After a loved one passes away - TIAA (PDF)

After a loved one passes away Your guide to financial and practical matters  What’s inside What you can do right now 2 Collect important papers Recordkeeping During the first month 4 Choose an attorney Consider the will Apply for benefits During the first few months 7 Change title or ownership Locate tax returns and financial statements Complete notifications In months 3–6 10 Consider hiring an accountant Review your finances and consider hiring a financial planner By month 9 12 Complete estate settlement On to the future 12 Some final thoughts Glossary 13 Suggested checklist 14  Introduction Losing a family member or friend is one of life’s hardest blows. Yet even during the emotional turmoil that follows someone’s death, there are important—perhaps time-sensitive—decisions to make. Often the person who must make the decisions is the spouse or partner of the person who has died. Or, the survivor may be a child, brother or sister, parent, or close friend. Although each person may have different tasks to handle, everyone must do some basic things. In the best situations, some preparation for these tasks will have already been made. A valuable lesson for all of us, at any age: Taking the time to organize papers makes a difficult time immeasurably easier for those left behind. What are some of the important things you need to do in the first few months after a loved one has passed away? Let’s start with what’s required immediately. Then we’ll move to some issues you may have to address as time goes on. After a loved one passes away 1  2 After a loved one passes away What you can do right now Collect important papers You may have to search for some of them. Check file cabinets, desks, offices and even odd places—kitchen drawers, closet shelves and cartons tucked away in the garage. While it might be tempting to throw things out in hopes of making the search less overwhelming—don’t. You can’t be sure which papers might prove to be important later on. It may be helpful to ask someone you trust to help you go through the decedent’s papers, if only for support during this painful task. For access to other documents, you may need court permission. In some states, for example, safe deposit boxes are sealed when someone dies. If this happens, you will need a court order to have access to the contents. Here are some of the documents you will need: Copies of the death certificate Generally, you need to provide a copy of the death certificate every time you either make a claim for benefits or retitle assets from the decedent’s name. You can get certified copies of the death certificate through your funeral director or from the county health department. Most likely, there will be a charge for each certified copy. You may want to get 10 to 12 copies initially, but you may need more later. Keep in mind that it isn’t always easy to get additional copies. So, depending on your situation, you may want to get more certificates early if you think you may need them. Copies of all insurance policies If you can’t find them, call the decedent’s life insurance agent or contact the insurance company directly. Copies of your marriage license If you’re the spouse of the decedent, you need a copy of your marriage certificate to apply for certain benefits. If you can’t find it, you can usually get copies from the county clerk where your marriage license was issued. Copies of children’s birth certificates If the decedent had any dependent children, you’ll need their birth certificates to establish claims for certain Social Security benefits. If you can’t locate them, copies are available from the public health office of the state or county where the child was born. While it might be tempting to throw things out in hopes of making the search less overwhelming— don’t. You can’t be sure which papers might prove to be important later on.  The revocable trust and will The decedent’s durable powers of attorney have no further legal force or effect. Instead, the decedent’s trust or will identifies the person responsible for finalizing the decedent’s affairs and pay the decedent’s debts, taxes and administrative expenses. The trust or will also provides direction for distributing the decedent’s remaining assets. You’ll need to locate the original trust and will. It may be in the decedent’s safe deposit box or filed in the decedent’s home with other important papers. It is also possible that the decedent’s attorney has the original trust and will for safekeeping. A copy of veterans’ discharge papers You will need a copy of a certificate of honorable discharge to claim any veterans’ benefits. The certificate should show the branch of service, dates of service and rank. If you can’t find a copy of the discharge, you may request one by completing Standard Form 180 (SF180). You can download this form online at archives.gov/veterans/ military-service-records/standard-form-180.html. You may also fax 314-801-9195 or write to request Standard Form 180. Send your written request to: the National Personnel Records Center (Military), One Archives Drive, St. Louis, MO 63138-1002. Social Security information Be sure to have your Social Security number along with the Social Security numbers of the decedent, his or her spouse (if not you) and any dependent children. If you do not know the Social Security numbers for the individuals that are needed, you could look for the numbers on past tax returns, in employment records or with other personal papers. Recordkeeping Keep all documents organized, perhaps by filing each in separate folders. If you’re concerned that any documents will get lost, make copies. You should also keep all incoming mail so bills and checks won’t get lost. And, depending on your situation, you may want to have the decedent’s mail forwarded to you (or someone else). Don’t throw anything