Knowing what to do when a spouse passes away can make a difficult situation a little easier to navigate. Unfortunately, we have seen too many cases where the surviving partner wasn’t ready for this upsetting situation. Being prepared will ensure that important financial issues are properly addressed. Here are some tips for handling the death of a loved one:
Key financial issues to remember:
Here are some important financial responsibilities that need to be addressed soon after the death of a loved one. These duties include:
1. Notify Social Security. Payments for a deceased person generally need to be stopped in the month of their death; although as a widow or widower, you may qualify for survivor benefits.
2. Don’t forget to file a tax return. Both an estate tax return and an individual return will need to be filed. An experienced accounting firm can handle the intricacies of this legal requirement for you.
3. Close or update financial accounts used by the spouse. When your spouse dies, there will likely be lots of administration around their financials. For example, credit cards will need to be closed (for a joint card, the card company will need to be notified), ownership of joint bank and brokerage accounts will need to be updated, individual accounts will need to be closed, and insurance policies will need to be discontinued. Some accounts may need to go through probate, while others will be exempt.
Accounts that do and don’t go through probate
Financial accounts of a deceased spouse are not automatically subject to probate. While many accounts are, there are some exceptions. For example, most trusts are exempt from probate. Payable-on-death bank accounts and transfer-on-death brokerage accounts also avoid a probate judge’s inspection. In all three cases, assets in the account are passed to a named beneficiary or beneficiaries automatically.
Trusts and POD/TOD accounts take precedence over anything a last will and testament specifies. For these accounts, whether the deceased had a will is not relevant. If there is a will, and there’s a conflict between what the will says and the named beneficiary on the account, the account prevails.
In most cases, a transfer of assets from an account that is exempt from probate cannot be challenged in court. There are exceptions, however. For example, if a POD or TOD account was opened in a community property state, and assets were deposited after the spouses married, and the beneficiary isn’t the other spouse, the transfer could potentially be challenged.
Another exception is created when a trust or POD/TOD account names a single beneficiary who predeceases the account owner. In this situation, the account’s assets are transferred to the estate, which is subject to the probate process.
Due to the complexities surrounding the financial consequences of a spouse’s death, it’s best to have an expert on your side. To speak with a financial planner who knows exactly what to do in this situation, click the button below.
Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Advisory services offered through Glass Jacobson Investment Advisors, LLC. Glass Jacobson Investment Advisors is not affiliated with Triad Advisors, LLC.
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