In my previous digital estate planning post, I posed the question regarding the difference between the decedent in the 1990’s who threw away all his bank accounts, photos, and family letters before death, and the decedent in today’s age who has stored all of this information online and fails to provide the password.
Before answering this question, estate planning is composed of two major classes of decisions: (1) heirs of the estate and (2) fiduciary appointments. Fiduciary appointments typically consist of naming individuals to act in various roles on a client’s behalf upon death or incapacity, such as personal representative/executor, trustee, power of attorney, guardian/conservator, etc. Simply defined, a fiduciary is one who is charged with making decisions on a person’s behalf, either in accordance with specific instructions or based on the best interests of the person represented by the fiduciary.
Keeping this fiduciary concept in mind, we can now jump back to our original question. The simple answer lies in who possessed the information. When information was in a paper format, the decedent was the one who possessed it. However, when information is stored in a digital format in a place other than the decedent’s personal computer, that information is no longer possessed by the decedent. Instead, the information is now possessed by an online service, and is stored in their servers.
Thus, there are two issues central to digital estate planning. First, a decedent may now have fiduciaries which are named outside of their estate planning documents. Second, a decedent’s estate planning documents may not effectively dispose of their digital assets, due to a conflict with the terms of service of the information fiduciary.
Now that we have effectively framed this issue, future installments will examine how these legal issues can be resolved, and whether an outside non-lawyer service is an effective mediator of such issues.
New research shows that almost nine out of 10 Britons have failed to set out details of where their online bank accounts and other personal effects can be found.
As the use of online savings, pensions and investment portfolios grows, so does the danger that their families could lose out on a fortune if accounts cannot be traced.
In total, billions of pounds could be lost in cyberspace, legal experts have warned. They say that writing a will is no longer enough – you also have to draw up a digital legacy.
KEEP TRACK OF ONLINE VALUABLES
The average Briton has £333 in digital assets, according to new research from Saga Legal Services. This includes savings and investments, and credit held in online only accounts, such as shops or gambling sites.
Others have expensive digital music and movie collections stored, or risk leaving private photos or blog posts freely available online for generations to come.
Despite this, 87 per cent of Britons do not have a plan in place for family estates to be able to trace them, and could bequeath wasted time, effort and financial loss to their loved ones, Saga warns.
BEWARE DIGITAL DANGERS
As we spend more of our lives online than ever before, with the number of over 65s using the internet daily quadrupling in the past eight years, we need to be ready for what follows when we die. Emma Myers, head of wills at Saga, says that as the financial implications of not planning your digital legacy are growing in severity, so it should be treated just like a will for your physical possessions.
She says: “In the same way that you would not want your loved ones falling out or being inconvenienced over a missing will when you die, it is also imperative to plan ahead for your digital legacy.”
Facebook has just announced that it is launching a Legacy Contact feature, which allows users to appoint someone to manage their account when they die, and post a final message on their behalf
This is already a problem, with almost eight out of 10 bereaved people reporting difficulties managing a loved one’s online accounts after they die, according to research from Co-operative Legal Services.
It calculates that with hundreds of millions of online accounts and assets in the UK, a staggering £17 billion could be lost in cyberspace.
Even after accounts have been traced, families face further tough decisions determining their loved one’s wishes. Families also overlook social accounts that may have sentimental value, or lose track of online contacts.
PASS IT ON
James Antoniou, head of wills for Co-operative Legal Services, says when people consider how they want their assets to be divided, the first thing they think of is making a will.
Yet all too often people fail to take their digital legacy into account. He recommends writing details of all your online accounts in a sealed letter to be kept alongside your will, addressed to executors.
“This should include references to the usernames and passwords, and answers to security questions.
“You should never put these in your actual will, because it can become a public document after death.”
Facebook has just announced that it is launching a Legacy Contact feature, which allows users to appoint someone to manage their account when they die, and post a final message on their behalf.
Google’s Inactive Account Manager app deletes information after a certain length of time, but this only applies to services such as Gmail and YouTube.
Too many other sites have failed to do this. So you have to take action yourself, because in the online world, you will not leave a paper trail when you die.
It’s a fact of life that we’re all going to die at some point. While it’s not something you probably want to think about, you can make things a lot easier on yourself (and your family) if you get everything in order now. Here’s what you need to do.
Your inevitable demise is hopefully not on your mind too often, but it’s still something you should think about long enough to get everything in order. Doing so ensures that everything in your life is organized so others can see what you want to happen after you’re gone, what you own, and how to handle a variety of situations.
If this sounds daunting, don’t worry too much: being unmarried, without children, and without a useful asset to speak of, I was able to get everything in order in about two hours (I still had a lawyer friend double-check everything to ensure I wasn’t accidentally giving my dog medical power of attorney). The more you own the longer it’ll take, but it’s not nearly as time-consuming as it looks because most of this stuff you probably already have ready to go.
Note: You can do a lot of this stuff on your own, but it’s a good idea to speak with a lawyer about your will, assets, and general estate planning. This guide is meant more to get you acquainted with terms, provide DIY options when applicable, and help you collect together what you need.
