What to do when a parent dies?

0:00 Welcome to something more with Chris Boyd. Chris Boyd is a certified financial planner practitioner and senior vice president financial advisor at Wealth Enhancement Group, one of the nation's largest registered investment advisors. We call it something more because we'd like to talk not only about those important dollar and cents issues but also the quality of life issues that make the money matters matter. Here he is, your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod and across the country. Here's your host, Jay Christopher Boyd. All right, joining me today is Jeff Perry and Russ Paul. We are all from the AMR team at Wealth Enhancement Group.

0:40 Thanks for being with us. And today, you know, we had occasion where we had a client who was talking to us about the passing of a parent and the thought occurred to me that this this is not unique. We run into circumstances like this with some, you know, frequency. Not, you know, not all the time, of course, but, you know, where a family member dies and there's a need for thinking about some of the planning and issues that come out of that. And we thought we'd talk about that today on our show. Try to give you some helpful, thoughtful things to consider as you embark on that kind of a circumstance.

1:25 Jeff, do you want to just comment a little bit about this? I mean, you've been through it, too, I'm sure. So I have. It's been five years next month since my mother passed. And, you know, I think, first of all, we should address kind of the emotional thing. I think there's a tendency when we have a loss of that significance to, you know, want to start taking care of the details and getting into whatever the things, you know, many of these things we're going to talk about today. But it's important that you allow yourself time to grieve. You allow yourself to have those emotions and that you surround yourself with emotional support and not just throw yourself into the logistics and the details.

2:09 Well, that's a really good point. I think far too often people are prone to just try to maybe it's nervous energy, busy energy, but they tend to jump right into it and want to resolve everything instantaneously. I think it's because they're trying, you know, they know they can't fix the situation. They know they can't bring mom back and, you know, your dad back, whatever. And I know you've been you lost your dad. So you have a reference to this as well. So we kind of focus on what we can control. Right. And so we can control about doing paperwork. We can control about checking on the house or checking on the surviving spouse if there is one or whatever it is. And so we just throw ourself into that and we don't allow ourselves to really kind of settle into what's happened and, you know, the emotional side of it and taking care of the family members and, you know, the emotional side of it, not just the details, but the details are important.

3:01 And I know we're going to focus on those. But yeah, I just wanted to have my opening thoughts about That's a great point. I think and I think it's too often we run into circumstances where people that in that nervous energy or whatever. Yeah. They just and sometimes it's anxiety, right? Sure. Well, maybe I you know, do we have enough to cover these issues? Is there cash? Is there liquidity? We got to get the life insurance moving. We got to move the IRAs or, you know, whatever. They start jumping right in and thinking, oh, let's let's get into crisis mode and address these things, right?

3:41 And really, generally, those things that we're going to discuss and some that you've mentioned, they are not an emergency. I mean, there's no like, we need to do this today. It's good. It's good to get organized. It's good to move forward. But none of them are an emergency. So give yourself some, you know, give yourself some leeway, some grace to take care of the important things first and certainly get organized and move forward and get the details done and do the planning. But don't put extra anxiety on yourself. And I do think, you know, this maybe prelude, you know, does lead to the idea that it's important to do some for planning and forward planning in advance of some of these kind of circumstances when it comes to the estate planning, when it comes to having liquidity reserves, having some some important documents, maybe some guidance for whoever's coming in behind you, you know, to know what there is, where to find it, you know, some of those kind of things.

4:44 But, you know, I think that's really a part of that thought process is the preparations that one can do for their family members. Well, it's an excellent point, Chris, because, you know, the two the two ends of this situation is someone who does a lot of planning communicates the plan to the executor, to the trustee, whatever it would be, to the family members. And so everybody kind of knows what the plan is, knows where the documents are, knows who the attorney is, know who the financial advisor is. And so it's that's one scenario, which is actually a gift you give to your family to to be prepared for your for your own death and to be clear on what you want, how you want things handled and have liquidity.

