When my dad passed away, a very dear client passed away shortly after. Both left their spouses to handle the finances, and although they left their affairs organized, extensive detective work was still necessary. Once the initial shock of losing someone subsides and the ceremonial procedures are over—what do you do now financially? After losing a best friend and loved one, thinking about money and handling the red tape required by financial institutions may be the last thing someone wants to face. In the best cases, it can take months to navigate through insurance policies, trusts, wills, bill payments, and account transfers to beneficiaries. Tremendous pressure is lifted off the family when they have someone they can trust to reach out to—which could be a financial advisor.

Knowing the total picture

A family working with a financial advisor when a loved one passes away has several advantages. Financial planners and advisors usually know the total financial picture and may have clues to accounts of which you may be unaware. For example, another client who recently passed away had several annuities bought 30 years ago that were held at various insurance companies. The trustees of the trust had no prior details on these policies, so working with those annuity companies was very time-consuming and difficult, as each company had their own requirements. One company wanted original documents and another accepted faxed copies, one wanted a long-form death certificate and another accepted photocopies, while some companies required a letter of acceptance for qualified account rollovers. Since the trustees worked long hours, it was hard for them to find the time to spend on the phone with the insurance companies navigating all the paperwork. A financial advisor knows the right questions to ask, which can speed up the process considerably.

The advisor may also be familiar with family dynamics—in some cases, the client may have discussed personal matters about the family, such as one child not being financially responsible or wanting gifting to continue to a certain charity, which may help the surviving family members make decisions.

Knowing the technology

My mom inherited a bank account abroad—not only did she not speak the language, but that bank’s technology was very complex and required several passwords and barcodes. This was confusing for her, and having someone to walk her through the process was very helpful.

A cellphone or computer can be a valuable resource—it contains a plethora of information such as emails, passwords, and other financial information. Having the deceased’s cellphone or computer can be crucial for logging in to accounts, resetting passwords, etc. Information in emails can also give clues to other accounts and bills that need to be canceled. While working with one client, we realized there were several apps on the spouse’s phone that needed to be canceled to avoid a monthly fee. It is important to keep in mind that although the intentions may be good, accessing these devices without permission could cause potential liability. It makes sense to talk to an estate attorney about what should be in place in advance before taking this approach. Having a legal document in place allowing you to access the phone, email, social media and other financial accounts of a deceased loved one may prevent any potential legal disputes. Another option could be to discuss passwords beforehand, but accessing someone’s account after that person has passed away may also have legal ramifications.

Knowing the process

An advisor can help you through the process of dealing with retirement accounts, pension companies, and insurance companies, as this can be confusing when it comes to rolling accounts over to the beneficiary due to the complex tax and transfer rules. Advisors have experience in what to look for and can facilitate the process more quickly, avoiding issues the client would not have expected.

Advisors can act as a liaison between family members. They can explain the process and expectations with respect to time and requirements by account custodians. The advisor can be a neutral third party that can discuss the best course of action between beneficiaries. Consulting a professional can ensure that accounts are set up correctly, avoiding potential tax penalties or premature tax payments. Discussions with beneficiaries regarding the best course of action could save them time and money in the long term—for example, issues like taking a lump sum versus leaving the account invested or knowing the tax consequences if they liquidate the account.

Many advisors will gladly work with heirs to open new accounts as a courtesy to the client. In many cases, retirement accounts must be split at the current custodian before they can be moved. IRAs and inherited IRAs have complicated account rules for tax purposes, so correct accounts should be opened to avoid any type of tax penalty. 

Knowing the professionals

The financial advisor may have relationships with the client’s CPA, estate attorney, and insurance agents. A client may change estate attorneys and not inform the beneficiaries, but the advisor may still have several revisions of the estate documents and beneficiary update forms on file. Financial advisors can also work as a team with other professionals to brainstorm the most efficient plan for taxes and future estate planning. The advisor can coordinate obtaining trust tax IDs, facilitate the update of estate documents with the attorney or make sure any trust accounting is in place after consulting with the CPA.

Planning for the future

A financial advisor can reevaluate your risk tolerance, goals, and expenses going forward, especially if your financial plan was created when you were married. Usually, the portfolio is anchored to the spouse with a lower risk tolerance. Have the goals changed? Have the expenses changed? Should the portfolio still be invested in the same allocation?

Links to other related blogs:

Navigating the Death of a Loved One

Estate Planning for Online Accounts & Digital Media