away until you have a chance to go through it. Be alert for unordered merchandise or bills for services never performed. Some scam artists take advantage of the recently bereaved in the hope that they will pay phony bills without investigating. It’s a good idea to ask for itemized bills from doctors and attorneys. Avoid paying bills “for services rendered” only. Remember, this is an emotional time when your concentration and memory may not be at their best. Keep records of all outgoing mail, particularly if it’s business related. After a loved one passes away 3  4 After a loved one passes away During the first month Choose an attorney Unless required by the decedent’s state of residence, not all estates need an attorney. Still, a good attorney can help handle many problems more easily than you may be able to alone. An attorney can answer such questions as: W My spouse’s safe deposit box is in his name only. How do I get access to it? W Does the decedent owe any estate or inheritance tax? W What rights do creditors have to the estate of the decedent? You may know an experienced estate planning attorney. If not, try to get a referral from a reliable source. For example, you can contact the local probate court for a listing of attorneys who handle probate matters. It pays to think carefully before you hire an attorney. Be sure to discuss the fees that will be charged. Generally, the more complicated the estate, the higher the attorney’s fees. If you can’t afford the cost, but feel you need an attorney’s help, check your local bar associations to find out if free legal services are available where you live. Note: Although not required, you might consider using the attorney who drafted the will. It may be helpful since he or she may be familiar with the decedent. Consider the will If there is a will, you, or your attorney, will need to file a petition with a local probate court to admit the will to probate. Probate is the legal process of proving the validity of a will before an estate can be distributed to the rightful heirs. And it involves the court appointing an executor or personal representative of the estate. The executor—who is almost always named in the will—oversees the distribution of the decedent’s assets, pays any debts or taxes, and complies with any legal and accounting requirements. Not all assets have to pass through probate. For example, any property titled in the names of both the decedent and another person as joint tenants with right of survivorship automatically passes to the co-owner. Proceeds from life insurance policies, retirement annuities, Individual Retirement Accounts (IRAs), etc., are paid directly to beneficiaries (if one is designated). In addition, any property titled in the name of the decedent’s revocable trust at death can also avoid probate and will be distributed to the beneficiaries named under that trust. If the decedent does not have a will, he or she is said to have died intestate and the estate will pass per state laws of intestacy. You, or your attorney, will need to file a petition to request appointment as the decedent’s administrator. The probate court, which is located in the county where the decedent last resided (or where any out-of-state TIAA financial consultants handle situations like yours every day. Their suggestions may make it easier for you to make your own informed decisions.  real estate or other tangible property that requires probate is located), typically has jurisdiction over the estate. The administrator’s duties and responsibilities are similar to those of a personal representative or executor. If more than one person is interested in serving as the administrator, each would file a petition with the court requesting the appointment. The court would then determine which person is best suited to serve. After all of the administrative tasks are complete, most states direct the administrator to distribute the decedent’s remaining assets to the surviving spouse and any children. If there is no surviving spouse or children, assets will generally be distributed to the decedent’s closest blood relatives, perhaps parents, brothers and sisters, half-brothers and half-sisters, grandparents, nieces and nephews, or cousins. Each person’s interest in the estate depends on the survival scenario. If no relatives are living, then a decedent’s assets could be added to the state’s escheat fund. An attorney’s help may be invaluable. Apply for benefits You may be eligible to claim certain survivor benefits such as pension benefits, veterans’ benefits, Social Security or other employee benefits. Pension benefits If the decedent worked for any length of time, death benefits may be available under a company pension or annuity plan. If the employer was a state college or university, benefits may be payable through the state retirement system. Pension benefits earned through the federal government often carry survivor pension benefits, too. Check with any current and previous employers to determine whether there are any retirement benefits that are available. Veterans’ benefits There are several different types of veterans’ benefits. If a veteran was receiving veterans’ benefits at the time of death or met certain other conditions, he or she may qualify for a contribution toward burial costs in a private cemetery. Grave markers are available free of charge to eligible deceased veterans. Other benefits may include educational assistance and medical care for dependents. You can find information on veterans’ benefits, including a listing of national cemeteries by state, on the Department of Veterans Affairs (VA) website, va.gov, or by calling 800-827-1000. To apply for benefits, contact your local VA office (you can’t apply online). The VA will send you instructions and forms. You’ll need: W A certified copy of the death certificate W A copy of a certificate