Decide What Happens After You Die
Planning for your death is actually two things: what happens after you die, and what happens if you’re ill and unable to handle decisions yourself. Let’s start with taking care of what happens after you die, starting with your last will and testament.
Write Your Last Will and Testament
Your last will and testament is a document that designates what happens with your property, guardianship of your children, and names the person (executor) who carries out your wishes after you die. If you don’t own a lot of property, a simple will is likely all you need.
It’s possible to draft up a simple will on your own, but it comes with its own set of pros and cons. These include problems with outdated information, specific state related tax issues, and how they handle specific trusts. As USNews notes, online wills are a one-size fits all solution, that can’t always account for the complicated situations of real life. However, if you only need a very basic will SmartLegalForms, LegalZoom, or RocketLawyer all provide a simple template for doing so for between $15 and $80. These laws and requirements change often, and if you don’t do it right you might unintentionally give someone more power over your estate then you want. Most simple wills have just a few sections where you can say what happens to your assets, and designate who gets any property you own.
When you’re drafting up your will, you’ll also name your executor. After you die, this is the person who handles your estate (all of your property), finances, debts, and everything else. It should go without saying this is a person you would trust to handle your estate when you’re alive. Once you die, a probate court will officially give power to your executor to handle your affairs. They do not have control over your estate until after you die.
Finally, to make the will legally binding, you’ll usually need to get signatures from at least two witnesses (who aren’t beneficiaries listed somewhere on the will), and it’s advisable to get it notarized by a notary public. You can usually find a notary public at your bank, and they act something like an official witness for legal forms.
If you have a lot of assets that you want to designate to multiple people, or to make sure your will is legally sound, you should speak with a lawyer about getting a more advanced will written up. Things start getting really tricky when finances are involved, and if you have a lot of assets it’s worth at least consulting with a lawyer (if you need help finding a reputable lawyer here’s our guide). I spoke with lawyer Elizabeth D Mitchell of Ambler & Keenan, LLC about the basics of what you can expect from an estate planning firm:
I usually start people out with a form and have them think about who they would name as their power of attorney. From there, we’d look at their assets and arrange for special circumstances. It’s important to remember that estate planning isn’t just what happens after death, it’s also about what happens if you’re incapacitated… What I always tell people is that it costs more to clean up a financial mess afterwards then it does to plan ahead.
Mitchell also adds that although it takes a little time to get everything in order, most estate planning lawyers offer some type of free consultation before they into your plan. This is because once they set up a plan with you, you’ll be dealing with them for the rest of your life so it’s important to know exactly what you’re getting into. Mitchell also recommends people at least speak with a lawyer about writing up their will even if they don’t own a lot of property because it’s possible a single mistake could mess everything up. As the New York Times points out, the law is different in every state, and something as minor as not declaring the document a will out loud will make it invalid in certain states. A lawyer is also handy to set up trusts so your family gets paid out. According to the Wall Street Journal, trusts are increasingly important:
Rick Law, founder of estate-planning firm Law ElderLaw LLP in Aurora, Ill., says estate planners increasingly recommend revocable trusts in addition to wills, since they are more private and harder to dispute. “Every will is like a compass that points toward the closest courthouse,” he says.
A revocable living trust can be changed anytime during your lifetime. After you transfer ownership of various assets to the trust, you can serve as the trustee on behalf of beneficiaries you designate. Provided you do so, there aren’t any ongoing fees.
That said, if you don’t own that much, or you don’t mind leaving it all to one person, the whole process of writing out your own will takes about 20-30 minutes. Photo by Ken Mayer.
Outline the Funeral or Memorial Service
Obviously this step is optional, but if you want something specific to happen at your funeral or memorial service after you die it’s a good idea to get it in writing, and let your family know your wishes. Doing so gets rid of the headache of planning for your family, and ensures you get what you want. You don’t need to go in and plan everything out, but here are a few things worth considering:
If you want a burial, you need to find a grave plot. You’ll need to contact a local cemetery and purchase a plot if so. If you want a specific cemetery or plot, the earlier you do this step the better.
If you want cremation, you’ll work with a funeral director, so contact a local funeral home and arrange any details with them.
Decide if you want to pre-pay for any arrangements so you don’t have to worry about your family paying for anything while they wait to get access to your money. Since the average funeral is around $6,500, so it might be helpful to pay ahead of time.
At this time, you can also decide if you want anything specific in a memorial service, how you want the wake handled, and everything else. It’s also common to add these details to the will if you want to make sure your wishes are followed. Obviously this is a very personal event, and what you want depends a lot on your religious and social background. It’s a good idea to make your wishes known to family members to take the pressure off them when the time comes.
Designate What Happens If You’re Ill or Incapacitated
Just as important as what happens after you die is what happens if you’re ill, incompetent, or incapacitated. For this you need a living will, a power of attorney, and a medical power of attorney. If it sounds a little scary, don’t worry, it doesn’t take a lot of time and by the end you’ll know that you’ll only get the medical support you want.
Designate a Power of Attorney
A power of attorney is the person who can attend to financial or legal matters if you fall ill or are unable to handle them for yourself. It’s a good idea to choose a power of attorney so that they can attend to your financial and legal issues immediately after you fall ill. The power of attorney expires when you die, and the control of your finances typically shifts to the executor you named in your will. In some cases this is the same person.
