Meridian Blog

As I was writing this week’s blog, I realized that my last one was also about a sensitive topic (divorce), so I promise my next one will be a LOT lighter! Nevertheless, navigating the loss of a loved one and in turn, inheriting assets can be both a financial blessing and an emotional challenge. It’s a moment filled with mixed emotions—grief for the loss of a family member or close friend, paired with the responsibility of managing their estate. Whether it’s cash, property, investments, or valuable heirlooms, handling an inheritance thoughtfully and strategically is crucial to ensuring long-term benefits and avoiding potential pitfalls.

Obviously the first priority during estate settlement is to allow time to process emotionally. Rushing to make decisions while you are still grieving can lead to additional stressors, mistakes, or regrets. Depending on your relationship with the deceased—whether it’s a spouse, parent, sibling, child, or close friend—the steps you need to take can vary.

Locate and Gather Records / Documents

The first and extremely important step when a family member or close friend passes away is to get organized, which will ensure the estate settlement process goes as smoothly as possible and there are no loose ends.

Locate a copy of the will as this will indicate who has been named as the executor of the estate. If there is no will, then the estate is considered to be “intestate” and the estate is subject to the decedent’s state of residence intestate succession laws. This requires going into probate court where a judge will appoint a representative to oversee the estate settlement. Unfortunately, until the court system has combed through every detail of their estate, all assets without named beneficiaries are frozen, creating a more time-consuming and exhausting process for surviving family members. Hence, the vital importance of at least a will.

Obtain multiple copies of the certified death certificate as this will be needed when contacting financial institutions, credit card companies, and investment firms. Keep in mind that some institutions will not accept a photocopied version.

Locate important personal documents such as the driver’s license (if applicable), social security card, birth certificate, documents pertaining to divorce if applicable, marriage license, retirement documents, etc. This information is helpful when contacting and informing Social Security.

Once the basic documents and tasks of informing the key agencies are done, it is wise to make a master list of contacts, including anyone named in the Will (if one was put into place), business colleagues, neighbors, and professional contacts such as the financial advisor of the decedent, their estate planning lawyer, and/or accountant. This will be used during the “Inform” step.

Understand the Probate Process

If the decedent did not have an active Trust (see Nathan’s blog on Trusts here) and did or did not leave a Will, the estate will need to go through the probate process. As mentioned above, if a Will is not in place, an appointed representative will need to be named by the court before anything can happen. With a Will, there are key steps, although the details will vary by state.

• File a copy of the death certificate with the probate court. This does not have to be the executor and can be the family member or the estate attorney.
• If a Will is in place, it is required to be filed with the court. The deadlines vary by state but can range from 30 days to 3 months after the decedent’s passing. The court will then validate the will.
• Once the court accepts the Will, a representative will be named to carry out the decedent’s wishes in the Will. This is usually the executor, unless that individual declines the responsibility.
• At this point, the purchase of a probate bond may be required. This is not always required, and if the deceased does not have large debts and the heirs wish to waive it, the probate process can continue without one.

“A probate bond is a financial guarantee bond issued to protect the interests of heirs and creditors of an estate from the negligence or fraud of the executor.” – executor.org

Identify Assets and Debts

Whoever is elected as the executor will have the responsibility to take inventory of all the decedent’s assets to see what needs to be distributed, as well as the debts to ensure there is a plan to pay them off. Assets will consist of:

• Cash: This may come in the form of bank accounts, physical cash, or CDs.
• Investments: Stocks, bonds, or mutual funds.
• Real Estate.
• Personal Property: Art, jewelry, antiques, vehicles, or other heirlooms. These may require a professional appraisal.
• Retirement Accounts: Such as IRAs or 401(k)s, which may have specific tax implications.
• Business Ownership.

Inform Necessary Parties

Once the probate or estate settlement process is underway, it is important to notify the necessary parties, including:

• Beneficiaries
• Agencies that were offering the decedent benefits (such as pension plans or annuity payments)
• Life insurance companies where the decedent had active policies
• Creditors, Banks, and State and Federal Tax Institutions: It is beneficial to ensure there is a bank account set up to receive all payments owed to the decedent, which should be used to pay off debts and taxes.
• Miscellaneous: Such as the post office, utility companies, and any companies where the decedent had subscriptions.

Distribute Assets / Inheritances

After debts and taxes are paid and probate is closed, the assets can be distributed according to the decedent’s wishes. Depending on your relationship to the decedent, you may find yourself or a loved one in a position of inheriting assets. It is important to understand the implications of inheriting assets for spouses and non-spouses, and it is highly recommended to contact a financial advisor at this point to discuss your options.

While we wish none of our clients and readers ever have to use the below flowcharts, we know that is not realistic, and can only hope they provide some guidance during a tough period of time.

Click image to open the full PDF checklist.

Click image to open the full PDF checklist.

References

• American Bar Association – Estate Planning Resources: https://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/
• Consumer Financial Protection Bureau – Dealing with Death and Debt: https://www.consumerfinance.gov/ask-cfpb/what-happens-to-your-debts-after-you-die-en-1463/
• Investopedia – Understanding Probate: https://www.investopedia.com/articles/personal-finance/111815/probate-guide-process.asp

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