of honorable discharge W Your marriage certificate (if the decedent was your spouse) W The birth certificates of any dependent children W All relevant Social Security numbers After a loved one passes away 5  6 After a loved one passes away Social Security If the decedent contributed to Social Security for the required period of time, you may be eligible for survivor benefits, usually as a spouse or dependent child. Payment of Social Security survivor benefits is not automatic. You must file a claim. Call Social Security at 800-772-1213 to find out if the decedent was covered and to discuss possible benefits. One of the online calculators found on the Social Security Administration website, ssa.gov, may also provide helpful information. (Type “calculator” in the Search box.) When applying for Social Security survivor benefits, make sure you have these items: W Death certificate W Proof of age, such as birth certificates, for you and any other beneficiary(ies) W Proof of your and the beneficiaries’ relationships to the decedent (for a spouse, the marriage certificate; for children, birth certificates or adoption papers) W Social Security numbers of all concerned W W-2 forms of the decedent for the past two years to help Social Security compute your benefits IMPORTANT NOTE: If the decedent was already collecting benefits, it’s important to notify the Social Security Administration that he or she has died. Also, if Social Security benefits were being directly deposited to an account, be sure to keep the account open until the decedent’s last payment is received. Other employee benefits If the decedent was employed at the time of death, you should contact the employer about any health or accident insurance in addition to life insurance. In some cases, an employee’s health insurance can be continued for a surviving spouse or dependent children. Also, ask the employer about any payment due for unused vacation or sick leave. Even if the decedent wasn’t employed, you may still want to contact previous employers to check if you’re entitled to any benefits. Ask if the decedent belonged to any unions or professional organizations that may offer death benefits for their members.  During the first few months Change title or ownership After a death, you may need to transfer ownership or change the title on property, or modify documents. Your house If you owned a house with the decedent and there is a mortgage outstanding, you’re now responsible for that debt. It may well be your largest single personal obligation. If there is mortgage insurance on the loan (a type of credit life insurance), the outstanding mortgage balance on your house or part of the outstanding balance may be payable by the insurance. Advise your creditors of the death, and they should be able to tell you if credit life insurance is in force. Insurance policies If the decedent had life insurance, the death benefit will pass to the named beneficiary. If there is no named beneficiary, the death benefit will generally pass according to the terms of the decedent’s will. Keep in mind, in addition to life insurance policies that the decedent may have owned, there may be group term life insurance through his or her employer or credit life insurance, most often seen as mortgage insurance. Check your own insurance policies to see if your beneficiary designations should be updated. Evaluate your coverage to determine if you may need less or more, depending in part on whether you have dependents. Consider whether you need to purchase your own or additional health insurance. Automobiles You will need to change the title of any cars owned by the decedent. Your state’s department of motor vehicles can tell you what needs to be done to change a title. You may also need to change the name on the policy of your automobile insurance. Your will In your own will, you may have left property to the decedent. If so, be sure to update your will. Credit cards Cancel credit cards held exclusively in the name of the decedent. If there is an outstanding balance: W Determine if the account is insured. Insurance through the credit card provider may pay off any balance upon notification of the death. W Determine if the account was shared. If a spouse, family member, or business partner co-signed the card application, that person is likely responsible to pay the balance. However, if a second cardholder is an “authorized user” (i.e., only has charging privileges), they are not responsible. After a loved one passes away 7  8 After a loved one passes away W Determine if the account is owned solely by the decedent. If the decedent lived in a community property state (Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin), his or her spouse may be responsible to pay the balance, even if the account is individually owned. Generally, if the account is owned solely by the decedent, the executor is likely responsible to pay the balance. The Credit Card Act of 2009 requires card providers to notify the executor in a reasonable time, and refrain from adding fees and penalties while the estate is being settled. The Federal Trade Commission also provides debt collection guidelines, allowing legitimate collection activity while reining in overaggressive tactics. If you’re the spouse of the decedent, you may have credit cards in both your names. You should notify the credit card companies that your spouse has died and the card should list your name only. Continue making payments in the meantime to keep your own good credit rating. When applying for new cards, be sure to tell the lender about credit cards you shared with your spouse. Retirement plan assets Retirement plan assets such as 401(k), 403(b), 457(b) and IRAs, pass to the named beneficiaries. The amounts that are received by the beneficiaries from non-Roth retirement plans will be subject to income tax, unless the income is