Tasks soon after a Death
Once the final rites are done it is time for attention to financial and legal matters. Some of these tasks can be done by anyone. Some need to be done by the Personal Representative (PR) or specific persons.
The decedent may have paid certain bills periodically. If a payment is missed on the due date, there may be substantial late fee or even termination of a necessary service or a late payment penalty. Hopefully, the decedent has prepared an Estate Data Organizer that specifies the bills to be paid upon his death or incapacity. These bills generally have to be paid from the funds in the decedent’s bank account. This can be done by the surviving spouse who is named in the account. If a Living Trust is the owner of the account, the Survivor Trustee can operate the account. The bank will require a Death Certificate mentioned under Immediate Tasks. If the Estate Plan is based on a Will, the Personal Representative can pay the bills after some legal procedures. If the decedent had set up the bank account as Payable on Death (POD) or Transfer on Death (TOD) to another person, that person can pay the bills.
Review all automatic payments. Cancel or change them as necessary.
Cancel services no longer required such as phone connections, cell phones, leases, water and electricity (if decedent lived alone in a rental place). Cancel credit cards in decedent’s name, and magazine and newspaper subscriptions if no longer necessary. Vehicles may have to be sold and insurances cancelled. Sale of licensed vehicles may be easier when the owner is still alive and deemed certain to die, since any power of attorney ends at the person’s death.
Inform Social Security Administration (SSA)
The Funeral Home will send a “Statement of Death by Funeral Director” to the SSA within a few days if you give them the SS number of the decedent. Contact the SSA and enquire about benefits for survivors. You may have to visit their office. The SSA will pay a nominal death benefit of $255 to certain survivors. Ask them what papers you need to bring with you and who needs to be present. The surviving spouse and young children are entitled to certain benefits if the decedent had worked for a certain number of years. Even if the decedent was not yet receiving SS payment, the spouse and children of certain age can receive benefits. If the surviving spouse is getting a lower SS payment than the decedent, the surviving spouse’s payment will stop and the decedent’s SS payment will be paid to the spouse depending on his/her age.
Check Employer Benefits
Contact the Human Resources office of the employer of the decedent to check if there are any benefits to the family. Even if the decedent had been retired for some time, there may be pension, health or life insurance benefits to the family.
Check Life Insurance Policies
If the decedent has left information about life insurance policies, contact the companies on procedures to collect the benefits. If no information has been left, look for bills and letters from insurance companies. Call and ask if there is any insurance in effect. The proceeds from the policy, if any, owned by the decedent may count as a part of the estate for Estate Tax purposes.
Take out Required Minimum Distribution (RMD or MRD)
If the decedent was older than seventy and a half in age, and had a retirement account such as IRA, 401(k) etc., check if the RMD has been taken out for the year of death. If not, take it out based on the decedent’s age before the year of death ends. Separate RMDs are required for each type of retirement account (i.e., IRA, 401-k etc). Failure to take it out on time will result in a 50% penalty. Have the retirement accounts transferred to the beneficiaries. If it is transferred to a beneficiary as an inherited IRA, the income tax consequences may be less than cashing it out. In subsequent years, the RMD will be based on the beneficiary’s age. If it is an inherited Roth IRA, the beneficiary is required to take out a RMD in subsequent years even if the beneficiary is younger than seventy and a half in age.
Update Cost Basis of Assets
If the decedent had investments in securities, contact the custodian brokers and have them update the cost basis of the investments as of the date of death. If rental real estate is involved, get an appraisal by a qualified appraiser. If the investments have appreciated, the update will reduce taxes. Updates of joint investments are possible even if the spouse survives. If the investment is inherited by someone, it is considered a long term investment for income tax purposes even if it is sold within a year.