The form to designate a power of attorney varies by state, but if you want to do it yourself you can get a document from the same services where you did your will (SmartLegalForms, LegalZoom, or RocketLawyer). If you’re giving one person complete control over everything you can likely manage to fill this out yourself, but if you want to limit what they can do it’s likely best to consult with a lawyer. Photo by Andy on Flickr.
Prepare a Living Will and Designate a Medical Power of Attorney
Every state has different paperwork for your living will, and different guidelines (you can grab paperwork specific to your state here). Essentially, each form allows you to designate what type of medical care you want to receive if you can’t speak for yourself, as well as designate if you want to donate any of your organs to science. Again, you’ll usually need two witnesses when you sign, and it’s wise to get it stamped by a notary. When you’re finished, keep a copy for yourself, and give copies to your physician, a family member, and your healthcare agent (your lawyer will also keep one if you use one). Additionally, if you do not want CPR or ACLS, you want to fill out a Do Not Resuscitate order with your doctor.
Not every medical procedure known to man is covered in the living will, and for those unexpected occurrences you may also want to designate a medical power of attorney (also known as an agent, attorney-in-fact, health care proxy, or health care surrogate depending on where you live). This person can make medical choices for you if they’re not included on your living will, or if you give them the power to override your previous choices if the circumstance warrants it. Additionally, they can also get the right to see your medical records (which is helpful if you choose anyone other than direct family), apply for Medicare on your behalf, and make choices about any medical procedures when you can’t. Again, this differs by state, but you’ll often name a medical power of attorney on your living will. Of course, before you give someone the power of attorney you’ll want to go over what type of medical treatments you want and don’t want, and make sure they agree to follow your wishes.
The living will and health care power of attorney forms are important for everyone to fill out. I did mine in about 10 minutes. With these completed, you’ll have the peace of mind that you’ll get the medical care you want (or don’t want) in just about every circumstance. Again, a lawyer is helpful here if you’re unclear about anything. If you’re not sure what type of treatments you’d like when you’re incapacitated you should speak with your doctor. Photo by Social Innovation Camp.
Organize Your Finances, Life Insurance, Bills, Debts, and Everything Else
While the bulk of your assets are distributed on your will, you still have a lot of financial obligations out in the world. Naming an executor on your will and a power of attorney is just one step. You’ve probably already done this, but it’s also important to get all your finances organized so your heirs can actually find what they need. According to the National Association of Unclaimed Property, around $32.9 billion assets are currently unclaimed because the state took hold of them instead of the family. So, whether you decide to write up your will with an estate planner or not, you still need to get everything in order.
Two of the most important documents are your life insurance policy (especially policies from former employers) and retirement plans (as well as pensions and annuities), because both are easy to overlook. If your heirs don’t know these accounts and policies exist, they can’t claim them and the funds usually go to the state. So, gather up your various policies and keep them together.
If you don’t have a life insurance policy, you might want to get one, and we’ve walked you through what you need before. A life insurance policy isn’t just about covering your salary after you die, it’s about helping your family pay for funeral costs, car loans, credit cards, mortgages, and everything else.
To make the process easier on your family when you pass away, it’s also a good idea to gather together all your debts (especially big ones like your mortgage, car loans, or credit cards) in one place so your heirs can pay your bills for you while they figure everything else out. You likely already do this, but it’s good to keep everything together so they don’t have to search for it. To make the process even easier (and skip over any conflicts with power of attorney), you can add a family member to at least one of your bank accounts so they always have access to some of your funds.
If you have a lot of sources of income, it’s a good idea to meet with a financial advisor to get everything organized. You can find one through The National Association of Personal Financial Advisors. With your financial advisor you can set up beneficiaries for retirement plans, make your accounts accessible, and create spending plans for your surviving family.
Secure Your Digital Life (and Pass the Keys onto Someone You Trust)
The reason this is an important step is not just to give your heirs access to your bank accounts, it’s also so they can shut down services you don’t want around. For example, Facebook can memorialize your page if you want, but if you don’t want that digital record sticking around, you might make a request to your heirs to delete it outright. Likewise, if an heir wants access to your Google account and you don’t give them the password, they’ll need to provide a name, address, photo ID, email, and death certificate. Which is to say, it’s a lot easier for your family if you just give them your passwords.
So, when you’re putting together your list of usernames and passwords, include instructions for how you want those accounts handled, including if you want them to do anything specific with your home computer. It might seem a little weird, but if you want a little control over how your digital life is handled after you die, this is the only option. If you’re using a password manager like Lastpass then you can just look in your password vault for a full list of all your accounts and passwords. It only takes a couple of minutes to copy the ones that really matter.
