Financial Steps When a Loved One Dies
Each week in this column, I like to share life lessons with readers. This week’s message is difficult to share, because it is very personal for me. But this is information all readers should have.
Last October my family was dealt a blow when my only daughter passed away unexpectedly. She was a special education teacher in Hawaii. She had a bank account, lines of credit, and she filed taxes. Thus, there were important financial matters that needed attention. Some of these I simply had to learn the hard way.
Despite the emotional blow, when you lose a loved one you must immediately deal with the finances of burial or cremation. It’s critical to let your loved ones know your wishes beforehand in the event you pass away. Otherwise, they are just guessing.
Further, your family could end up spending a lot more than you intended, thinking it’s what you would have wanted. When you’re grieving, you’re vulnerable. However, you could take some of that burden off the hands of your family by clearly conveying your wishes, or even by prepaying for your funeral.
In addition to dealing with the funeral service, the funeral director has two very important roles. One is helping you obtain a death certificate. You will need this for all sorts of things in the months ahead. But the second, which I didn’t know at the time, was to make sure the funeral director notifies the Social Security Administration of the death.
The funeral director obtained two death certificates for us “without cause.” However, we were under the impression that we needed a final death certificate — “with cause” — before we could take further necessary steps. That can take months to receive. Therefore, we took no action for a couple of months. My daughter’s bank account remained open, and businesses were still drafting her account.
Immediately after her death, we contacted her landlord, and were given permission to collect her personal items. That also helped us understand which bills she was paying, so we could contact the appropriate companies and explain the situation.
With mail forwarding set up, we started to get bills from utilities and from the hospital. (She was hospitalized for 11 days before she died.) Each time we called and explained the situation, but without a final death certificate, her estate was essentially frozen. No life insurance could be paid out. Her teacher retirement account would also have to wait. Some of the creditors said they would write off the bills, and some said they would send them to collections.
About two months after her death we started getting notifications from banks that someone was trying to open up lines of credit in her name. Someone out there had her Social Security number, and was using it to try to open up lines of credit at Chase, CitiBank, and Wells Fargo. Fortunately, these banks were on top of things, and because I set up my daughter’s mail to be forwarded to me (another important step!), we received these notifications.
At that point, I verified that the funeral director had notified Social Security. He had, but he said it can take a while for them to update their systems.
But I also learned I needed to inform the credit bureaus, so they could freeze her credit. That was a bit of an ordeal, but I finally spoke to someone at Equifax. They said they couldn’t do anything until I sent a letter and a copy of the death certificate. They told me the one I had would suffice, and that I didn’t need to send the final version. Here are the instructions. Once that is done, they will notify the other credit reporting agencies.
I exchanged messages with my daughter’s bank, who explained that they could close the account with one of the death certificates we had, and an Affidavit for Collection of Personal Property. I followed those steps, and the account was closed.
The final thing you will have to do is file a tax return in the name of the deceased. That means you will need to contact the entity that was paying the deceased to make sure you get the proper tax forms. On the final tax return, note that the person has died. This serves as notification of the death to the IRS.
This all presumes that you are avoiding probate with the estate. For a more complex estate, you will have to start the probate process.
To summarize, the key steps that need to be taken following the death of a loved one are:
- Decide on a funeral home.
- Work with the funeral director to obtain a death certificate, and ensure that they notify Social Security.
- Inform the landlord and collect personal belongings from the home if they are renting. Take note of any bills the deceased appear to be paying and contact those companies.
- Set up mail forwarding from the deceased.
- Inform financial institutions of the death.
- Contact the credit reporting agencies and inform them of the death.
- Obtain tax documents and file the final tax return.
In conclusion, the time following the death of a loved one is an extremely stressful period. Dealing with the financial matters following the death adds to the stress. By summarizing the important points, which I have had to learn the hard way, I’m trying to help those of you who may face these difficulties in the future.
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