Loss of a loved one: Things to know before handling an estate

Losing a loved one can be overwhelming. If you’ve recently experienced a loss, you’re likely still dealing with complex emotions. You might not feel ready to move forward with settling financial affairs, even though it's necessary.

Many people trying to handle a loved one’s estate often have the same thought: “I wish I'd known that beforehand.”

This guide can help you be better prepared if you find yourself having to manage a loved one’s estate.

Understand how an estate passes at death.

It's important to understand how your estate passes at death based on your own state's laws because this can determine the documents required by the financial institution to help settle the estate. You'll be required to provide documentation to prove you have the authority to communicate with a bank regarding the decedent's estate, or their assets and liabilities.

For example, you may be asked to produce letters of testamentary, which is proof from the probate court that you're able to serve as the executor for the deceased person's estate, or letters of administration, which are issued when the deceased doesn't have a will.

At death, your estate may be divided into two broad categories: Probate and non-probate. Probate is the formal legal process determined by each state that guides the orderly administration of the decedent's estate. The probate court appoints the person who is responsible for the payment of claims and debts from the assets of the estate before distributing any remaining assets to the intended beneficiaries.

If the decedent had a valid will, the court normally appoints the person named as executor. If the decedent didn't have a will, the court will appoint an estate administrator.

Not all estates will enter the probate process. Small estate affidavits may be used to disburse an account or transfer property when formal probate isn't required. The requirements of this process will vary by state.

Non-probate property and assets

It's easier to identify the property and assets not subject to probate first. Again, depending on the laws in your state, here are a few examples:

• Assets passing by state property law: An example could be a jointly held bank or brokerage account with rights of survivorship, also known as JTWROS, or tenancy by entirety.
• Assets passing by state contract law: This could include life insurance, pension plans, IRAs, retirement accounts, annuities, with a valid beneficiary designation, and property titles such as payable on death, or POD, or transfer on death, or TOD.
• Assets that pass by state trust law and trust terms: A revocable living trust is an example of a trust that may not be subject to probate. Note that testamentary trusts (i.e., those created through a will after death) are subject to probate.

Probate property and assets

Any other property and assets not included in the above categories may be subject to probate, whether the deceased had a will or not.

Be sure important documents are easily accessible in case of incapacity or death.

Keep in mind that until your institution receives certain documents, they may not be able to tell you much about the decedent's accounts or policies. Note that different financial institutions may ask for different documents. Sometimes larger organizations offer products and services that include banking, property and casualty insurance, life insurance and annuities. Each of these departments may be subject to varying regulations. Therefore, they may require different documentation.

Depending on the nature of the deceased's assets, accounts and policies, their financial institution may ask for the following documents:

• Death certificate: Proof that the person has passed away.
• Last will and testament: The legal document stating how the decedent wanted their property or assets distributed to heirs after their death.
• Trust document: Required if the decedent set aside assets in trust for someone else. Sometimes family members take part in managing the trust or a third-party trustee, such as a bank trust department, can be involved.

Keep wills and trusts up to date with life events, such as marriage, divorce, births and the deaths of named beneficiaries. If you have a trust, it's important that you've acted to properly retitle all the accounts or assets intended to be held in the trust. Not doing so could lead to unwanted probate.

Identify your loved one's financial products, services or relationships with various institutions.

These might include bank accounts, certificates of deposit, property or auto insurance, life insurance, annuity contracts or other investment or retirement accounts. Depending on the account type and styling, you may need several different documents to settle your loves one’s accounts.

Understand that permissions can change upon the death of your loved one.

Although contracts or accounts may stay the same after a loved one passes, at times, the deceased's death automatically triggers changes in account access and permissions. This is often true even in the case of jointly held accounts. Keep the following possibilities on your radar:

• If your loved one had a power of attorney naming you as their agent, that permission becomes void after the member has passed.
• Conservator accounts can be frozen and become part of the deceased's estate after the owner dies. That means administrators can’t manage the accounts as before.
• Although a POD account is meant to pass to the named beneficiary or beneficiaries upon the deceased's death, it's different from joint ownership of the account. Therefore, the ownership transition may not happen as smoothly or quickly as you might expect.

Don't overlook these items.

Authorized credit card users

An authorized user may not continue to use the credit card of the decedent. For example, some financial institutions close the decedent's credit card as soon as they’ve processed the notification of death for the primary credit card holder.

We recommend setting up an authorized user as an enhanced authorized user by the primary account holder. This allows the authorized user to use their own log in ID and view account transactions and payment history. However, this account will still be closed upon the decedent's passing.

We also recommend all members who are authorized users have at least one credit card under their own name where they're the primary credit card holder. This can help ensure that they have an open credit card to use in case the other cards are closed.

Signature card updates

Sometimes, even joint bank accounts can be frozen if a signature card hasn't been returned to the financial institution prior to the decedent's passing.

Property and casualty insurance policies

Insurance policies for your auto, boat, motorcycle, home or other property may need to go through the underwriting process again upon the death of the co-insured. The survivor is responsible for updating all policies, and premiums may change as a result. Don’t forget to contact the insurer to remove the deceased person from the policies.

Life insurance funeral assignment

Sometimes having sufficient funds on hand for a loved one’s final expenses can be difficult. That’s one benefit of life insurance. A funeral assignment is an agreement signed by a beneficiary of a life insurance policy assigning all or a part of the life insurance benefits directly to the funeral home for funeral expenses. Upon approval of the death claim, payment for funeral expenses is paid directly to the funeral home and any excess balance is sent to the beneficiary or beneficiaries.

Policy and account beneficiaries

Talk to your loved one before they are ill or pass away to ensure they have updated their beneficiaries for life insurance policies, annuities and retirement accounts. Sometimes, due to death or changes in circumstances, the named beneficiary on a policy or account is no longer appropriate. Failure to do so could result in proceeds passing to an unintended beneficiary, regardless of anything documented in a will.

Make a to-do list.

It can be difficult to think strategically about next steps when you are dealing with the loss of a loved one. If possible, work with your loved one ahead of time so they can help make sure their affairs are in order. That will also help alert you to necessary obligations so you’ll know what to do when the time comes.

8 steps to take on behalf of the deceased

1. Get professional help as soon as possible.

Involve your legal, tax and financial professionals to provide needed guidance.

2. Submit court documents that help establish or identify the estate executor.

Your institution may be able to send you a link via text message to upload these documents or allow you to send them via fax or mail.

3. Inform your financial institution of your loved one's death.

This is often accomplishable online via a survivorship dashboard or by talking to a customer service representative.

4. Submit a death certificate.

You can usually upload it online, mail a copy or fax it.

5. Let financial institutions know about the deceased's products and relationships.

If you don't know, the customer service group can help you identify them and inform you of specific documents needed to settle their accounts.

6. Update insurance policies.

Insurance policies for auto, boat, motorcycle, home and other property usually must go through the underwriting process again. The survivor is responsible for updating all policies, and premiums may change.

7. Check with the funeral home.

See if final arrangement expenses have been paid through an insurance policy.

8. Update automatic services, such as bill pay.

After you provide your bank with your loved one's death certificate, don’t forget to update any automatic services.

We hope this information has provided time-saving tips and peace of mind for what can be a difficult period in our lives.