5:31 So there's no one stressing about how the light's going to stay on at that house or mom's house versus the other the other scenario, which we see probably as frequently as the plan scenario is that no one knows anything. No one knows if there's a state plan. No one knows the passwords to any of the online accounts. No one knows if there's a safety deposit box. And that creates a huge amount, a lot of anxiety, avoidable anxiety, avoidable. Yeah, that's why I say it's a gift to your family. If you if you do the proper estate planning and you include family members where appropriate and really take that off of that burden, if you will, of putting that onto your family members when they're already in some type of grief, it is common for one partner, spouse, you know, to be more engaged.

6:31 And it is common for one spouse to be less engaged in the financial life. It's not to say that's always the case. We run into some families where it's very much mutually involved. And, you know, Jeff, you talk about how you and your wife have regular a review of things together. And so there's a there's a good familiarity with all this stuff. Yes. But I think, you know, not everyone has that. And oftentimes when it's the surviving spouse who is left with the I don't I don't deal with this stuff. It's foreign to me. He she did all of that.

7:13 It can be very stress filled because now it's suddenly I have to learn something I've been putting off for, you know, all these years and never really wanted to know because that was their thing, you know, so it can add stress. But it is, I think, important for there to be some involvement to the point where there's at least sufficient awareness of some of these things. And the more you can do some of that, even on the periphery, the better you are when the time comes that you step into that role of I now I need to be more involved, it's not as uncomfortable, maybe, or overwhelming about, you know, we've been dealing with volatile markets lately.

8:05 Well, that's something that if you've never done it before, suddenly it becomes really anxious, ridden in a time when you're like, do I have enough? Will it will be able to make ends meet? And so, you know, all the things that people do in this time when they are grieving. So, yeah, just try to share some of that. Not only the hey, this is where my important documents are kept and here's a letter of instruction, you know, who to call when something happens, which is a really good idea. That'd be great. Right. You know, but OK, so, Jeff, Russ, I think you wanted to add something.

8:46 Am I right? Well, I guess just to Jeff's point, I think there's such a level of overwhelm, whether it's a spouse or a parent or especially if it's a sudden passing, you know, there's so much going on. You have to call family members, you start getting letters, you you know, and then you have to think about funeral arrangements and these types of things. And especially if it's, you know, one person or a couple of people, it's it's a lot. It's a lot to deal with, let alone the financial. And the immediacy of it is, oh, we've got funeral arrangements. We've got to come up with an obituary, exactly, eulogies and all the things that go into that immediacy of.

9:28 The passing and all the logistics involved on top of the emotional grief. Yeah, it's a lot to a lot to deal with. So so so usually the financial can take a backseat to that. It doesn't need to be addressed until after that has been done. Although I do see, by the way, it seems like people have a longer period from the time of one's passing to. It seems more common to me that culturally, you know what I mean? Yep, I see it like a celebration of life, you know, within a week or so.

10:09 Suddenly, you know, people are going weeks and months between the time of passing to some of those very common. We're going to a service on Saturday and the lady has been deceased for probably two months. Yeah, yeah. Isn't that interesting? Well, in that case, you might be needing to deal with some of the financials a little sooner, right? Not in that instance, but most instances you're dealing with this, you know, get through the grieving, the immediacy of all of that. Then let's turn our attention to some of the financial implications.

10:51 Now, we can talk about maybe some of the things that are common things people want to deal with. I mean, probably the first and most obvious is you need to obtain a death certificate that's usually provided through the funeral home in the process. They usually provide. They do. And one piece of advice from not only myself, but other people that I know have gone through this order more than you think you need. Yeah, there's a cost for a death certificate. You may not be aware of this, but an actual embossed or whatever they are, you know, death certificate. There's a charge to obtain those.

11:33 Some people tend to be a little bit hesitant to say, oh, how many do I really need? But so, you know. Yeah. Don't order one, you know, just to think you can photocopy it because many institutions require an original. Right. So who might be examples of people that would require a death certificate? Jeff? Well, certainly any governmental agency, you know, depending if you're applying for survivor benefits on a pension, perhaps, or maybe you're going to look at survivor benefits on Social Security. Any governmental, the Veterans Association, Veterans Administration, they would be they'd want originals. And I think there's some, you know, brokerage firms and other financial institutions that want to, you know, and just your life insurance.

