When Someone Dies: The Financial Steps
Very little of this is urgent, and the pressure to act fast is where costly mistakes happen. Here is what genuinely needs doing early, and what can safely wait.
What Actually Needs Doing First
In the first days the only financial tasks that matter are small.
- Order more death certificates than you think you need. Ten to fifteen certified copies. Almost every institution wants one and many will not return it. Getting more later is slower and more expensive than ordering them at once.
- Find the documents: will, trust, insurance policies, deeds, recent statements, tax returns. A list of accounts matters more than any single document.
- Secure property. An empty home, a vehicle, anything of value.
- Do not rush to close accounts. Several things below depend on them staying open.
Tell the financial institutions, and then stop. Debts of the deceased are generally paid by the estate, not by relatives personally, and paying a creditor out of your own pocket is usually both unnecessary and unrecoverable. Collectors sometimes contact family in ways that imply otherwise. You are not personally liable for someone else’s debt simply because you are related to them.
Who Gets What Is Mostly Already Decided
Two separate systems are running, and most people only know about one.
Assets with a named beneficiary pass outside the will. Retirement accounts, life insurance, payable-on-death accounts and jointly owned accounts with survivorship go straight to the named person, usually quickly and without probate. The will does not govern them.
Everything else passes through the will, and through probate, which is the court process that validates it and authorises someone to act. If there is no will, state law decides who inherits, which is frequently not what the person would have chosen.
Notifications Worth Making
- Social Security. Funeral homes often report the death, but confirm it. Payments received for the month of death and after usually have to be returned, and a surviving spouse may be entitled to a lump-sum death payment and to survivor benefits.
- Employer or former employer, for final pay, life insurance and any pension or retirement plan.
- Insurers. Life policies do not pay automatically; someone has to claim.
- The credit bureaus, to flag the file as deceased. This is the main defence against identity theft using a dead person’s details, which is common enough to plan for.
- Veterans Affairs, if the person served. Burial benefits and survivor benefits exist and are frequently unclaimed.
For a Surviving Spouse Specifically
Two decisions carry real money and both have time limits worth knowing.
An inherited retirement account has different options for a spouse than for anyone else, including treating it as your own. The choice affects required withdrawals and tax for decades and is not always reversible.
Social Security timing. Survivor benefits and your own retirement benefit are separate, and in some circumstances one can be claimed while the other grows. Getting the order wrong can cost a meaningful amount over a lifetime.
Selling the house, moving, giving money to family, buying a financial product. Grief and a lump sum together are exactly the conditions predatory sales target, and the pressure to decide is almost never real. Park insurance proceeds somewhere insured and boring, and revisit in six months.
What Not to Do
- Do not distribute assets before debts and taxes are settled. An executor who pays beneficiaries first can be personally liable for what is left owing.
- Do not keep using a joint card or an account after the holder has died without checking. Rules differ and it can complicate the estate.
- Do not ignore a final tax return. One is usually required for the year of death, and the estate may need its own.