Set Up a Master File of Everything
Once you have all your paperwork sorted, wills filled out, and everything else, it’s time to pack that all into master file you share with a close family member or friend. Remember, this includes everything about your life, so keep it in a safe place (or in a safe deposit box), and share it’s location with your family. After completing the steps above, you should have everything in order, but here’s what you should include (List culled together from UC Berkeley, The Wall Street Journal, and our own “In-Case-of Emergency” document):
Letter of instruction
Social security numbers/cards
Passports (numbers and expiration dates)
Driver’s licenses (number, expiration dates)
Names/address/telephone numbers of healthcare professionals
Healthcare proxies/living wills
Medications (dosages, name of prescribing physicians, pharmacy, address/telephone
Social worker or caseworker names and contact information
Passwords, web sites, and other digital information
Income sources (retirement and/or disability benefits, Social Security, etc.)
Financial assets (institution names, account numbers, address/telephone, form of ownership, current value) of cash, bank accounts, stocks, bonds, mutual funds, money market funds, retirement and pension plans, IRAs, annuities, life insurance
Real Estate (property addresses, location of deeds, form of ownership, current value)
Other assets (location of items/titles/documents/form of ownership, current value) including automobiles, boats, inheritances, precious gems, collectibles, household items, hidden valuables/items in storage, loans to family members/friends
Liabilities (Creditor institutions, address/telephone, approximate debt) of mortgages, personal loans, credit cards, notes, IOUs, other).
While some of these records need to be physical copies (like your birth certificate), others, like contact info, a copy of your will, and property information can be digital, so use whatever system you’re more comfortable with. Whatever you decide, keep everything organized in a folder together, and let a family member know where everything is.
If you need a little help getting everything organized, webapps Everplans, Get Your Shit Together, and CNN’s guide to estate planning are great resources that guide you through more of the specifics. As always, if things get too complicated, don’t hesitate to contact an estate planner for help—most will offer you a free consultation.
Our lives are increasingly conducted online with many of us managing bank accounts, utility bills and much of our correspondence online these days. Many people now consider their social media portfolio to be among their most personal assets. With this trend only increasing across all age groups, the difficult question of what happens to our digital presence after we die has become more and more important.
The BBC recently reported that, Co-operative Funeralcare, one of the UK’s largest funeral providers, had recently conducted research into the question of a “digital legacy”, and its conclusions suggest that most of us do not make any provision for management of our online accounts after we die. For example, while almost all bank customers now have the facilities to manage their accounts online, only one in four make suitable arrangements to pass on the details to those left to wind up their estate. 80% of those who attempt to manage online bank, utility, shopping or social media accounts following a death reported problems in doing so, leading to unnecessary stress and complications at a difficult time.
It is never easy to discuss arrangements for end of life, but as with any estate planning, the most important thing is providing peace of mind and the knowledge that your estate will be managed in line with your wishes. Online assets should be viewed just like any other asset in this regard. Whether this means leaving the necessary details to manage accounts in a sealed letter alongside your Will, or in some other secure way, making suitable arrangements now ensures that you can be confident that your loved ones will be able to manage your estate without unnecessary difficulty.
Meanwhile, social media websites continue to adapt their offering to provide options for their users to control their online presence after their death. Last month Facebook® unveiled legacy settings, giving users the option to delete their account permanently upon their death, or to pass control of selected aspects of their account to nominated friends or relatives. Memorial pages, where friends can post comments and tributes about a deceased, are a popular alternative. Some technology companies even allow users to prepare messages to be rolled out following their death, often many years into the future. Given the rapid pace of technology, and the growing importance that we place on our digital presence, this market seems destined to expand and change for years to come.
Settling Estate: What Do I Do When Someone Dies?
Settling the estate can be a trying process, particularly for those grieving. By following these practical steps and being aware of state law, you can ease the process for everyone involved. Settling the estate means safeguarding your loved one’s property during the administration process, paying debts and taxes, and distributing the assets of the estate to those who are entitled to receive it.
Note: The following legal and logistical information is most readily applicable to residents of California. However, where California’s laws or procedures differ greatly from those of the majority of other states, we have made an effort to make our out-of-state readers aware of this.
1. Initial Tasks
Handling the estate starts with a few practical tasks:
Determine Who Is the Executor or Trustee Consult with an attorney if it is unclear who has been appointed by the will or trust.
Arrange for Temporary Care of Minor Children and Other Dependents Your first task is to set up temporary care for any minor children and other dependents of the person who died. You might need to look into day care, hospice, or pet care services for temporary assistance until a longer-term solution can be found. For information on the legal process, see 3. Minors and Dependent Adults below.
Obtain Certified Copies of the Death Certificate You will need death certificates for a variety of purposes, so it’s a good idea to have plenty of copies. Read our section about the Death Certificate in Immediate Help for more information.
Look for a Will or Trust Locate a will, trust, or any other important after-death documents. For tips on locating these documents, see our section on Locating Important Documents in Immediate Help.
Collect the Mail Collecting the person’s mail protects his or her privacy, but it also serves an important administrative function. The mail will help you identify the person’s property, because account statements and other documents relating to his or her property will arrive by mail. Bills will arrive by mail too, which will help you identify potential creditors.
Paying the Bills
After a death, bills will continue to arrive for expenses incurred during the person’s lifetime. These may include medical bills, credit card statements, utility and cell phone bills, invoices for mortgage payments, tax bills, insurance premiums, and so on. Here are a few tips for how to handle bills:
Surviving spouses may be personally liable for the person’s debts, depending on state law. If you are a surviving spouse, consult with an attorney about whether and to what extent you should pay your spouse’s bills.
