We recently talked about preparing financially for the “worst-case” scenario. By creating a plan for what should happen if you pass away unexpectedly, you can bring peace of mind and make it easier for those you leave behind.
But what if the worst has happened, and there was no plan? What do you do if your loved one passed unexpectedly and you don’t know what to do next?
First, don’t let the practical considerations of what to do about finances and final expenses get in the way of your emotional needs.
You are allowed to grieve and feel the loss of a loved one without having to rush into a mountain of paperwork. Get any kind of help you think you need so you can protect your mental health and state of mind.
People who rush through the process of dealing with a lost loved one’s finances often make mistakes they regret. Talk to people who’ve been through it themselves and find out what they learned. It’s common to think about getting rid of any sad reminders of the one you lost, but you might give away or sell something of theirs you’ll wish you had later.
Some people are taken advantage of by predators when they’re most vulnerable or become overly generous and give away too much of what they are left by their late loved one—protect yourself first, and don’t rush to dispose of sentimental items and assets that are left behind.
It’s normal to experience some level of grief and sadness for long periods of time after a someone passed away unexpectedly. You may experience bouts of depression and holiday blues during festivities, anniversaries, or vacations. It’s important to get professional medical help if you need it, and to remember that it eventually will get easier to cope with.
But what are you supposed to do once you’re able to cope emotionally?
After you’ve talked to those who can help you emotionally process the loss you’ve suffered, talk to a financial expert. Start with your late loved one’s own financial advisor or attorney, if they had one. If they didn’t use a financial planner, then you could look for one of your own, but be careful and get trusted recommendations before you commit to anyone.
If your loved one left behind more debts than assets, a nonprofit credit counselor will talk to you free of charge. If your late loved one still had a job, talk to their employer’s human resources department. They may have death benefits or life insurance through their job, and you’ll want to know if any of their employment benefits will continue for your loved one’s dependent family.
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You’ll need death certificates—multiple copies for different accounts, typically. Also, your loved one’s ID paperwork, like birth certificate, social security card, marriage license… any of these may become necessary to have, so locate them as early as possible. You’ll also want to find their Will, if there was one.
Note: If they served in the military their discharge papers (DD214 or other separation documents), this will help in determining if they are eligible for “Veterans death benefits” which helps to cover burial, funeral, and transportation costs.
As you deal with the final costs, like funeral and burial expenses for your loved one, save receipts for everything—there may be one final tax return you’ll need to fill out for them. If your loved one passed due to illness, gather any paperwork around final medical bills as well.
Also gather paperwork around any property that was owned, including any mortgage, reverse mortgages, or home equity loans still outstanding on the property. Look for info on any investment accounts, retirement funds, insurance policies, bank accounts, or regular bills like utilities and credit card statements. If you can find a recent tax return and credit report, those will help a lot.
Note: It may be illegal to keep utilities like water, gas, and electricity in a deceased person’s name if you are doing so to intentionally deceive the utility company. You’ll need to provide personal information, including the account holder’s name, phone number, date of death, and Social Security number.
Create a full accounting of income, assets, liabilities, etc. You want to be able to determine if you can manage the financial obligations left behind, or if the estate was insufficient to pay all of the bills that will start coming due.
Pay special attention to assets that are owed against, like a car with an outstanding auto loan or any real estate with a mortgage. If the heirs can’t assume those payments, it may be time to sell the asset or surrender it to the lender. Insurance policies protecting real estate and automobiles should be notified.
You will want a complete and thorough inventory of every account and obligations your loved one had. Close any account you can, and stop new expenses and bills from coming in. Accounts that will be kept open need to be transferred into your name; you want to have total control over the outstanding accounts and be able to budget to keep up with any necessary payments.
Don’t rush to pay off any outstanding debts until you’ve completed a thorough assessment of what debts are owed, and how your cash flow stacks up to your new monthly obligations.
Anyone your loved one had an account with should be notified, as well as the three credit bureaus, social security administration, and any organizations s/he belonged to. Some organizations offer their own death benefits, like veterans’ agencies, unions, or fraternal organizations.
Be alert to obituary swindles, also known as bereavement scams. “Obit-scouring swindlers pretend to be long-lost friends or relatives of the deceased, contacting surviving spouses out of the blue to commiserate and reminiscence. These shows of simulated compassion can evolve into romance scams or “attempts to defraud beneficiaries out of inheritance money,” according to this article from AARP.
If a debt collector calls, don’t commit to anything. They are unlikely to be sympathetic after your loved one’s debt and may pressure you to pay off the debt right away.
Talk to a debt coach first and create a plan. You may find out you’re not responsible for debts (depending on where you live and how the debt was set up, and whether it was your spouse who passed away). Remember, it’s typically the deceased person’s estate that pays debts, not the survivors (unless it’s a spouse, co-signer or joint account holder). Don’t be pressured into paying a debt you’re not responsible for with your own money.
If the worst-case scenario happens to you and there was no plan, take your time and get professional help from people who specialize in estate matters if needed. Don’t fall prey to a scam or debt collector, and don’t take on responsibilities you can’t afford. Talk to a nonprofit debt coach for personal expert advice, budget help, and a plan to keep financial considerations from making a bad situation worse.
