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Financial concerns come into play after the decedent's death. Sometimes the decedent has carefully planned his or her estate so that only a quick consultation with an attorney or accountant will be necessary and a few forms will need to be signed. However, in many cases the decedent has done no planning at all and the financial situation is a mess which it might take months or years to straighten out.
One of the first things to consider is incoming bills. Can these be paid? Who can write checks? Are there only a few easily paid bills, or are there thousands of dollars of medical costs? Did the decedent run his or her own business? Is there someone who can manage the business, whether for the short run or the long run?
There is the issue of valuing the assets. A federal estate tax return will have to be filed if the decedent’s assets are worth more than $1,500,000 to 3,500,000, depending on the year of death, and it is possible that some federal estate tax will be due. To file the return you will have to know how much the decedent’s assets are worth. There is the issue of getting casualty insurance for tangible assets such as real or personal property.
What are you going to do about social security and other payments? Can checks issued after death be cashed, or must they be returned to the issuing organization? Who has the right to enter the social security box?
Depending on the decedent’s work situation, there might be the issue of retirement and annuity benefits, pension, profit sharing, IRA and other benefits. Also, the insurance company which issued the life insurance has to be contacted and dealt with.
As this book is being written, the state of health care and medical insurance is in a state of flux and change. Even if American health care and insurance come to operate more smoothly and efficiently in the coming years, you will still have to deal with whatever medical bills may arise and the insurance situation related to the decedent. As more and more people die in hospitals or in managed health care facilities, large medical bills and complicated insurance situations will be faced by more and more survivors.
If there is a probate, many of these concerns will be handled by the executor or administrator. But in a majority of cases there won’t be a probate (and even in cases where there is one, there will probably be assets not subject to probate). In these situations the decisions will fall to you, the nearest surviving relatives. (And in most cases the executor or administrator is one of the nearest surviving relatives.)
Nevertheless, the person who is the executor or administrator is not always someone who inherits under the will. Nor are the people who inherit under the will always the designated beneficiaries of life insurance policies or IRA benefits. If the decedent has planned well, there will be no major surprises. But it is not unknown for someone to die and for his wife to discover that an insurance policy or IRA account still lists a previous wife as the named beneficiary. Once the decedent is dead, the designation can’t be changed.
Be prepared to spend a lot of time with these financial concerns. Many times the survivors express the wish that they could just finish up all this business. These matters will probably take several months to sort out. And while it is possible that you are independently wealthy and don’t care much what happens, it is more likely that you will need to deal with these properly in order to contribute to your own financial future.
The assets of the decedent need to be valued as of the date of death. Assets get a new value for tax purposes when someone dies. If a federal estate tax return is filed, the new value is the value listed on the federal estate tax return. This is either the fair market value as of the date of death or six months after the date of death. If no federal estate tax return is required, the new value is the fair market value as of the date of death.
This valuation is needed to determine if a federal estate tax return is due. If the value of all of the decedent's assets is over $1,500,000 to 3,500,000 at the date of death, a federal estate tax return is due nine months from the date of death. If it is under this amount, no federal estate tax return is due.
As long as the decedent was a United States citizen or permanent resident, all assets, even those in another country, must be valued. These assets might include real property, stocks, bonds, bank accounts, life insurance, IRA accounts, company pension benefits, cars, furniture, loans to family members, and unexercised stock options.
The value of each asset is the “fair market value” as of the date of death. This is the value that would be obtained if the assets were sold on the date of death. The Internal Revenue Service has regulations regarding the valuation of some assets.
For stocks and bonds which are traded on a regular market, the value is the average between the high and low on the date of death. If the decedent died on a weekend or holiday, the value is the average of the high and low on both the last trading day before death and the first trading day after death. For mutual funds, the fair market value is the closing value as of the date of death or the last day before death if the decedent died on a weekend or holiday. For real estate, a written appraisal for each parcel or separate piece of real estate should be obtained. In most cases this can be done by a local real estate broker or agent.
In community property states, only the decedent’s one-half of each asset is counted. A couple would have to own assets of more than $3,000,000 before an estate tax would be due. (The decedent’s one-half would need to be over $1,500,000 if he or she died in 2004.)
The new valuation also establishes the value for income tax purposes if the asset is later sold. If the decedent purchased his or her home years ago for $100,000, but it is worth $400,000 at death, the people who inherit the home will only pay income tax if they later sell the home for more than $400,000.
Valuing assets is one of the things which you will need to have an attorney, accountant or other financial planner help you with. Before you see such a professional, you should make a list of all real estate, securities, bank accounts, employee benefits, life insurance, tangible personal property, or other assets which the decedent owned at the time of death.
In many states, safe deposit boxes are no longer sealed at death and inventoried by a government agency. However, in other states, safe deposit boxes are still sealed and inventoried.
If the safe deposit box has another signer on the box, the other signer or signers may legally enter the box and remove anything they wish. If there is no co-signer on the box, then anyone who has a certified copy of the death certificate and the key to the box may enter the box to search for and remove the decedent's will and any burial instructions. A representative of the financial institution will accompany the person to be sure nothing else is removed.
If there is no co-signer and there are no probate proceedings, then the people who inherit the decedent's assets can usually fill out a form after the decedent’s death, enter the safe deposit box, and remove the contents.
If there is a probate, the executor or administrator may legally enter the box after being appointed by the court and remove all of the contents.
If the box is sealed, you should make an appointment with the state agency to inventory the contents of the box. (It may take several weeks to schedule the appointment.) Obviously, you will need the keys to the box to enter it. If the key has been lost and can’t be found, the financial institution will generally have it drilled open. The institution will probably charge a significant fee for this. If there are co-signers on the box, they can enter it after it is inventoried. Otherwise, the executor or administrator will have to do this. If someone has a power of attorney for the decedent, the power of attorney terminated at the time of the person’s death and the agent (the person with the power of attorney) cannot enter the box.
Talk to someone at the institution where you keep your safe deposit box and find out what will happen to it after your death. Will the box be inventoried? If so, what government agency inventories it and who should be contacted? How long does it take to get an appointment? In addition to all of this, it is a good idea to keep a list of what you keep in the safe deposit box. It can be very disconcerting trying to find documents or items after someone’s death and not knowing whether they are in the decedent’s safe deposit box or not. Let your loved ones know what you keep in the box and the easiest way they can get access to it after your death. Be sure that they know where the key to the box is located.
It is also a good idea to have another family member as a co-signer on the box, or for a husband and wife, to have a third party as a co-signer. That way, after your death someone can enter the box without waiting for an executor or administrator to be appointed.
Please click here to return to beginning.These excerpts from What to Do When Someone Dies © 2004 by Milton Berry Scott