If you are not the surviving spouse, do not pay bills from your own personal bank accounts. If you do, you may be deemed to have assumed responsibility for paying the debt.
Legitimate bills should be paid from accounts that belonged to the person, and such payments should be made only by someone who is authorized to make decisions, such as a Trustee or Executor. Forward bills to the Trustee or Executor, or if no one is yet serving as Trustee or Executor, hold the bills temporarily without paying them until someone is appointed to serve.
It is the job of the Trustee or Executor to identify what bills are legitimate, to fulfill creditor notification requirements, and to accept or reject creditor claims. The Trustee or Executor should consult with legal counsel about completing these tasks, because failure to fulfill the legal requirements could expose the Trustee or Executor to liability.
If creditors press for payment before a Trustee or Executor has been appointed, let them know that all bills are on hold pending appointment of an authorized legal representative. If the creditor threatens legal action or files a claim, contact a lawyer immediately.
Secure the Residence, Automobiles, and Tangible Property Lock the person’s residence and car, and allow no one to take tangible personal property that belonged to them. Tangible personal property includes furniture, antiques, artwork, as well as personal effects like clothing, jewelry, and personal documents. If there are people you do not know who have keys to the house, consider changing the locks. If you cannot reliably secure the residence, consider packing up the tangible personal property and moving it to a secure location such as a storage locker. If people you do not know have extra sets of keys to the car, move the car to a locked garage.
Notify Credit Card Companies and Credit Reporting Agencies Toprotect against fraud, notify credit card companies that the person has passed away, and that no one should be permitted to make additional charges to the credit cards following the date of death. Let them know that the Executor or Trustee intends to close the accounts. Send a letter to each of the three major credit reporting agencies, Equifax, Experian, and Transunion, letting them know that the person has passed away and instructing them that no one should be allowed to use his or her name or social security number to apply for new credit.
Notify the Employer If the person was employed at the time of death, notify the employer. Arrange for delivery of the final paychecks, and deposit the income checks into a bank account held in the name of the person or the person’s living trust. Ask the employer to identify the benefits provided by the employer to the person, such as health insurance coverage, life insurance, and retirement plans.
Notify Social Security If the person was receiving social security checks, notify the Social Security Administration immediately. Often the funeral home or service provider will send a notice as a courtesy. Otherwise, call the Administration at the phone number provided on their website www.ssa.gov. Some family members may be eligible to collect a portion of the person’s Social Security benefits. Ask the Administration to provide you with information on survivor benefits, or consult with an attorney.
Notify Veterans Affairs Administration If the person was a U.S. war veteran, call the federal Department of Veterans Affairs and have any veteran benefit payments stopped. There are cash benefits of $300 to $2,000 to the family members of veterans depending on the type of duty and the situation at death. Also, ask the VA about burial benefits, or visit the VA burial benefits page here. You will need the person’s VA number or service number and active dates of service.
How the assets of the person who died are administered depends on whether he or she left a will or a trust. To administer his or her property, you must meet specific legal requirements. Failing to follow the process can result in personal liability for the Trustee or Executor. We strongly recommend that you consult with an attorney who is experienced in trust and estate administration to advise you on the legal requirements. The attorney should be licensed to practice law in the state where the person was residing at the time of death. To find attorneys in your area, look up Legal Counsel on our Local Resources page.
Revocable Living Trust A revocable living trust, also simply called a living trust, has become a widely used estate-planning tool, partly for the purpose of avoiding probate, which is further discussed below. A trust is an agreement between a “Grantor,” the person who creates the trust and transfers property into the trust, and a “Trustee,” the person who holds the property and administers it for the benefit of “beneficiaries.” When a Grantor sets up a “revocable living trust” for his or her benefit, he or she typically also serves as the initial trustee. After the Grantor dies, the trust becomes irrevocable, and a named successor steps in to serve as trustee. The successor trustee must hold or distribute the trust property for the named beneficiaries and in accordance with the instructions set forth in the trust agreement. The trust administration process occurs privately, for example, without Court involvement or oversight.
What if Property is not in the Trust? If the person set up a revocable living trust, but his or her property was never transferred into the trust after death, you should consult with an attorney. Depending on the circumstances and state law, such property could potentially be confirmed to be property of the trust. If not, such property will be subject to probate, as discussed below.
Last Will and Testament If there is no trust, but the person left a will, the assets of the estate must be administered through “probate.” Probate is the Court process for settling the estate of someone who died. A family member must petition to have the will admitted to the Court and ask for an Executor to be appointed. Once the Executor receives “letters of administration,” he or she must fulfill the legal duties set forth under state law (For example file an inventory of assets, notify creditors, and pay debts and taxes.), and after the administrative tasks are completed, the Executor must distribute the estate property in accordance with the instructions in the will and under the supervision of the Court. Probate fees can run into the tens of thousands of dollars, depending on state law, and probate can take one to two years to complete. High fees and long delays are two of the reasons why many people decide to set up revocable living trusts—property in a trust generally is exempt from probate.
