Much to do. Not much desire to do it.
After the death of a loved one, all you want to do is grieve. But the harsh realities of funeral arrangements, probate and estate taxes quickly muscle in on your anguish, especially if you are the surviving spouse or executor.As you grapple with the financial fallout from a friend or family member's death, here are some pointers:
Make final arrangements
"Before you do anything else, look for burial instructions," says Richard Van Der Noord, a financial planner in Macon, Ga. "That part moves quickly."
If you don't know what sort of funeral the deceased wanted, you may find instructions tucked into a "doomsday" file or included in a more general letter of instructions. Also check to see if the funeral has been prepaid.
In fact, Van Der Noord encourages clients to both plan their own funerals and pay for them. That way, their families won't be left scrambling to pay the bills and they won't have to make difficult -- and costly -- decisions about what sort of funeral to purchase. "You're at a very emotional time, and you end up making bad decisions," he says.
If the funeral hasn't been prepaid, pay for it as best you can, advises Jonathan Forster, an estate-planning attorney in Rockville, Md.
He notes that you could cover funeral costs by tapping any account that you held jointly with the deceased with right of survivorship. Alternatively, if you have to, use your own credit card.
The money will be deemed a loan to the estate. Once the legal review known as probate starts, you can tap the deceased's assets. If the estate is opened up quickly, you may get your money back before your credit-card bill comes due.
Call in the pros
"You're going to need an accountant and an attorney to get through the process," Forster says. If you are the executor and the deceased doesn't have an attorney and an accountant, find yourself one of each.
You need an attorney to interpret the will and get the estate through probate. You need an accountant to value the assets and file state and federal estate-tax and income-tax returns. Federal estate taxes are owed if a person dies in 1999 and leaves people other than his or her spouse more than $650,000.
Van Der Noord says an accountant is especially critical. "I have not seen a case where you can do without an accountant," he says. When first talking to lawyers and accountants, try haggling for lower fees.
"When you discuss fees, remember that the larger the estate, the more leverage you have to negotiate, because they typically get paid as a percentage," he says. "And if the estate includes only marketable securities, you can negotiate a lower fee than if the estate includes a family business, multiple pieces of property or property in multiple states."
Take a deep breath
You arranged the funeral and you lined up an attorney and an accountant. Next? Take a break.
If you are the surviving spouse or executor, you may be besieged by real-estate brokers, investment advisers and family members, all anxious to snag a piece of the deceased's estate. Inform them that no financial decisions are going to be made for at least a month.
"I tell my clients to sit tight for 30 days, don't take any interest or dividends from the estate if you don't have to, keep records of what you do and then, after the month is through, come in," Forster says.
The Internal Revenue Service expects to receive estate taxes, if any, within nine months of the date of death, so there is usually plenty of time.
But not everybody can be laid back. "It's harder if there's a hard-to-value asset, like real estate or a closely held business," Van Der Noord says. "That makes the nine months seem much shorter." If the deceased is a corporate executive, a quick decision also may have to be made about exercising stock options.
Consider disclaiming
If you are the beneficiary of, say, your uncle's will and you already have oodles of money, you may want to disclaim all or part of the inheritance. You can't, however, decide who then gets the money. Instead, the money passes according to the instructions in the will, as if you had died before your uncle.
But if that means that the money then goes to, say, your children, it could be a smart move. Because the money goes directly to your kids, rather than passing through your hands and then onto them when you die, you may save a significant chunk in estate taxes.
If you want to disclaim, you usually have to do so within nine months, Forster says. In the meantime, don't accept dividends or interest from the estate, or you will nix your chances of disclaiming those assets.