Coping with the death of a loved one is often a devastating emotional and psychological process, and for those tasked with tying up the loose ends of a late friend or family member, it probably doesn’t help when you’ve got to repeatedly explain to a seemingly endless string of customer service reps why they can’t speak to the account holder.
In situations where death is imminent, preparation — however grim a task it might be — could help to alleviate some of the stress when you eventually do have to box up your loved one’s life. But even those who think they’ve got everything planned in advance may be surprised when they hit roadblocks they hadn’t accounted for.
That’s a lesson Network World columnist Paul McNamara learned earlier this year following the death of his father, who recently documented how his difficulties with closing his father’s credit card account led him to realize it would have just been easier (but not really legal) to lie and pretend to be his deceased dad.
“I thought I was pretty well prepared,” Paul told Consumerist about the experience, noting that he had dealt with many of the same issues when his mother passed 25 years ago. “We did all the basics — got him a will, power of attorney, a health care proxy. But there were things that became tricky after the end, like bank accounts, CDs, investment accounts, and credit cards.”
PREPARATION IS KEY
Paul’s father was ill for some time, and Paul had the forethought to obtain power of attorney, allowing him to act on behalf of his father regarding financial and legal matters for property.
However, that power doesn’t cover all aspects of a person’s financial life, and Paul was left to close his father’s accounts, namely a Visa credit card.
“We didn’t do enough to prepare for the fact that once he could no longer take care of his own affairs, it became difficult for me to do it,” he recalls.
To understand part of Paul’s issues, you have to know the difference between a co-borrower, joint account, and power of attorney.
“We didn’t do enough to prepare for the fact that once he could no longer take care of his own affairs, it became difficult for me to do it.”
Power of attorney is a document and the attorney is the person you appoint to act in your place — this can be a family member, friend, or trusted confidant.
What power of attorney does is allow someone to act on your behalf in all your property and financial matters – though it can also be limited to specific functions, such as managing your investments. The big catch with power of attorney is that it ends at the time of the person’s death.
Thus, Paul’s power of attorney expired when his father did, and that proved problematic: he was cut off from his father’s bank accounts.
“My name was on his bank account as power of attorney, but I wasn’t a co-account holder,” he tells Consumerist. “Had I been a co-account holder I would still be able to get at his account now, and pay a few remaining bills, and most importantly be able to distribute money to his heirs. Instead, it ends up in probate because power of attorney ended when he did.”
“The thing I would have done, or wish I had done, was to get my name on his accounts as a co-account holder,” he says, adding that the probate process of settling his father’s personal and financial affairs could take months or even a year.
What’s the best option for you?
While it’s true Paul would have been able to close his father’s bank account, credit cards, and pay any remaining debts had he been listed as a joint account holder or co-borrower, how would such an action affect Paul’s own financial well-being?
Several members of the National Association of Personal Financial Advisors tell Consumerist that while it may have been easier for Paul to act as a co-borrower, it doesn’t make the best financial sense.
“As co-borrower, you are jointly liable for the debt, and any misdeeds will impact your credit score,” James Kinney, a CFP with Financial Pathway Advisors, tells Consumerist, noting that this option has many downsides, especially if the elderly family member is forgetful and might miss bill payments while still handling their own affairs.
“Also, joint ownership of a bank or investment account often causes problems,” he says. “A child may become joint owner with an elderly parent ‘just to help manage things.’ But when the parent dies, that account will now belong 100% to the child.”
This could lead to strife between siblings and other heirs, as they wouldn’t have a legal tie to the investment or account. Additionally, joint owners may both be liable for taxes on income generated by the account.
One way around this, Kinney suggests, is to title the accounts in the parents’ name with a “Transfer on Death” beneficiary designation, meaning the account will automatically transfer to named beneficiaries instead of into one person.
Keep Documents Up-To-Date; Extra Death Certificates On Hand
Regardless of the prep work you’ve put in, there will be bureaucracy, red tape, and skeptics. To that end, advisors and estate planners say having documentation in order is key.