No Estate Plan If the person left no trust and no will, he or she is said to have died “intestate.” An intestate estate is subject to probate, too. Under intestacy, the person’s property must be given to whoever is entitled to receive it under state law. Typically, a surviving spouse and descendants are the first in line to inherit. If the person had no surviving spouse and no living descendants, then his or her parents would generally inherit next, and if parents are no longer alive, siblings and their descendants are typically next in line. The specific rules of intestate succession vary by state law.
Small Estate Administration and Spousal Petitions In some states, there are exceptions to the probate requirement. If your loved one’s estate is a “small estate” as defined under state law, a simpler process may be available to transfer assets to the beneficiaries. In California, for example, if the estate has no real property with a date-of-death market value of more than $50,000 and the estate has a total value of less than $150,000, the beneficiaries of the property can have the assets transferred to themselves by completing affidavits. Also in California, if the person is survived by a spouse, the surviving spouse can use a spousal petition to take title to property he or she is inheriting, instead of having to conduct a formal probate proceeding.
Joint Property Joint property, such as real property titled in joint tenancy with right of survivorship or joint bank accounts, transfers automatically to the survivor upon the death of either joint owner. Joint property typically is not subject to probate under state law. If you are the surviving owner, you must complete paperwork to remove the owner who has died from the title. For example, for real property, an affidavit of death of joint tenant must be recorded with the County where the property is located. The affidavit removes the name of the person who died from the property and places it entirely in the name of the surviving owner.
Pay-on-Death Account or a Totten Trust Pay-on-death (“P.O.D.”) accounts or a Totten trust automatically transfer to the payee upon the death of the owner. Like joint property, these type of accounts bypass probate. You should notify the banks where the person held accounts of his or her death, and provide them a copy of the death certificate. The banks will then contact any beneficiaries directly. If you are the beneficiary, the bank will likely ask you to complete forms to transfer the account to your name.
Life Insurance Policies and Retirement Plans Life insurance proceeds and retirement plans are paid directly to the beneficiaries named on the policies and plans and are not subject to probate. If the person failed to name beneficiaries, however, the life insurance proceeds and retirement plans will have to be paid to the person’s estate, which could trigger a probate. Contact the institutions holding the life insurance policies and retirement plans, and inform them of the person’s death. The institutions will contact the named beneficiaries directly.
Guardian of the Person If the person who died left minor children, and the other parent is no longer alive, a guardian “of the person” will have to be appointed for the children by the Court. The guardian of the person is the individual who is granted physical custody of the children and is responsible for their care and upbringing until they reach age 18.
Nomination of Guardian by Person Who Died If the person left a will, check whether the will included a nomination of guardian. A nomination of guardian is the parent’s expressed wish for who should take custody of the children in the event that both parents have died. Courts typically place great weight on the wishes of the parents when appointing a guardian, but keep in mind that the wishes of the parents will not necessarily be determinative. The Court may appoint a different person if the Court believes that doing so would be in the best interest of the children.
Assets of Minors If both parents have died, their minor children will also likely inherit their property. Minors, however, cannot legally manage their own assets. If the parents left the property to the children in a trust, the Trustee will be in charge of managing the assets for the minor children under the terms of the trust. If there is no trust, the Court will likely have to establish a guardianship “of the estate.” The guardian of the estate is responsible for managing the minor’s assets until age 18.
Dependent Adults If the person who died was caring for an elderly parent or another dependent adult, check whether the dependent adult has a general durable power of attorney or a living trust. If so, the adult’s affairs should be handled by his or her agent or trustee. Contact that agent or trustee, and contact the adult’s attorney, and inform them of the person’s death. If there is no power of attorney and no trust, the Court may have to establish a conservatorship for the adult. A conservatorship is similar to a guardianship, except that the subject is an incapacitated adult, instead of a minor child. A conservatorship gives the conservator authority over the incapacitated adult’s physical care and financial matters.
To learn how to establish a guardianship for a minor or a conservatorship for an incapacitated adult, consult with an attorney.
Estate Taxes If you are serving as Trustee or Executor, you should consult with legal counsel and an accountant about whether estate tax returns must be filed. The estate tax is a tax on all property owned by the person at the time of death. In addition, you may include in the estate certain gifts made during life for estate tax purposes.
Federal Estate Tax In any given year, there is an applicable federal estate tax exemption. The value of the estate that exceeds the exemption is subject to the tax. Under the Tax Relief Act of 2010, the applicable exemption for 2011 was set at $5,000,000, and in 2012, the exemption increased to $5,120,000. The 2011 and 2012 maximum federal estate tax rate is 35%. In 2013, however, the exemption is scheduled to drop down to $1,000,000, and the maximum rate is set to increase to 55%. Anyone whose estate at the time of death has a value in excess of the applicable exemption amount in that year is required to file an estate tax return. You may need to have property appraisals done to determine accurate date-of-death values. In addition, for a married person who passes away in 2011 and 2012 with a surviving spouse, an estate tax return may be filed to preserve the “portability” of the person’s federal estate tax exemption, even if the value of the estate is below the exemption amount. For help deciding whether to file an estate tax return, please consult with an attorney or accountant.
