No one wants to talk about death or the fact that it can happen to anyone at any time. It is a morbid subject to discuss, but it is also a vital conversation to have with our loved ones. If we do not take steps to prepare for our departure, we risk leaving our executor and beneficiaries in a difficult position where they must piece together information while grieving. Here are some reminders to help ease the burden of estate settlement:

Create a Will/Trust

A will is a legal document that lets you decide what happens to your estate after you die. If an individual dies without a will, a local probate court will choose who receives their property and other assets.

Is Probate Required?

The probate process is the legal method for administering and distributing a deceased person’s estate. Probate can be avoided if the decedent’s assets are held in a trust or their accounts are titled properly. Depending on the state you live in, most estate attorneys recommend avoiding probate as the process can be expensive and lengthy (for example, in California it can take a year or more to clear probate).

Assets titled in the following will avoid probate:

• Trusts
• Payable on death (POD)
• Transfer on death (TOD)
• Joint tenancy with right of survivorship
• Retirement plans (IRA, Roth, 401k, pensions, etc. with designated beneficiaries)
• Life insurance

Prepare an Advance Health Care Directive

An advance health care directive is a legal document that outlines how decisions should be made about your medical care if you are ever unable to make those decisions yourself. Part of the directive is nominating someone to have medical power of attorney to make decisions on your behalf. The power of attorney will go into effect only after your doctor deems you incapacitated.

Nominate a Guardian for Minor Children

If you are a parent, you can use your will/trust to nominate a guardian for your minor children. The surviving parent will usually get sole legal custody if one parent dies. However, in the tragic scenario that both parents pass, having a guardian nominated in your will/trust is crucial. A guardian will be responsible for all your children’s daily needs, including food, housing, health care, education, and clothing. If you do not nominate a guardian in your will/trust, a court will have to choose one for you.

Name an Executor

An executor is the person or entity named by the deceased person in a will to administer their estate. If a person has a trust, the executor is referred to as the successor trustee. Being nominated as an executor/trustee can be an honor, but the responsibilities can be substantial. The executor assumes the powers and fiduciary duties necessary to comply with both the terms of the will or trust and the legal requirements imposed by the state.

The time immediately after the death of a loved one can involve a lot of expenses. There may be hospital bills and burial costs, in addition to regular bills like housing expenses and utility bills. If financial assets like bank accounts are held in an individual’s name without any instructions at death, that money may be untouchable for an extended period and until the bank receives legal documents and a death certificate. Opening a joint account or adding a payable at death (POD) feature can give the executor quick access to funds.

Your executor should be able to access the following documents:

Financial Documents

• Tax returns (both federal and state)
• Wills and trust documents
• Beneficiary designations (for IRAs, 401k and qualified retirement plans)
• Bank account statements
• Brokerage account statements
• Credit card statements
• Life insurance policies
• Social security documents
• Passwords (for phones, computers, and online accounts)

Real Estate Documents

• Title papers
• Purchase and renovation documents
• Mortgage agreements
• Home equity loan documents

Other Documents (if applicable)

• Business financial statements
• Promissory notes owed by family or third parties
• Auto registrations
• List of valuables (antiques, artwork, collectible, jewelry)
• Safety deposit box key

Other Important To-Dos for an Executor

• Arrange the funeral or celebration of life
• Publish obituary and notify friends
• Stop all unnecessary expenses such as subscriptions, medical insurance and credit cards
• Obtain death certificates (typically supplied by the funeral home)
• Complete charitable donations

Obtain an Estate Tax ID (EIN) Number After Death

Your executor will be required to obtain a Tax ID number known as an “employer ID number” or EIN. When someone dies, their assets become the property of their estate. Any income those assets generate is also part of the estate and may trigger the requirements to file an estate income tax return. Form 1041 is required if the estate generates more than $600 in annual gross income. The estate federal tax return is due nine months after death, unless an extension is filed.

Conclusion

Navigating the complexities of estate settlement can be challenging and is a significant time commitment. While an executor or trustee doesn’t need to be a tax or legal expert, seeking professional guidance is highly recommended to ensure the estate is managed effectively and in compliance with estate laws. If you need recommendations, we are familiar with a number of highly regarded estate planning experts.

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