a return of after-tax (previously taxed) contributions or nondeductible contributions, if from a Traditional IRA. When you inherit retirement assets there are strict rules regarding when you are required to take withdrawals and how much you must take. And these rules will differ based on your relationship to the decedent. A surviving spouse will have more options than a non-spouse who inherits retirement plan assets. As a beneficiary, you can speak with a TIAA financial consultant, at no additional cost to you, to discuss your withdrawal options. You’re also eligible to use other TIAA products and services. To arrange for an appointment with a consultant, call us at 800-842-2252, weekdays, 8 a.m. to 10 p.m. (ET). If the decedent was already receiving TIAA retirement income, survivor benefits depend on the income option under which the decedent was being paid. In this case, it’s important for you to speak with a TIAA consultant. To arrange for an appointment (at no additional cost to you), call us at 800-842-2252, weekdays, 8 a.m. to 10 p.m. (ET). Once we learn of a participant’s death, we are able to prepare and send to each beneficiary a packet of information, including the forms to complete along with the estimates of survivor benefits. Our consultants can help you to think about your withdrawal options and can explain the plan rules. Bank accounts If you and the decedent had a joint bank account (savings, checking, CD, etc.) that was owned as joint tenants with rights of survivorship it will usually pass to you automatically. Speak with a bank representative to see about changing the title and signature card on the account. You may need to show a death certificate to do this. In some states, joint accounts are frozen upon notification of a death. Check with the bank to learn how to have your funds released. Bank accounts that were solely in the name of the decedent will have to go through probate.  Note: If you plan to open a bank account for the estate, the estate will need its own tax identification number. You can find information and forms to apply for a tax identification number on the Internal Revenue Service website, irs.gov. Stocks, bonds and other investments If you shared investments with the decedent and ownership passes directly to you, check with your stockbroker to change the title on stocks, bonds, mutual funds, etc. The broker may need a copy of the death certificate. If the decedent owned the investment account(s) in his or her name only, title will be changed to the beneficiary. The financial institution will usually request copies of the death certificate and the will to confirm a beneficiary’s right to the portfolio assets. Safe deposit box You’ll generally need a court order to open any safe deposit box rented only in the name of the decedent. Until the will has been probated, only the will, life insurance policies or other documents relating to the death can be removed from the safe deposit box. Locate tax returns and financial statements Along with other important documents mentioned earlier, you should locate federal and state (if applicable) tax returns for the three years prior to the decedent’s death. Plus, keep at least three months’ worth of bank and brokerage account statements on file. Note: It’s very important that you keep bank and brokerage statements for the month the decedent passed away and the prior month for future reference. Complete notifications The funeral home or memorial service firm will usually prepare an obituary and submit it to local newspapers. You might want to think about others who should know about the death. Consider notifications to alumni groups, professional organizations, societies and any other groups to which the decedent belonged. After a loved one passes away 9  In months 3–6 Consider hiring an accountant There are a number of different tax returns that may need to be filed. You may decide to prepare them yourself or you may choose to work with an accountant. In either case, you will want to make sure that you, your accountant and your attorney are all coordinating efforts. For the year in which the death occurs, the decedent’s income taxes will be due on the normal filing date of the next year. Of course, you can request an extension, which will be granted if your extension request is filed by the original due date of the return. If you’re the husband or wife of the decedent, you can still file a joint return for the year of death as long as you have not remarried. Upon a loved one’s death, it’s possible that you are required to prepare and file estate or inheritance tax returns at both the state and federal level. About 18 states have their own estate tax or inheritance tax. Keep in mind that state-level estate and inheritance tax and any applicable exemption amounts may be different than the federal estate tax exemption amount. This means that the decedent’s estate could be exempt from federal taxes but may still owe taxes to the state. Federal estate tax returns are due within nine months of the date of death. For 2021, the applicable federal exclusion amount is set at $11.7 million per person (an increase from $11.6 million in 2020). The exclusion will revert back to the 2017 level ($5 million, adjusted for inflation) beginning in 2026 unless Congress takes affirmative action to keep it. Further, the concept of “portability” allows a married couple to effectively combine their estate tax exemption amounts; meaning, in 2021, a married couple can pass $23,400,000 free from gift or estate tax either during their lifetime or following their deaths. Your attorney or accountant can guide you in preparing income or estate tax forms and give you valuable information on your state’s estate tax, inheritance tax or gift tax, and fiduciary income tax, if applicable. An attorney or accountant can also advise a beneficiary on whether it may be appropriate to consider disclaiming property you are set to inherit from the decedent to facilitate certain planning objectives. Disclaiming is a technique in which you renounce your interest in an asset that may be passing to you. This allows the asset to pass to the next in line beneficiary. There are stringent requirements with respect to effectively executing disclaimers. It will be important for you to understand the impact that disclaiming assets might have on your long-term financial and estate planning goals. You can download forms and find more information on the Internal Revenue Service website, irs.gov. Check your own insurance policies to see if you need to update your beneficiary designations. 