Key Financial Aspects to Address When a Family Member Passes Away

by: Jeff M. Brandon, Senior Wealth Planner

March 6, 2023

The passing of a loved one is undoubtedly an emotional experience. The immediate days and weeks after can be overwhelming, between planning a funeral, adjusting to a new life, and starting the process of getting the deceased’s affairs in order. 

With the stress and sorrow that the mourning period brings, it can be easy for things to slip through the cracks. That’s particularly true for those who are executors of the will: a complex undertaking with an extremely steep learning curve. 

After someone’s death, the executor and wider family will work with a wide range of people: attorneys, investment advisors, wealth managers, accountants, insurance agents, a funeral home, and more. Understanding what has to be done, when, and by whom, can be extremely challenging. The support of trusted advisors can make all the difference. 

In this guide, we explore the financial details that family members must address when a loved one passes away. We will share the key steps the executor must take throughout the process. We will also outline several estate planning steps you can start taking today to make this process easier on your own family. 

Obtaining the Death Certificate + Letter of Testamentary

In the days after a loved one’s passing, the first step in handling their affairs is to have a death certificate issued. A doctor’s signature is required, which can take a week or two to obtain. Your funeral home may be able to assist in this process. Be sure to ask for multiple copies (10 is a general rule of thumb) of the certified death certificate, because originals are sometimes required by various banks, etc.

Once the death certificate is obtained, named beneficiaries on any accounts owned by the individual who passed may contact the relevant financial institutions. The institutions that provide these accounts typically have well-established frameworks that make this a relatively straightforward process to handle beneficiary distributions. 

For assets without named beneficiaries, the process is more complex. The executor of the will is required to present the death certificate to a probate court in the county where the deceased resided. 

A probate judge then reviews all relevant documentation before providing a Letter of Testamentary: a document that grants the executor the legal right and fiduciary power to administer the estate of the deceased. Depending on the county the deceased resided in, this process can take weeks or even months and can be complicated further in the event the will is contested. 

After the executor receives the Letter of Testamentary, they may begin the process of consolidating and disbursing the deceased’s estate.

Disbursing the Estate: Key Elements to Consider

Once the probate court grants the executor the fiduciary power to act on the behalf of the estate, the executor can begin taking steps to consolidate and disburse the estate. This is a significant undertaking with many moving pieces.

It’s often best to categorize the various matters that must be considered:

  • Income: various parties may have to be notified of the individual’s passing, including the Social Security Administration, Veterans Administration, the person’s employer, and pension plan administrators. 
  • Deposits: any bank deposits titled in the name of the deceased should be retitled or transferred as specified in the will.  
  • Investments: the individual’s investment accounts that did not have a beneficiary designation should be retitled, transferred, or distributed to beneficiaries of the estate, as appropriate. This can include managed accounts, brokerage accounts, retirement accounts, and other investment vehicles. 
  • Liabilities: if the deceased had a mortgage, auto, business loan, or credit cards, the financial institutions that hold these loans should be notified of their death. 
  • Insurance: life insurance benefits may be claimed, and other policies, such as health, homeowners, auto, and umbrella insurance, should be canceled or updated. 
  • Real Estate and Personal Property: any real estate, cars, boats, or other personal property owned by the deceased must be retitled. Determine if any real estate needs repairs or maintenance before being placed on the market and hold back any required funds.  
  • Business: if the deceased had ownership in any businesses, this should be retitled and any relevant buy-sell agreements executed in agreement with surviving partners. It is critical that the executor engage the services of trusted accountants and lawyers to see this process through.
  • Other: there may be several miscellaneous matters to be handled, for example, the cancellation of all subscriptions, memberships, and online accounts and the retitling/transfer of safety deposit boxes. 

This is not a complete list. It’s crucial that you fully evaluate the estate of your loved one to ensure that all bases are covered. Once the estate’s assets and liabilities have been identified, the liabilities must be paid for before the estate can be distributed.

Tax Considerations

With so much to focus on when it comes to organizing and distributing your loved one’s assets, it’s important not to lose sight of the tax considerations that may be triggered by an individual’s death.

If the estate is valued at more than $12,920,000 (as of 2023), federal estate taxes may be due. To determine the estate’s tax liability, consult with your accountant. You can also partner with Smith + Howard, who brings significant experience navigating these kinds of tax issues. 

Executors should also note that income taxes are owed in the year the individual dies. Again, it’s recommended you work with an experienced tax advisor to determine tax liability. 

Smoothing the Way with Estate Planning 

There is much that can be done while you’re living to smooth the path for your loved ones at your passing. A robust estate planning process eases the burden on families and loved ones and ensures your intentions are clear and carried out according to your wishes.

One possible step that can significantly ease the process is to re-title assets into a revocable trust. While you’re alive, you’re the trustee and the beneficiary of the trust. Upon your death, control passes to a person of your choice, known as the contingent trustee.  Contingent beneficiaries are also named stipulating to who and how your assets are distributed by the contingent trustee after you pass. This avoids the executor of the estate having to navigate those assets through the probate court system.  Discussing your situation with a financial planner could help you determine if a trust is good for you.

Additionally, it’s helpful to maintain a cash account with a Pay on Death or Transfer on Death designation. In the event of your death, ownership of the account is immediately transferred to your named beneficiary.  This may be someone different than your executor. The cash in this account can be used to ensure your estate can meet immediate obligations (such as mortgage payments and property taxes), while the executor goes through the process of probating the estate. 

Smith + Howard Wealth Management: Trusted Advisors

The days and weeks after the passing of a loved one are a challenging time for everyone involved. Despite this, it’s important not to overlook the financial details that must be addressed when a family member passes. 

During this period, the counsel of a trusted advisor can be invaluable. The knowledge that comes with guiding many individuals through this process can help families avoid bottlenecks in the process and disburse their loved one’s estate in a stress-free, efficient manner. 

At Smith + Howard Wealth Management, we offer a wide range of services, including investment management, financial planning, and estate planning. Our team brings a highly-focused, personalized approach to helping our clients achieve their financial goals and build a lasting legacy. Our relationship with Smith + Howard Advisory, LLC allows us to bring 50+ years of tax expertise if it is beneficial to you.

If you would like a review of your estate plan, you can contact our financial planners, Jeff Brandon or Michael Mueller, in our office.

To learn more about Smith + Howard Wealth Management, contact us today.

Unless stated otherwise, any estimates or projections (including performance and risk) given in this presentation are intended to be forward-looking statements. Such estimates are subject to actual known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those projected. The securities described within this presentation do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in such securities was or will be profitable. Past performance does not indicate future results.