Financial advisor Michael Chamberlain suggests in his 10 Keys To Proper Estate Planning Guide that anyone looking to make things easier for the ones they leave behind should make clear requests for funeral arrangements, update their beneficiary forms, and make a list of their physical and digital assets.
“If you have life insurance, annuities, or retirement plans — like an IRA, 401(k), 403(b) or others — there should be a primary beneficiary, as well as contingent beneficiaries, which could be your children, a charity or good friends,” Chamberlain says. “It’s particularly important to make sure your designations are current if you’ve remarried or had other family changes. These accounts will automatically pass based on beneficiary designations and do not go into probate.”
As for surviving heirs, before contacting credit card providers, mortgage and student loan lenders, utility providers, and other companies, heirs should have plenty of copies of their loved one’s death certificate on hand, as well as personal information such as Social Security numbers and past bills.
While Paul hasn’t been able to tie up all the loose ends with father’s accounts, he was eventually able to close that Visa credit card — after several rounds of back-and-forth with the issuer.
“For the last two years of his life I was paying his credit card bills,” Paul tells Consumerist. “I was paying with checks that had me as power of attorney, but turns out I was able to do anything but close account.”
He could use the card as he wished, pay the bill when it was due, “but when I called to close the account to make sure no one else could get at it. I was told I had to send a death certificate, write and attach a cover letter, address and stamp the envelope, and trust that it will get to the right person.”
Paul says the difficulty in closing his father’s credit card account was in contrast to the fairly easy time he had in doing other things with the account while his father was alive.
“They have my phone number as the phone number of record on the account. I can answer all of their security questions about him. They say they’ll put a ‘hold’ on his account based on nothing but my word and knowledge of his identification details,” Paul wrote in his column about the experience.
Holly Thomas, a financial planner and member of NAPFA, suggests that in the case of credit card companies, loved ones should look into the requirements to close the accounts ahead of time.
“It might be a good idea to contact them and ask what form of power of attorney they will accept,” she says, adding that dealing with financial institutions often requires some up-front work.
Discover offers a special department — Deceased Account Services Specialists — to handle credit cards after death. These employees work with family members to finalized an account.
Unlike Visa, which required Paul to submit copies of his father’s death certificate, Discover says it will not ask for this information. Likewise, Capital One says the only verification it needs are the person’s name, Social Security number, date of birth, account number, and date of death.
PRO TIP: When contacting the credit card company’s customer service department to close accounts, advisors suggest you inquire into whether or not the account holder had purchased credit life insurance, which may pay off the account balance.
Paul may have been able to close the credit card out, but his father’s bank account remains in limbo.
The bank was notified of the death through the Social Security Administration, and because there was no one else listed on the account, it’s effectively been frozen since.
Had Paul been listed as a joint account holder, his father’s account would have passed to him. However, as the financial advisor pointed out earlier, this could have also left Paul in a bind had his father had excess debt or other financial constraints. Instead, it becomes property of the estate.
“The account is inactive, but it is in probate now,” Paul says of his father’s account. “So his attorney is handling his affairs and going through that process.”
Thankfully, Paul does not have to deal with selling his father’s house, as it was sold before his dad passed away. For survivors who have to not only sell a late loved one’s home but deal with the lingering mortgage issues, it’s not always easy.
A lot of what happens in this part of the process depends on whose name is on the mortgage.
For example, with a mortgage held by two parties — perhaps you and your spouse — little would change; the loan would transfer to the surviving spouse. However, you’d still want to contact the mortgage company about the death, so the mortgage can be updated to reflect sole ownership. This may require the production of a death certificate to verify.
A mortgage held by one person would be transferred to the deceased’s estate. At this point, the person appointed to handle the estate would be responsible for making payments.
My Way Forward, a blog on loss, suggests that the personal representative contact the mortgage company to notify them of the death. The company will likely have its own policies and procedures to follow.
In the case that the homeowner took out a reverse mortgage — which allows a borrower, 62 years or older, to convert the equity in their home into a lump sum or monthly payments — their heirs or surviving spouse will be responsible for repaying that equity.
The latest changes to reverse mortgage laws have attempted to shield surviving spouses from losing their homes in many cases. However, the non-borrowing spouse will still stop receiving funds from the reverse mortgage after his or her spouse dies.