10 After a loved one passes away  Review your finances and consider hiring a qualified financial planner It is important to review your cash flow (i.e., to take a look at how much money is coming in each month and how much money is going out to meet expenses). From this, you can put together a short-term budget. If your monthly expenses are greater than your income, look for ways to cut spending or for possibilities to boost your income. If your monthly income exceeds your expenses, you can consider additional savings or investments using the inherited assets—to provide for your future. Retaining the services of a qualified financial advisor can be invaluable to you because your financial situation and income needs will likely change over time. Financial planners play a critical role in the quality of life enjoyed by millions of people by functioning as their personal financial advisor and helping them to plan for and take control of their futures. The planner’s investment oversight and review can help with asset allocation (i.e., diversification) and can help to assess market risks. In addition, planners are trained to recognize how changes in your health or family situation, new hobbies or goals, market fluctuations, changes in tax laws, or changes in risk tolerance can all impact your financial situation. For this reason, it can be beneficial to meet regularly (e.g., annually) with a planner to determine if there are any material changes in your situation and to determine whether your financial plan is still on track. From time to time, you’ll likely want to adjust your investment goals, change your risk tolerance, rebalance your assets or implement a new income strategy in response to changes to your situation. It is important to us that you know that you are eligible to work with a TIAA consultant at no additional cost to you. To arrange for an appointment, call us at 800-842-2252, weekdays, 8 a.m. to 10 p.m. (ET). After a loved one passes away 11  12 After a loved one passes away By month 9 Complete estate settlement Typically, there are just a few outstanding details remaining by the ninth month following the decedent’s death. An important reminder is that the federal estate tax return, if required, is due nine months after the decedent’s death. Typically, assets will be distributed to the beneficiaries upon closing the estate. On to the future Some final thoughts Right now, the future may seem very far away. When you’re grieving or feeling emotionally off balance, it’s natural to feel overwhelmed by practical matters that need attention. Try to take things one step at a time. Focus on what needs to be done right away, today; and then tomorrow; and then the day after. Before too long, the list of things to do will look more and more manageable. While we’ve tried to address most of what needs to be done after a loved one passes away, many situations will be unique. For more detailed guidance on what to do after a death, you may want to seek legal or other professional advice. 12 After a loved one passes away  Executor/Personal representative The person appointed to administer the estate of someone who has died leaving a will which nominates that person. The executor/personal representative must ensure that the person’s desires expressed in the will are carried out. Practical responsibilities include gathering the assets of the estate, obtaining information in regard to all beneficiaries named in the will and any other potential heirs, collecting and arranging for payment of debts of the estate, ensuring estate taxes are calculated, forms filed and tax payments are made. Testator The person who creates a valid will. Probate The general term for the entire process of administration of an estate of a decedent, including those without wills, with court supervision. The initial step in the process is proving a will is valid and then administering the estate of the decedent according to the terms of the will. The will must be filed with the clerk of the appropriate court in the county where the decedent lived, along with a petition to have the court approve the will and appoint the executor named in the will. If the court determines the will is valid, the court then “admits” the will to probate. Probate court A specialized court that has jurisdiction over probating wills and administering estates. Intestate The position of dying without a valid will in place. Closing letter For estate tax returns filed on or after June 1, 2015, closing letters will be issued only at the request of the taxpayer. Instead, account transcripts from the Transcript Delivery System (TDS) are available online to tax professionals. Transcripts reflect transactions including the acceptance of Form 706 and/or the completion of an examination. File this with your state tax authority, which will then issue its own estate tax closing letter, confirming the closure of the estate. If the estate went through probate, you will need the assent of the beneficiaries that the estate is distributed. Submit this to the probate court to receive final approvals of the estate closure. Glossary After a loved one passes away 13