How to manage a parent's finances after they die
Here's what you need to know
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Dealing with the death of a loved parent is never easy. While things like credit card accounts, benefits, and taxes may seem inconsequential to someone dealing with grief, getting a handle on your recently deceased loved ones' financial matters as soon as possible is essential.
There are several financial tasks to do after a parent dies. For example, you’ll need to reach out to a parent’s financial and insurance accounts and alert those companies of your parent’s death. And you’ll also need to do the same with Medicare if your parent had an account and Veterans Affairs if your parent was a veteran.
Let’s take a closer look at the financial tasks you’ll need to take on when taking over a parent’s financial affairs and handling their estate plan.
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Talk financial matters over with your parent
Don’t wait until after a parent has died to look into financial accounts. Reach out when they can still talk about finances and share information. It may seem awkward since you are talking about how things will be when a parent isn’t there but try to be as honest and direct as possible as you go through your parent’s financial matters.
“If possible, prior to the death of a parent, have discussions with them about their financial situation and create a list of accounts, beneficiaries, and advisors,” says Ed McGill, co-founder and partner of McGill Junge Wealth Management, a Northwestern Mutual Private Client Group. “This can save considerable time and stress.”
You’ll also need to find account numbers and passwords for various accounts, and if your parent can tell you where these items are, this can be time-saving. Setting up a secure password manager will help to ensure the passwords are kept safe.
Get copies of the death certificate
You’ll need multiple copies of your deceased parents' death certificate to settle their financial affairs. You may order multiple copies of a death certificate through the funeral home or mortuary, and it’s best to overestimate how many you will need. Depending on your circumstances, you’ll probably need at least 10 copies.
“Obtaining the death certificate is one of the most important steps because this helps with many other items on the list, including filing for insurance claims and death benefits, settling your loved one’s estate, and updating credit reporting agencies,” McGill says “If you receive the death certificate first, it will make the other steps easier.”
Gather necessary essential documents before you begin calling financial and other companies.
You’ll want to have to gather as much documentation and account information as possible before calling to inform an insurance or other company of a parent’s death.
“Before making any calls, make sure you have all of the necessary information needed for the institutions you are contacting,” McGill says.”Not only will they need the death certificate, but the insurance companies will need policy numbers and personal information of your parent.”
Inform important parties of your parent’s death
In the event of a parent’s death, you’ll probably need to inform several individuals and institutions of their passing. This can include landlords, banks, credit card companies, and the IRS. In most cases, you will need proof of their passing; this is where copies of the death certificate may be required.
“You’ll also need to inform key parties of the deceased’s passing, including financial advisors, insurance companies, credit reporting agencies, and relevant government agencies in charge of benefit plans such as Medicare or Veterans Affairs,” McGill says. “Lastly, you should prepare final tax filings for the deceased, as this can create a smoother process when handling estate affairs.”
The IRS explains how to file a tax return for someone who has passed away.
Begin the probate process
After a parent dies, you also must begin the probate process regarding the parent’s property. Probate is a legal process that occurs after someone dies that determines how assets are divided.
The probate process varies by state, and you may wish to work with a probate attorney. The first step is filing a petition with the probate court in the county where your parent lived. You’ll need to contact the parent’s creditors and estimate the value of their estate, including bank accounts, stocks, and bonds. Once any outstanding debts are paid, the remainder of the assets are left to the parent’s beneficiaries.
“If a will exists, an executor will distribute assets according to its terms,” McGill says. “If not, a court will name an administrator to determine who gets what.”
If there is no will, probate judges usually appoint the next of kin, such as a son or a daughter, as the administrator.
Don’t delay these financial steps
Grief makes things difficult, but you shouldn’t delay these crucial financial steps.
“It’s important that you start working on these sooner rather than later and inform all the appropriate agencies of your loved one’s passing, as it will be a smoother process overall,” McGill says.
Benefit plans, such as with Veterans Affairs and Social Security, should be dealt with as soon as possible. “Some steps can lead to greater issues down the road if you don’t complete them early on. For example, if you don’t cancel your loved one’s benefit plans, you risk having a lengthy, complicated repayment process,” McGill says.
For example, if you don’t cancel benefit plans such as Social Security and Veterans Affairs promptly, you’ll be asked to return any payments made after the recipient died.
Consider the help of a professional
Handling a deceased parent's affairs is a complex and time-consuming task that could take weeks and even months to complete. Work closely with your parent’s financial institutions to help smooth the process. If your parent has a financial advisor, reach out to them early in the process. They may have the account information you need.
“Obtaining a death certificate and completing the additional steps can take weeks or months,” McGill says. “Working with the financial institutions and professionals will help to organize these items and create the simplest process possible.”
In particular, reach out to a parent’s financial advisor.
“If your parent had a financial advisor, work closely with them to complete end-of-life planning and estate planning. They are professionals who know about your parent’s finances and know the process for completing all these tasks,” McGill says.
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