Written By: Tony Pitzer, CFP®
No one is ever prepared for the passing of a loved one. Even when family members have time to say goodbye, the pain isn’t lessened. We’re always left reminiscing about our time spent with them, and then doing our best to be strong in a future without them. As difficult as the emotional stress is to deal with, families still have the task of sorting out the person’s financial affairs. To create some order in an already chaotic time, some individuals name an executor of an estate to carry out that process. An executor has the legal responsibility to organize the estate, pay off outstanding debts and bills, and then distribute the remaining assets according to the decedent’s last wishes and orders. There is no monetary threshold for needing an executor of an estate, but larger estates can benefit from calling for professional and legal assistance.
Who is the Executor?
Generally, a family member is selected for the role. Whoever is chosen, there must be an unshakeable trust and belief in that person to carry out their duties with the heir’s best interests in mind. If no family member is available, a corporate or company executor might step in.
Depending on the net worth of the individual, executors work with an attorney and financial planner to catalog things that don’t pass easily via their will. Items with subjective worth, such as art or a wine collection, need to be appraised and properly valued. A certified financial planner can help navigate that process.
What is Probate?
After the executor of the estate is established and they’ve assumed their role, they enter probate. Probate is a court-supervised process of authenticating the will and last testament. The stakeholders will work together to identify and locate the assets, as well as determine each item’s value. As mentioned earlier, for items like art, an appraisal needs to be organized. A financial planner can assist with probate court forms and other processes.
Once the items are cataloged, the executor will pay off any outstanding debts and bills that are left behind. Depending on the value of the estate, federal estate taxes can come into play. The law dictates that estates worth $11.7 million per person are subject to additional taxes. After settling outstanding bills, debts, and taxes, it is then the executor’s responsibility to distribute the remaining assets based on the will. The length and difficulty of this process differs from state to state, and consulting with a financial planner can help mitigate the stress of probate.
Probate doesn’t always flow as smoothly as the recently deceased might have wanted. In addition to appraisals holding up the process, unruly heirs and unlisted personal property can lead to complications. After a family death, heirs might have conflicting opinions on who is entitled to what property. Family members often have keys to each other’s houses or access to bank accounts, and the executor of estate, who is usually a family member, must make sure that all items listed in the will are accounted for.
However, unlisted items are extremely common in estates. People commonly buy new things like TVs, watches, or cars. But no one is rushing to their will after the purchase to update who gets the item after they pass. Part of the estate executor’s role is to determine how to distribute unlisted property in a fair manner. In certain situations, the property might be sold and the cash divided among the heirs.
What To Do When a Spouse Dies
There are steps for newly widowed individuals to take. Reach out to a certified financial planner. Since you’re no longer planning a life for two people, your investments should reflect your personal needs, such as growing your own wealth and planning out your estate. Additionally, a financial planner can identify ways to help you live more comfortably that you might not have found on your own. Those ways may include being able to collect social security as early as 60 years old instead of 62 due to being a widow or widower or being able to roll over assets into an inherited IRA. That would give the spouse access to those funds before age 59 without the 10% penalty.
You should also take time before making a big financial decision. The death of a spouse is a major event that alters your life. You shouldn’t rush to make another major decision, such as selling your house or quitting your job. In high-stress situations, we tend to make decisions based on our emotions. Don’t give up something that you might regret later. You deserve time to mourn and gather your thoughts.
Reach out to Merit Financial
If you have questions about setting up a will, establishing an executor of an estate, or need financial advice after the passing of a spouse, Merit is here to help plan the best future possible for you. Please reach out to us here to set up an initial consultation.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation. Merit Financial Advisors and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.