When someone dies, their family members must go through a lengthy series of tax, financial, and legal steps in order to sort out the affairs of the deceased. Trusts and Estates Associate Adam Garber teamed up with Business Insider to put together a guide to many of the hurdles that surviving relatives will certainly face. Take a look below for a short summary, or view the full article, "Here's what happens with your stuff after you die."
It will be necessary to determine whether or not there is a will.
If there's a will, the executor will be named in the will. In lay-person English, their job is to administer the process by which assets are transferred, including paying the deceased's debts, filing their income-tax returns, and distributing any remaining assets according to the terms of the will.
If there's no will, the remaining assets pass to the decedent's heirs according to the state of law. The executor is appointed by the court.
The executor or closest family member will need many copies of the death certificate.
It's important to get multiple copies of the death certificate. They will be necessary when notifying financial institutions, government agencies, insurance agencies, and others about the death.
Death certificates can be obtained at the funeral home. It's a good idea to obtain at least 10.
The deceased's debts will — usually — not be passed on to family members.
The deceased's estate is liable for debts, but the deceased's family is usually not. The exception to this is when debts are in joint names/cosigned, in which case the survivor party will be responsible for the debt.
Someone will need to contact Social Security and other government agencies, alerting them of the death.
"This step is typically completed by the executor of the decedent's estate. The executor should contact the Social Security administration to let it know to discontinue Social Security payments," Garber told Business Insider. "If the Social Security Administration is not notified, the decedent's estate will owe the money back."
Additionally, "If the decedent was a veteran, the executor should contact the VA, as there may be a death benefit payable as a result of the decedent's death."
After that, every other group and company that the deceased was associated with will need to be contacted.
An executor will need to get in touch with banks, savings providers, mortgage providers, credit-card companies, and insurance companies to notify them of the death. Additionally, they will need to get in touch with the "everyday things" that may not immediately come to mind, including utility companies; internet, phone, and TV companies; and even the deceased's employer.
The executor will have to file a final income tax return, and possibly an estate tax.
"The executor will also have to file a final income-tax return for the decedent. On the income-tax return, the executor will indicate the decedent is deceased," Garber told Business Insider.
"Also, if a decedent's gross estate exceeds $5,430,000, the executor will have to file an estate-tax return within nine months of death," he added. "If an estate tax is due and a return is not filed, there are penalties for failure to file and file to pay and interest is assessed on any amounts due. If the executor distributes the assets without filing the return, the government may have recourse against the executor."
If an heir wishes to live in a home with mortgage debt, then they are responsible for making the payments. Otherwise, they can try and sell the house to pay off the existing loan.
If a person who inherits a house with mortgage debt wishes to live in it, then they will be responsible for making the mortgage payments.
Alternatively, the person can choose sell the home in order to attempt to pay off the existing loan. But if the mortgage is worth more than the property, then the executor can try and get the bank to agree to a short sale or tell the bank to foreclose.
"That being said, if there is a personal guarantee, the bank will have a claim against the decedent's estate to the extent that there is a short fall and the decedent's other assets will be used to pay that claim," according to Garber.
Creditors will have a claim against the deceased's estate.
"When a person dies, that person's creditors have a claim against his or her estate. The executor pays all of the decedent's debts with his or her assets," Garber told Business Insider.
"If the decedent's assets are insufficient to pay his or her debts, then those debts die with the decedent so long as somebody is not jointly liable on them." "In the case where a decedent's debts exceed his or her assets, state law sets forth an order of priority in paying off a decedent's debts," he added.
The executor of the deceased's estate can reclaim any debts owed.
"A debt owed is an asset of the decedent's estate. The executor of the decedent's estate is in charge of collecting the debt. It is important to make sure that debt is papered so that the executor will have a way to learn about the debt," Garber told Business Insider.
To read the full article, please click here.