If the deceased had a student loan in their name the debt may be forgiven or it may transfer to any remaining co-signers or heirs.
According to the U.S. Department of Education, if the borrower of a federal student loan dies, the loan is automatically canceled and the debt is discharged by the government.
Private student loans do not, unfortunately, always offer the same liability protections.
Liability for these loans vary depending on the lender’s policies. In many cases, the lender will attempt to collect from the deceased’s estate. If there is no estate, the loan will likely be transferred to a co-signer — the opposite can happen when a co-signer dies. If there is no co-signer, the debt will then fall to the spouse, depending on state laws.
If the deceased person has been living in their own home before their death, the survivors should contact the utility providers — water, gas, and electricity — to either have the service transferred to their name or canceled.
Again, survivors will likely be required to provide a copy of the account holder’s death certificate, their Social Security number, and even past bills in order to perform these tasks.
Canceling or transferring a cable or wireless account may be a bit more involved. Everplans, another blog that assists those after a loved one’s death, suggest calling the provider and informing them of your plans for the account.
In some cases, the provider may require the survivor pay a fee depending on the company’s policies or the contract currently in place. Additionally, the balance should be paid once the account is closed.
You may need to provide a copy of the death certificate, and other personal information about the account holder.
Of course, closing or transferring these accounts may be more difficult than it sounds. Back in 2010, a reader named Wyatt told Consumerist about the ordeal he went through with Comcast while trying to close his deceased father’s account.
Despite sending copies of his father’s death certificate, Wyatt continued received bills for the account.
“Once again, I called Comcast. This time, I was told that there was nothing they could tell me, because I wasn’t the owner of the account,” he wrote to Consumerist. “They insisted I would need to fax the death certificate to them a third time, or take it into a local service center (the nearest one for me being over 50 miles away) before they could even discuss the account with me.”
While social media accounts on Facebook and Twitter may turn into a memorial for the deceased, it’s also important to ensure no one else can get access to these profiles. You don’t want grandma to share that cute kitty picture from the other side.
For these reasons, many networks have created features that allow users to control what would happen to their account after death.
Facebook, for example, will now allow users to designate a “legacy contact” to have some control over their pages, or otherwise designate what they’d like to happen to their accounts after they’ve passed.
If that doesn’t seem like something you’re interested in, you can also tell the social site to simply shutter your account. To choose a legacy contact: Go to Settings > Security > Legacy Contact (at the bottom of the page). Choose your person, and you’ll have an option to send them a message to give them a heads up.
Google began offering a similar option in 2013, the AARP reports. The Inactive Account Manager allows individuals to designate up to 10 trusted friends or relatives as beneficiaries of their online accounts.
Each social media network spells out their rules regarding the accounts for deceased members in their Terms of Service agreement, the AARP notes.
The situation is the same for email accounts: check the terms of your provider to determine how your account can move forward.
Naomi Cahn, a law professor at George Washington University in Washington, D.C., says that users who want their heirs to have access to their email accounts should draft a statement with that information.
“This document can help others carry out your wishes and can be added to your will,” Cahn says.
Purchasing and downloading a song from iTunes or a book to your Kindle doesn’t give you the legal right to pass those things on to their heirs, according to the AARP.
Again, information on your digital downloads and your ownership (or lack thereof) of them can be found in the terms of service agreement with your preferred service provider.
The same issues can be found on photo-sharing sites like Shutterfly and Flickr. To ensure that your family doesn’t lose access to your photos, the AARP suggests downloading copies to an external hard drive or directly to your computer.
In addition to knowing your online rights when it comes to preparing to pass on email, social media, and digital downloads, financial advisor Chamberlain urges consumer to make records of their digital assets.
This helps those who will manage your accounts upon your incapacity or death, he says. Keep records of both online login information and offline documentation for all bank, brokerage and credit card accounts, bill pay sites and other accounts you access online.
Store this information in a secure and known location, preferably with your other estate-planning documents. This allows the trustee, designated power of attorney or executor to access your accounts as needed. Sample forms are available for download.
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