12:23 Oh, definitely. Yeah. And there's two types of by the way, there's two types of death certificates. One has the cause of death and all the details and one does not have that. So good point. Circumstances, maybe you don't necessarily need that information. That's right. So if that's one of your concerns about, you know, sharing death certificates, there is a short version, a long version. And I believe that the you know, the governmental agencies certainly will take a short version. A life insurance may require a long version depending on the cause of death and depending on the policy type. Right. Yeah. Not sure. Good point. That's a tidbit I hadn't even thought of.

13:03 Yeah. I think there's a temptation to maybe be hesitant to inform the pension company and the Social Security that there's been a passing because it's like there's income coming in that might be changed or disrupted, but guess what? It's the law and Social Security is one of those mandated when there's a death certificate filed, it automatically goes to Social Security Administration. So there's not a lot of people 300 years old. Well, I'm not saying there's not flaws in the system.

13:45 I couldn't resist. I know. Or data entry mistakes. Right. Yeah. But yes, you have to report these things in a timely manner. And, you know, we do see in the news some stories that people who passed away and, you know, people don't report it. And things get Social Security fraud and it does happen. But if you go to a funeral home and report, you know, and ask for a death certificate, which it's going to get back to so you may as well do it. Right. And yeah. And just you don't want to be in a position where you have to pay back substantial sums if you, you know, delayed very long. You know, I mean, things don't necessarily happen instantaneously, as we said.

14:26 But you don't necessarily want to be in arrears for six months or a year or whatever, because that gets clawed back and you're you know, you end up having to repay that money and you don't want to have spent it and need it and, you know, all that kind of thing. So. OK, so in terms of life insurance, I've been on the other side of this as a life insurance agent early in my career when we've had a death claim and delivering a check to a family. These days, I think mostly it comes in the form of some kind of an account that's an interest bearing account that you can write checks against or whatever.

15:09 But, you know, same same concept, that notion of having those resources that have been planned for. And and I find that at least in the past, when I've been involved in this, it seemed to happen generally pretty quickly. Russ, did you have life insurance involved in your family story that was it something that happened quickly in terms of getting the death benefit? Well, you know, you need the like Jeff said, you need a death certificate. So that took a little while. And then if the submitted and then it did take it wasn't immediate. And I know some insurance policies offer like advance.

15:50 Oh, yeah. But there's usually some cost associated. Yeah, yeah, yeah. So it's definitely not ideal, but it did take some time, probably two or three weeks, I would say. So, yeah, everything sorted. Yeah. Getting a death certificate and everything. I hear that and I think, well, that's pretty quick. Well, like if you need the access to the funds right away, if there wasn't proper planning done to get accounts in order and to get beneficiary designations on file, you know, it can change the dynamics. But it felt like a long time. Yeah. Yeah. When you're when you're in that moment trying to deal with it and plan for paying some bills and stuff, probably create stress.

16:34 Banking is another topic that's challenging because it depends. Yeah. But on one level, you kind of want to keep those accounts open as funds come in. And I guess if you have a joint account, that can be much more efficient. On the other hand, you know, if you're getting checks made payable to a deceased person, how do you process those? Well, I think it's really important that you keep the bank account open. And, you know, even if there's money going out, it's the bank account can tell you a lot about the person's life and what their obligations are.

17:19 A lot of people have auto pay set up for every bill that they have. So if nothing else, you're gaining information about what what you have to take care of if you're the executive for, you know, in this case. That's a good point. Auto pay, right? Yeah. These kind of things can be huge. I went to an FBA talk recently and I think we'll try to get the presenter as a guest sometime on our show. And she was talking about, you know, digital footprint and all this kind of thing. And I mean, your automatic banking is one example, and she was talking about a widower who he hadn't been paying the bills because it wasn't one of the bills he was used to paying and suddenly turned off, you know, and it's like, oh, yeah, that was paid out of her account, you know, that kind of thing.

18:12 So you can imagine circumstances like that where, you know, if you're not keeping those accounts active, but better to be, you know, this is, again, for planning, make sure your accounts are joint accounts or in a trust or, you know, some mechanism that is appropriate for at your passing that can make those funds accessible readily, not require probate. You know, that kind of thing. One of the issues to the bank accounts and other accounts is passwords. Yeah. You know, more and more everything we do is online and passwords are something that people either have one and they keep in their head or they use a Google password or, you know, some other type of password management system.

