning comes peace
Part of the retirement planning process is to show my married clients what it will look like when the first person passes. There can be a sense of calm that comes from planning for something so scary. At TRS, we work with a one-page income plan that shows exactly how much they can spend up to age 100. It also makes it easy for us to see what it will be like when the first person passes, and how the income will change.
The truth is that in retirement, the income changes very little when one person dies. It’s really just a matter of the lower of the two Social Securities going away. Our planning sheet shows our couples exactly what amount of money they will have to live off of if one of them passes away. Sometimes people think they have really big life insurance policies, but then they see through this plan that they actually don’t need the big payout because of their joint assets.
Utilize your networks right away
Right after a loved one dies, there are usually a flurry of arrangements and tasks that need to be accomplished quickly, in succession. Many of the to-do’s on a bereavement checklist can be handled with the help of your support system. If you lose somebody in a hospital, make sure the hospital will connect you with a legal pronouncement of death and help to arrange any organ donation logistics, if applicable. Hospice centers, funeral homes and churches can also offer support to make the immediate rush of tasks easier to keep track of. The same goes for the act of notifying friends, family, colleagues and neighbors. This doesn’t have to fall on you alone. Your close friends and family want to help during this time. Delegate the task of notifying your network to a trusted family member or friend.
Call your estate attorney right away. The more complicated an estate, the more important it is to have an attorney. If you are not the executor of the estate, then you should also get the executor involved quickly. These are people who can be a support to you in the bereavement process and take away some of your burden.
Don’t make any rash decisions
The months after the loss of a loved one are very vulnerable days. This is not a time to make any big financial decisions. This is a time to grieve, cherish memories and tie up loose ends. Use this time to pay any outstanding bills and finalize accounts that need to be closed. Some bereavement checklists will have to-do’s that include signing accounts over to the surviving spouse. Please, wait on that. Do not sign any accounts over to yourself before talking to a trusted financial planner about your options.
Many of my clients are surprised to learn that they should not take over their deceased spouse’s IRA account or 401K. If you are the beneficiary of these accounts, you will assume that after your spouse dies, it will be time to take over the account. There can be significant tax consequences to doing that if you don’t have to.
I advise my surviving spouse clients to figure out the amount of money they need, and only take that out. I’ll give an example. Washington State exempts $2.2m from estate tax. If my husband dies with $3m IRA and I take it as my own, now I have $3m. If I died tomorrow, $800,000 would be subject to tax at around 20% = $160,000 in taxes. One workaround is disclaiming $800,000 and having my kids inherit that amount instead, where I take over $2.2m. If I die tomorrow, there is no tax, saving my estate $160,000 in taxes. So, it’s worth it to wait if you can.
A lot of what I advise my clients on during bereavement is what I went through when my mother died. I found that keeping everything organized was key to making the process manageable. In the face of grief, it can get easy to be very overwhelmed by all of the to-do’s on the bereavement checklist. I recommend keeping files in a portable filing box, along with a notepad that will act as a diary – taking notes and dates of all phone calls, a list of items that need to have titles transferred (cars, home, accounts).
When closing out accounts, you will need around five certified copies of the death certificate, which are considered originals. Some financial institutions require certified copies as proof of death. They cost $25 each, so one should be prudent on how many to order. More and more financial institutions are now only requesting a copy of the certified copy, as technology has improved and the institutions are able to double check on the death of an account holder.
Having a checklist during the bereavement process is priceless. A list of items that you can check off one by one, without having to put too much thought into it, is a proactive way to ease the burden placed on a surviving spouse during this emotional time. One of the things that always amazes me is the resilience of the surviving spouses I get to know. Of course, we shed tears. But time and time again, I’m so impressed by how even in a time of grief and complete life upheaval, my surviving clients are able to come to me and ask, “What needs to be done?”
The Retirement Solution has provided our own bereavement checklist as a resource for survivors on our website to make the process as easy as possible. Ready to get started on your estate planning with a trusted retirement planner? Contact us.
By Cindy Mueller