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How to Help Beneficiaries Manage Financial Affairs, Thrive After a Family Member Dies By Scott Montgomery, CLU, ChFC

One of the most critical yet often forgotten steps in the estate-planning process is preparing a surviving spouse to take over a family’s financial affairs. Even if you checked off all the boxes on your estate-planning to-do list, creating a will, properly titling accounts, naming beneficiaries and structuring assets for tax efficiency, your plan may fail if your named beneficiaries do not know what they need to do to settle your estate and manage the inheritance you created for them.

The death of a spouse or a parent can be one of the most difficult and overwhelming experiences individuals will go through in their lives. The emotional and mental pain can be debilitating at a time when those you left behind are also tasked with planning a funeral, paying bills and making important decisions that will affect their lives for years to come. Even if you were deliberate and shared every detail of your estate plan with your beneficiaries before your passing, the list of things they must do can still become overwhelming.

One of the first calls widows/widowers and/or the children of decedents should make is to the decedent’s trusted financial advisors, who hopefully have deep experience navigating these matters and the benefit of knowing the details of the decedent’s estate plan and his or her specific wishes. Financial advisors, accountants and lawyers can help surviving family members gather important estate-planning documents, such as wills and trusts, and inventory your intangible assets, including bank and brokerage accounts, retirement savings plans and insurance policies. This step will also help introduce your beneficiaries to the tax rules and financial implications of rolling over inherited retirement accounts, which, depending on the type of account, can include required minimum distributions (RMDs) and forced withdrawals over a 10-year period.

Ensure your beneficiaries have access to funds they will need to pay immediate expenses. They will need to request from the funeral home multiple copies of your death certificate. This document is required to change ownership of accounts, including the utility bills, and claim life insurance proceeds and other benefits to which they are entitled, including Social Security benefits. Surviving spouses will also need to assess Social Security benefits claiming strategies and, in some cases, contact the decedent’s employer to receive unpaid wages and continue health insurance coverage without interruption.

When preparing your beneficiaries to settle your estate, it is equally important that you share with them or a trusted advisor the login information for your digital assets and online accounts, including those on social media platforms. Not only can this help surviving family members continue paying essential and maintaining their medical, home and automobile insurance coverage, but it is also one of the best things you can do to preserve your online legacy and protect your identity from theft and fraud.

As previously mentioned, settling a decedent’s estate comes with a minefield of tax implications that beneficiaries may overlook. For example, there is an individual federal income tax return filing requirement in the year of the decedent’s death. Surviving spouses may file a joint income tax return in that year. There could also be a federal estate tax filing requirement for the decedent’s estate, which the IRS considers to be a separate taxable entity from the individual decedent. Depending on where decedents live and the state where their assets are located, there may also be state income tax filings and payment obligations that surviving spouses and other beneficiaries must address.

Finally, it is critical beneficiaries meet with advisors to understand how their inheritances will affect their individual financial plans, investment profiles, estate plans and income tax liabilities in the future. Investments must be attended to and not put on auto pilot or ignored. You and your surviving spouse should not underestimate the various tax, legal and investment matters that must be addressed after death. Advanced planning is one of the best ways you can reduce and even alleviate these burdens on your loved ones.

About the Author: Scott Montgomery is a director with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor and a registered representative with PWA Securities, LLC.

Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor Ft. Lauderdale, FL 33301 (954) 712-8888.

Scott Montgomery is a registered representative of and offers securities through PWA Securities, LLC., Member FINRA/SIPC.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation

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Updated on October 2, 2023