19:03 Right. They write them down on a sticky note somewhere that you'll never find. So it's because I can relate to that. Yeah, sure. It's a tricky question, though. I mean, we're inundated with protect your passwords, however, right. And then we're asking you, don't forget to share your passwords in case you pass away. Right. And don't don't write down words, but share your. Yeah, right. So it's possibly the virtues of one of those programs that helps to remind you, remember passwords, but does someone else know how to get access to that? And do they know that you're using it? Right. Yeah. So it's a it's a delicate issue, but it is it is a burden that you're putting on your executor or your heirs or the people that you're asking to take care of, you know, maybe a surviving spouses that you have access not just to the funds, but to the actual information that you need.

20:00 Right. To manage. Well, we'll come back and do a deeper dive on digital assets and planning for that on another show, because I think that's a very full topic in and of itself. So going back to, you know, when a parent passes, you know, one of the obvious things is to make sure that the home is secure. Right. Who has keys besides you or do you? Right. But, you know, but making sure that you have that kind of limited, you know, as to who can access things. I was surprised that who had keys after my mother passed virtually virtually everyone.

20:46 Yeah, well, and particularly if you have multiple family members, it would be natural for maybe multiple family members to have keys, but if you are the executor of the estate, you might want to have limits on who has access to what who's taking what from the home so that it goes by plan, you know, what's that? Change the locks. Change the locks. Yeah, probably. Probably the right answer, because you don't know. No, it could be lots of people that aren't family as well. Could be a repair person that had a key for a moment and no one got it back. Yeah, could be.

21:26 Who knows? Secure the property and also the property, the valuables inside the property. Yeah, right. You know, that's also important to consider, especially if you don't know who has access and turn off the water. Yeah. Oh, good point. Yeah. Laughing because I'm I'm notoriously been bad with that on our own house with the change in seasons, much better now after learning a lesson. What about things like Medicare or the Veterans Administration?

22:07 How how does one go about that? You know, that becomes another topic to think about. Make sure you get these, um, uh, particularly if there's outstanding costs with regard to medical expenses late, late in life. Find and, you know, identify legal documents. If there is a will, it may be the guidance of how things are handled for settling in a state. Um, and I think what's funny about this, Jeff, is that far too often people really don't know what they don't know when it comes to the settling of an estate.

22:54 There's there's a lot involved and we tend to think, well, I can do this. You know, it's it's not that big a deal. And sometimes that's true. But there's oftentimes there's things that get overlooked in that process and there may be reasons it's advantageous to to deal with it. Give you an example of something that came up recently. The idea of some widow we were talking with. If it was a widow or widower. But anyway, a family we're talking with and the residents of the house, there was never anything done to address the do you remember who this was?

23:35 I forgot who it was. Well, but just the step up in basis that would be benefited on the house at the first spouse's passing. There's never been any steps to make that notation, make that, you know, materialize that the virtue of how are we going to get that benefit of a step up? And this is was there any appraisal being done at that time? Was there a filing of an estate tax to address these kinds of issues? Were brokerage accounts changed so that the basis of investment assets that were jointly owned adjusted to to include half of that step up in basis or whatever?

24:24 So there's a variety of different circumstances. So it's hard to speak generically about this. But these are things that oftentimes people don't know to do. But if they don't, it can undermine the end of paying more taxes is ultimately what it means. And they may be benefited by actually seeking counsel from a professional lawyer who does a state settlement, you know, kinds of the wills and trusts. Just that issue alone would probably save. And depending on the size of the asset, the cost of the woods, you know, the typical household could tip could cost you more by not getting professional advice.

25:07 Yeah, it's a good example, right? So find those documents, identify who the relevant person is, who's going to essentially be used to call it an executor, executrix. What do they call it now? Representative, personal representative and identify that and get that process started, which is a lengthy process. It requires public notifications and inviting contests. And it's a judicial process. So it takes takes time. What are some other things that people need to think about? I have I wrote down one that pretty interesting to notify the credit bureaus and credit agencies. So there's no idea.