State Estate Taxes Also ask your attorney or accountant whether the state where the person who died was living has a state-level estate tax. The state-level applicable exemption amount and tax rate may differ from the federal estate tax. A few states, like California, have abolished the state estate tax.
Income Taxes A personal income tax return must be filed for the first part of the last year of the person’s life through the date of death. The surviving spouse may file as married jointly on behalf of both spouses. For the second part of the year, a fiduciary tax return will have to be filed for income earned by the person’s estate or trust after the date of death. For example, if the person owned rental property held in a trust, the trust would have to file an income tax return, reporting rental income for the second part of the year following the date of death. Special rules apply to income earned during life but received only after death. Seek the assistance of an attorney or an accountant to prepare the income tax returns.
Tax ID Number You’ll need to get a tax ID number for the Estate or Trust in order to file a fiduciary tax return. For more information on how to obtain a tax ID number, visit www.irs.gov, or ask your attorney or accountant.
Capital Gains Tax Capital gains taxes are based on an appreciation in value. For example, if someone purchased stock in 2002 for $300,000 and then sold it in 2012 for $400,000, there would a capital gain of $100,000. That “capital gain” of $100,000 would be subject to a 15% federal capital gains tax, as well as state capital gains tax. The purchase price of $300,000 in this example is called the “basis” and the sale price of $400,000 is called the “amount realized.”
For property that is inherited, however, the basis is “stepped up” to the full fair market value at the date of death. In the example above, if instead of selling the stock, the owner dies when the stock has a value of $400,000, and the heirs of the person then immediately sell the stock for $400,000, the basis would be stepped up from $300,000 to the $400,000 value on the date of death, and there would be no capital gain. Capital gains tax could be due, however, if the value appreciates between the date of death and the date of sale. If you have inherited property and are considering selling it, consult with a tax professional about whether a capital gains tax could be due.
What, if any, insurance policies of the person who died should be kept in effect following the date of death?
Homeowners and Renters Insurance You should maintain the homeowners and renters insurance policies so long as the property remains in the Estate or Trust, to protect the Estate and Trust assets in case of property damage or lawsuits. Cancelling the coverage could actually expose the Executor or Trustee to liability for breach of fiduciary duty, if property damage or lawsuits deplete the assets as a result of lapsed insurance coverage. The Executor should inform the insurance company of the death in writing and request that the Estate be added to the policy as a “named insured” as soon as possible in order to secure the same rights as the person who died.
Automobile Insurance You should consider maintaining the insurance policy on the car if the rates are favorable. Most auto insurance companies will continue to cover the vehicle and the new legal owner at the same rate under the “permissive use” clause of the insurance agreement. Alternatively, if the car will lay idle during the administration period, or if it will be sold, you can consider registering the car for “planned non-operation” with the state DMV and cancelling the insurance policy, to save expenses for the Estate.
Health Insurance Thanks to COBRA (Consolidated Omnibus Budget Reconciliation Act, 1986), if the person who died received employer health insurance, surviving spouses and dependents will be eligible for continued coverage following his or her death, if they were originally covered. You can contact the insurance company or the employer in order to remove the person from coverage, while continuing coverage under the existing policy for qualifying family members.
Certain assets raise unique issues that the Executor or Trustee may need to address.
Personal Residence If the personal residence of the person who died was a rental, to save ongoing expenses, the Executor or Trustee may decide to terminate the lease, vacate the premises, and place all of the tangible property in storage until they are distributed. If the person owned his or her own home, check whether the will or trust hands over the residence to anyone. If not, the Executor or Trustee should determine whether any of the residual beneficiaries wish to take ownership of the property, provided there are other equal assets that can be distributed to other beneficiaries.
Alternatively, the Executor or Trustee may sell the property and distribute the net proceeds. A title search should be done to find out whether there are mortgages or liens against the property. If the residence is underwater, the Executor and Trustee would have to decide whether to pursue foreclosure, a deed in lieu of foreclosure, or a short sale as a means of disposing of the property. For assistance with underwater properties, you should seek the advice of an attorney and a realtor.
If the surviving spouse, minor children, or other family members were residing with the person at the time of death, they might have the right to continue living there during the administration of the estate or trust, depending on state law. Consult with an attorney about whether occupants can be allowed to remain in the person’s home and for how long, or whether they will have to move from the premises.
Other Real Estate If the person who died owned other real estate, check whether there are tenants occupying their property. If so, look for a copy of the lease agreement among his or her papers, and arrange for rental income checks to be sent to the Executor or Trustee. Find out whether the person had hired a property management company, and if so, request a copy of the property management agreement. If the property will be sold, you should consult with an attorney and a realtor as to whether steps should be taken to remove the occupants from the premises before the property is listed for sale.
Bank Accounts If there is no trust, the accounts of the person who died should be retitled to the name of the estate. To do so, the bank will likely request from you copies of the death certificate and the letters of administration, as well as the Estate’s tax ID number. You can consolidate cash accounts into a single Estate account for ease of administration.
