When your spouse passes away, the impact on your life is dramatic. Unfortunately, dealing with the pain of loss is not the only item that needs your attention. The loss of a spouse has financial and legal implications, too. Some items need to be addressed right away. Others are ongoing concerns that you will be dealing with for a long time.
The following is a list of nine things that can help you move forward during this difficult time. If you complete these steps, you will be on the right track to protect your financial and legal future.
1. Obtain Copies of Certified Death Records.
There are a number of legal actions that will require a certified death certificate to accomplish. The funeral home, cremation center, or medical facility issues death records.
You should ask for three official, meaning certified, copies of these records. If you need more official copies later, you can always order them. These certified copies can then be used for things like insurance claims, real estate title changes, closing accounts, and other tax, legal, and money concerns. In most cases, you can show the certified copies to the financial institution, ask them to make a photocopy, and have them return the original to you.
2. Keep Track of Your Expenditures.
The passing of your spouse will likely change your financial situation. If you’re already familiar with monthly budgeting, that will make it easier to adjust to your new situation. If not, you need to quickly familiarize yourself with your income and expenses.
Tracking your previous income and spending through bank statements is a good first step. You need to understand how much money it will take to cover your costs on an ongoing basis. At the same time, you need to consider that your total income may change with the loss of your spouse. Take care not to close the account receiving Social Security Administration payments until the proper time.
This is a good time to streamline your finances, limiting the accounts you use for spending as much as possible. During this time, you will want to track all the expenses tied to your spouse’s passing. Estate and funeral expenses, medical expenses, fees, debts, and property costs concerning your spouse should be tracked with receipts and invoices. Some of these expenses can be reimbursed or deducted from taxes.
It’s often necessary to create an account specifically for expenses related to the estate of your spouse, with a unique taxpayer identification number associated with it. That account will give you the ability to pay expenses tied to the estate and reimburse yourself for costs you have incurred in estate administration.
3. Document Your Assets and Debts.
A full accounting of what you own and what you owe is important. Gather records on everything from investment and retirement accounts, checking and savings accounts, real estate, personal items, mortgage and credit card debt, and everything else. Your spouse may have assets or debts you were unaware of. This may include safety deposit boxes, collectibles, artwork and more.
Depending on how your plan is arranged, you may have to file a tax return for the estate. Such a return would require you to have an appraisal of the value of all assets at the time of death. This has further tax implications as the value will be used as the income tax basis for future taxable events.
For example, if you sell a vacation home that belonged to your spouse, the difference in value between the sale price and the price your spouse paid for the property would likely be lower, resulting in a reduced income tax liability.
4. Get Professional Assistance.
If you’re in a position to do so, now is the time to find reliable, experienced professionals to help you. Experts in financial planning, estate administration, accounting, and law may be necessary to ensure that you make the best possible decisions. You need to choose a team of people you can trust to help you.
Your spouse’s estate may be overseen by a professional trustee or executor. If so, they may be able to help you get your team to work together more efficiently. An attorney can handle the production of necessary documents and legal filings. The accountant on your team can ensure that the taxes are handled correctly.
5. What Does the Estate Plan Require?
Make sure you understand what your plan requires when your spouse dies. In many cases, assets are to be divided into multiple trusts for your benefit. These may include a “Credit Shelter” or “Bypass” trust, a “Marital” or “QTIP” trust and a “Survivor’s” trust. Sometimes, they are referred to A and B Trusts, or A, B and C Trusts. There might also be a “Disclaimer” trust, which you’ll have the option to fund if it makes sense for tax purposes.
These estate plans can be complex and hard to understand. Your lawyer should explain the elements of the plan and how they work. Your estate plan may have been designed to give you flexibility. Unfortunately, it’s also possible that the estate plan is outdated. It may be necessary to adjust your plan to conform to your current situation and the tax laws in operation now.
6. Change Titles to Reflect the Current Owner.
Your attorney can help you identify which properties need to have their titles updated. Bank accounts, credit cards, mortgages and investment accounts may need adjustment. In addition, real estate and motor vehicles need to have their titles updated to remove your spouse from ownership records.
In some cases, your lawyer will be able to complete the documents used to update titles. This is often true for real estate and businesses your spouse owned. Bank accounts and other financial interests may require you to personally take action to update the title.
All of this needs to be accomplished in the correct manner and at the correct time to work with the administration of the estate. In probate proceedings, you may need to get approval to make changes. If you fail to update titles now, it can lead to trouble in the future.
7. Have a Tax Plan.
While your estate plan may have been made to limit tax liability, there are choices you will still need to make regarding income and retirement accounts. If you are a designated beneficiary of a 401(k) or other retirement account, you can choose to roll the assets into your own retirement accounts in many cases.
For the year of your spouse’s passing, you are still entitled to file your income taxes jointly. In subsequent years, your tax liabilities and estimated tax payments will likely change. This new tax situation may affect your tax liability in situations like selling property, making donations and changing your living situation.
You should discuss your tax situation with your accountant to make sure you’re making decisions that support your goals and overall strategy.
8. Dealing with Insurance.
Life insurance policies are a common concern when a spouse dies. You need to find and review any active policy with your insurance representative. Make sure you know the death benefit amount and the beneficiaries named in the policy.
In some cases, your spouse may have had life or health insurance benefits through their employer. Contact the HR department to discuss settling the current policies and receiving benefits.
This is also a good time to review your own insurance coverage as your situation has changed. You may need to adjust the amount of coverage you’re carrying or adjust the named beneficiaries.
9. Review Your Estate Planning and Financial Planning Situation.
As you deal with your spouse’s estate, you may want to consider addressing your own estate planning situation. The loss of a spouse often necessitates an update to the agents named on your financial power of attorney and health care proxy. Many people select their spouse as the named beneficiary. Insurance policies, retirement accounts, and more need to be updated to reflect your new situation. It’s likely that you will need to update your will and revocable trust.
In addition to estate planning changes, you need to address your financial planning. What are your goals? What expenses do you need to cover? Where do you want to spend your money going forward?
Your plan can also include goals around helping the people you care about. You might want to help your grandchildren pay for college or start a business. Once you have a clear picture of your assets, liabilities, income and expenses, you can make a plan to minimize your taxes and maximize what you can put into achieving your goals.
Don’t Be Afraid to Ask for Help
The death of your partner is a tragedy. It’s a difficult time to meet even your most ordinary day-to-day needs. Accomplishing everything else on top of that can seem impossible.
The key is to ask for help from anyone in a position to support you. The people you care about, including family and friends, can help you by listening, talking and watching out for you.
At the same time, you need to be able to rely on professional, experienced assistance at this time. At the Law Office of Janet Brewer, we offer skilled guidance in estate law matters.
Call our Los Altos law office at 650-325-8276 or contact us online. We can explain your options and help you successfully navigate the legal concerns raised by the death of your spouse.