25:49 Yeah, like the credit fraud. Yeah, exactly. That's one I haven't thought of, but it's the important one. Yeah. Sadly, I've read some articles on that. Russ, you're absolutely right. And sadly, most of the cases of fraud are related to the decedent. Right. You know, to that point, you got to cancel credit cards that aren't being used anymore. You've got to go through the process of, you know, turning off the electricity or moving it to a different name or whatever it's going to be. But these are things often many of these considerations, you know, changing the the title to your IRA, to the beneficiary.

26:29 And these are things you probably should do after you've had that consultation with the attorney in case there are some decisions that, you know, this could have implications of the options of how you might handle some aspect of the estate, whether it's, you know, whether when you know what at what level do you consider the the value of the estate and what date? Well, some of these decisions could impact that prospect as an example. So that was a good one, I think, CARS.

27:12 CARS is a tough one because it's, you know, even people who have family trusts, you know, they've done some work. So they've they want to avoid probate. They want to keep it private. They want an ease of transition and all the reasons that someone might do a family trust. Yeah. And they put their house into it. So that makes it easier. They put their brokerage account into it and then they kind of move on in life and say that was done and then they, you know, get a new car, right? Or they buy a boat or a mobile home, you know, an RV or something that isn't insignificant in value and does have to go through a process of who gets it. But if it's, you know, if it's not in the trust in my scenario here, it has to go through probate.

27:57 And there is a simplified version of probate, you know, not a full blown probate. If it's just a simple vehicle, maybe and not a lot of assets. It's pretty quick, right? Right. But maybe not. Maybe this person has a lot of toys or extra things and it can create, you know, in the other example, I'm kind of going backwards here, but people create trust and never fund them. You know, they go through the whole legal process. That's that's actually a great one to bring up. Yeah. Yeah. Elaborate on that, because I think that's often the case. People go to the lawyer, they get their binder, put it on the shelf, kind of like you do with your tax return. And then you realize, you know, nine months later, you're supposed to have been doing these these estimates on your tax return.

28:45 Well, there's things you got to do with your estate plan. Yeah, exactly. They get all the great advice and their lawyer spent hours and hours protecting their future and their heirs. And, you know, they they walk around and say, we have a family trust. And even if the lawyer was very, you know, most lawyers are very good at articulating like this is step one. You still have to do right. Yeah. Yeah. And here's, you know, I know attorneys who give their their clients worksheets like here are the items that should be in this trust and here's who to contact like I have a brokerage account, a Schwab. OK, we'll contact your financial advisor and they can help you put this asset into the trust and so forth.

29:28 But they just think they're done when they left the lawyer's office, like your tax example. And so, you know, 10 years later, they pass away, unfortunately, and the loved ones know that they have a trust. But they have a plan. There's nothing in it, but they didn't fund the plan. So I didn't execute the plan properly, essentially. Right. So two two scenarios play out. One is they have a will and the will says everything goes to the trust. But that's still probate because you have a will cost and time and effort. Or the will says a whole different scenario than the trust. Yeah. Yeah. What's going to happen to. Right. Yeah.

30:08 You know, beneficiaries ABCD and the will and beneficiaries ABCD EFG and the trust and there's no assets in the trust. So therefore the will is going to rule the day. And beneficiaries can be very different when it comes to the plan in the the trust, the estate plan from perhaps other types of assets like IRAs or the life insurance or annuities. These all have beneficiary designations. Sometimes they do. It does. It's like desirable to include the trust. Sometimes it's not desirable to include the trust. So these are things that usually your estate plan will include some guidance as to how the estate plan intends for these to be handled, but you still have to update the beneficiary designations to make it work in in concert with what the estate plan was.

31:04 And other times people will just do things kind of differently. And then you've got these sort of two different plans kind of happening. I'm going to just touch on one quick thing because it's on my mind. We were talking about it just before coming in, and that is inherited IRAs. These are sometimes when you it's different from a spouse receiving an IRA. Typically, an individual like a child from a parent, you have a different kind of IRA. It's an inherited IRA. It's it doesn't roll over into your own IRA. It's its own animal.