Business Interests If the person was the owner of a small business, check the will or trust for instructions as to the disposition of the business. The death of the owner can result in a sudden and steep decline in the business value. To mitigate against potential loss, you can immediately contact any co-owners or senior staff members to arrange for the continuing operation of the business, and to set up a system for collecting income and paying expenses during the administration of the estate or trust. The executor or trustee should decide as quickly as possible, based on the instructions in the will or trust, whether the business will be closed, sold, or liquidated. If the business is put up for sale, an appraiser may be needed to determine the value of the business. If the person was a licensed professional, for example an attorney, architect, dentist, or psychologist, the state may impose special rules regarding the winding up or sale of the business. Consult with an attorney to discuss the legal requirements.
Tangible Property You should identify items specifically entrusted to anyone in the person’s estate plan documents, and secure such items until they are ready to be distributed to the beneficiaries. If there are valuable vehicles, artwork, jewels, or antiques, consider having those items appraised. All remaining items of tangible property are typically distributed equally to the residual beneficiaries—that is in shares of roughly equal value, as the beneficiaries agree among themselves. For example, one way the beneficiaries can divide up the items is to take turns choosing them; perhaps you can draw cards to determine who gets to choose first. Read our blog post about dividing family heirlooms for tips.
Another option you have is to sell the remaining tangible property– for example, in an estate sale. There are many companies that manage such sales in return for a fee or percentage of total sales, or you can conduct one yourself. The net proceeds would then be distributed to the beneficiaries. Look up Estate Liquidation & Moving services on our Local Resources page. You can also make donations of the remaining items to one or more charitable organizations. Listed below are resources for donating different types of items:
CDs and DVDs You may be able to sell CDs and DVDs at a local used record store or online. Alternatively, you can try donating items to your local public library or school, or to organizations that are building libraries, as described in this article by Planet Green.
Computers and Electronics There are many regional options for recycling obsolete or damaged computers or electronics, or so-called “e-waste.” Some organizations will pick up these items for you. You can search the EPA’s directory for such organizations near you.
Children’s Toys New or gently used children’s toys, stuffed animals, or books can be donated to Stuffed Animals for Emergencies (SAFE), an organization that collects items to benefit children during emergency situations such as fire, illness, accidents, neglect, abuse, homelessness, or floods.
Art Supplies Items like art supplies, boxes, string, fabric, and paperboard can be donated. Web search “Creative Reuse Center” to locate a center near you where you can donate such miscellaneous items to help teachers, businesses, and artists.
Wedding Dress You can donate used wedding dresses to charitable organizations such as Brides Against Breast Cancer, a group that is funding an initiative called Making Memories to help those who are losing the battle with breast cancer.
Automobiles You will have to determine, based on the person’s will or Trust, who is the intended beneficiary of his or her automobile. To transfer title to the beneficiary, contact your state’s DMV and complete the required paperwork. Be prepared to provide the DMV with a certified copy of the death certificate as well as copies of valid registration papers and insurance coverage. If there is no named beneficiary for the car, and no residual beneficiary wishes to have the car, the Executor or Trustee may decide to donate it rather than trying to sell it. Habitat for Humanity, for one, accepts donated cars, sells them, and uses the funds to help build and secure affordable housing for at-need families.
Leftover Medications Similar to batteries and electronics, you should safely dispose of leftover medications. They are generally comprised of a wide variety of chemicals that can be hazardous when combined, and highly environmentally detrimental when they end up in landfills or filter into the water supply. The federal Drug Enforcement Administration recommends taking medications to local take-back centers. To find a take-back center near you, ask your local pharmacy or contact your local water management agency. You can also donate leftover medications to organizations such as the Afya Foundation and Aid for AIDS, which channel unused medications to Third World countries.
Email and Networking Accounts Consider hiring termination services to terminate the person’s email accounts and social and business networking accounts on websites such as Facebook and LinkedIn. Each company has its own policies as to what happens to online accounts after death, and whether the person’s online personal information or records can be accessed. See 7. Digital Death for more information.
Asset Search Services Finally, if you think the person who died may have had other unidentified property, you can consider hiring asset search services in order to locate any unknown assets, such as real property or accounts in other states. You can search state databases, or use services like Missing Money to locate unclaimed assets or property.
With so much of our lives online, digital property is becoming an increasingly important part of estate planning and settling the estate, just like physical property. When someone dies, their online accounts, including email and social media accounts, will live on unless otherwise dealt with.
Digital Estate Services The person who died may have stipulated their wishes in their will regarding their digital property. He or she may have also used an online service. Some companies allow you to create a “digital safety deposit box” with all of your account information stored in one place, and a beneficiary listed for each account. Whoever the person named as a “verifier” will be asked to verify his or her death, and then the beneficiaries of the person’s respective accounts will be notified.
If no arrangements regarding digital property were made, or if you cannot find out if they did, you may still be able to access or delete their online accounts. Currently, Gmail and Hotmail will mail the person’s information to the estate holder. Facebook will not grant access to the account, but if you contact them you can request that the person’s profile be taken down or turned into a memorial page.
Only five states – Oklahoma, Idaho, Rhode Island, Indiana, and Connecticut – currently have laws regarding digital property assets, though more are likely on their way. For information on individual state laws where they exist, visit the Digital Estate Resource page. Or for Digital Asset Services, visit our Local Resources page.