The grief and stress following the loss of a loved one can be overwhelming. And if you're the executor of your loved one's estate, it can be even more difficult, as there are documents to gather, institutions to notify and property to secure. To alleviate the stress of this difficult time, break down your tasks into manageable steps and lean on the professionals in your corner.
Make Funeral Arrangements and Notifications
The first steps after the loss of a loved one are to make funeral arrangements and notify people and organizations of your loved one's passing. Contact a funeral director, prepare an obituary and reach out to friends, family, employers, co-workers and organizations to which your loved one belonged.
To lighten your load a bit, consider assigning the most straightforward tasks to others. For example, divide up the list of people to notify among capable family members.
Secure the Residence
If your loved one lived alone, you'll need to protect their home and belongings. That means securing the residence by changing locks, finding people to care for their plants and pets and forwarding their mail and canceling their subscriptions to prevent deliveries from piling up – which can entice burglars.
Track Expenses
You may end up covering some expenses associated with securing the residence out of pocket. However, you should be reimbursed by the estate, even if you are the spouse and it feels like it is all coming out of the same pool of money. Some estate-settling expenses are tax-deductible, but only to the estate itself, so forgoing reimbursement can increase your tax burden.
To get reimbursed, keep track of all expenses and hold onto receipts. Then file a creditor claim with the probate court. If you believe the estate may not be able to cover your expenses, contact an estate attorney before you spend any money.
Gather Documents and Contact the Estate Planning Attorney
Request 10 to 20 copies of the death certificate from the funeral director or the Bureau of Vital Statistics. You will need these to settle the will, life insurance policies, bank accounts, credit cards, house deed and loans. Locate all estate planning documents, such as wills and trusts and birth, marriage and divorce certificates. Other important documents to locate are statements (including any beneficiary information) from financial accounts, including:
- Investment accounts
- Retirement accounts
- Bank accounts
- Annuities
- Insurance policies
If your loved one had an estate planning attorney or a financial advisor, that person may have these documents all in one place, such as the Baird Personal Information Guide. If not, you may have to collect them one at a time by contacting financial institutions individually.
If your loved one didn't have an attorney, it can be helpful to create an estate asset spreadsheet, if such a document doesn't yet exist. This sheet should include every major asset your loved one owned and how they owned it – whether individually, jointly with a spouse, through a trust or as an account with a beneficiary designation. Use this document to keep yourself organized or give it to the attorney you hire.
Contact Estate Attorneys and Financial Professionals
The first professionals you should contact are your loved one's estate planning attorney and financial advisor. If they didn't have either, you may have to find your own. Unless the estate was very small, or all the assets were owned jointly and will simply remain with the surviving spouse, assume that your team of professionals will include an attorney, a financial advisor and a certified public accountant.
Executing an estate frequently requires the cooperation of several different individuals and institutions. It can be a challenge to keep track of who needs what by when. Assign as much of this coordination as possible to a professional to avoid burnout. Your financial advisor can serve as your point person keeping these tasks on track. They may also have a list of trusted professionals you can turn to for help, even for small tasks, such as cleaning out your loved one's home.
Understand Important Tax Considerations
When handling an estate, there are a few tax considerations you may not be aware of. Here are some to keep in view:
- Selling your house. When an individual sells their primary residence, they may be able to exclude hundreds of thousands of dollars in capital gains from taxability; and that exclusion doubles for married couples. If a surviving spouse sells their primary residence within two years of their spouse's death, that same increased capital gains exclusion will apply to the sale. If they hold onto the house for longer than that, they will lose the increased exclusion. So, if you plan to sell the house, it's best not to wait too long and risk losing this tax benefit.
- Keeping the house. When you inherit a house, you inherit it at its fair market value upon your benefactor's death date. If you eventually sell it, any capital gain or loss will be calculated from that value – known as the "stepped-up" cost basis – rather than from the likely much lower price your loved one paid for it. This step-up can greatly reduce tax liability. So, if you inherit a home, it's best to have it appraised immediately.
- Final tax filings. You have until April 15 of the year following your loved one's death to file their final income tax returns, including possibly an estate return. States have their own estate laws and taxes. Don't assume just because the estate is small enough to avoid federal tax that it won't be subject to state tax. Your attorney or financial advisor should be able to advise you on state tax implications.
It can be difficult to keep track of everything that must be done to protect a loved one's estate after their death, especially when you're grieving. Your Baird Financial Advisor can help you navigate the complexities of settling an estate and work closely with Baird's estate planning and tax planning experts to help ensure your loved one's final wishes are carried out in the manner they intended.
The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.