31:46 And similarly, when you have a distribution from it, which you will have presumably for every year after. Well, actually, it depends, right? It depends if your parent died after starting their required beginning date. They're they're they're benefit. They're requiring these solutions. Then you continue to have to have distribution requirements and they now have to be done every year. And you but by the end of the 10 years, typically you have to have the whole amount out. There are some exceptions to this different rules for different circumstances.

32:30 Maybe you're a sibling who inherits an IRA and you're within 10 years. That's a different tax treatment. But in any case, in this scenario, we're saying typically you have a 10 year withdrawal treatment, and if the distribution requirements have begun, you have to keep doing them and in past years over the last several years. The IRS hasn't enforced that. But this year they are. So if you have an inherited IRA, be sometimes called a beneficiary, a beneficiary IRA. If you have one of those and your parents were subject to RMDs, you're subject to RMD, make sure you're taking advantage of that.

33:13 And the calculation of that is a little different. It's not the uniform table. It's a single life table and it just works differently. So get some help if you need it. But don't overlook it. Probably more to talk about there. But yeah, you could accelerate the RMD. You could you could take all the money. Oh, absolutely. Good point. Yeah. The IRS is happy for you to pay the tax on that at any time immediately. But that you have to do it within the 10 years for most instances. If it's a certain kind of trust, it might be five years, depending on the circumstances. And, you know, so there are a few examples of a five year payout period.

33:55 And then there are some rare, unique examples where you can do it over the old rules, like a lifetime stretch distribution, lifetime of the beneficiary of the beneficiary. Yes. But those are rare now for new deaths, you know, that kind of thing. So what was it, 2020 when that changed? People who had inherited IRA before 2020, you still may benefit from the stretch IRA rules. Talk to a professional if you need help. And again, that's a good example of the kind of reason why you listen to the show and the kind of help that good financial counsel can provide.

34:40 We try to help you with some of that on our show. So please share that with others. Good lessons learned, we hope. And we hope you will share it and like and helps people find the show. Share it with a friend. Makes a difference. And we hopefully you don't want to be that person who says late in life. How'd you how'd you come to do this? And the answer would be, I listened to something more. And why didn't you share it with me? Right. Right. So it's speaking of sharing, Chris, in the show notes, I'm going to attach a checklist as well as a article by Wealth Enhancement Group that Russ brought to our attention that might be a little bit more information for you.

35:23 So the checklist. Tell about that checklist. It's a checklist of things that you would think about doing if the parent died. And it would, you know, a lot of them, a common sense that you're going to know about, you're going to think about. But some of them aren't so common. It might just save you some time and save you some stress in a very difficult situation. You know what, Jeff? We also have a recent checklist about a parent that's aging. We do. Why don't we include that, too? Just if it's helpful, people might be dealing with different stages along the way. This might be a tool that could be a resource as well. Yeah, we have a lot of resources and feel free to reach out to us.

36:04 We can provide these resources pretty quickly via email to you. If you're watching a video and maybe don't have access to the show notes. Please reach out to us. We're happy to help. Let's just review that. You can find us on YouTube through the Wealth Enhancement Group's YouTube channel. You can find us on something more with Chris Boyd dot com, our Web page. And of course, you can find us through whether it's the audio podcast, wherever you like to listen to podcasts, you can find us there. Please share that wherever you like to listen. Share it with others. Thanks, everybody. Until next time, keep striving for something more. Thank you for listening to something more with Chris Boyd.

36:44 Call us for help, whether it's for financial planning or portfolio management, insurance concerns or those quality of life issues that make the money matters matter, whatever's on your mind, visit us at something more with Chris Boyd dot com or call us toll free at eight six six seven seven one eight nine zero one or send us your questions to A.M .R. dash info at Wealth Enhancement dot com. You're listening to something more with Chris Boyd. Financial talk show, Wealth Enhancement Advisory Services and Jay Christopher Boyd provide investment advice on an individual basis to clients only. Proper advice depends on a complete analysis of all facts and circumstances. The information given on this program is general financial comments and cannot be relied upon as pertaining to your specific situation.

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