Tax Tip of the Week | How to Avoid being Overwhelmed in Times of Death and Illness?

What do you do when one spouse refuses to be or has not been invited to be involved with finances but then an unexpected death or illness occurs?

Dealing with death and illness is a difficult time for a spouse and the family, no matter the circumstances. When the spouse is unaware of how the finances have been handled, it may lead to frozen accounts and assets. Gary Altman, an estate planning attorney in Rockville, MD., explained that it is common to find families in this situation. He recently had a client who had to ask her brother-in-law for financial assistance. Altman stated that his client did not have enough money in their joint accounts. She was unable to make ends meet because the accounts were in her husband’s name alone and the financial institutions will freeze the single-owner accounts when a person dies. 

Financial professionals and attorneys know that these times are sensitive, delicate and trying. They also have encountered many times that the surviving spouse who was hands-off has to deal with missing information and does not have complete knowledge of their net worth or where accounts are held. The surviving spouse will most likely be overwhelmed with the financial decisions while trying to cope with the day to day emotions of grief and loss. Grieving can cause a person to have high emotions, which may lead to unclear decisions. According to Susan Bradley, founder of Sudden Money Institute, grief can reduce cognitive capacity. She recommends that the surviving spouse focus on what is important or pressing during this time. For example, the survivor should pay the bills that are essential to live each day. Slowing down and realizing what is truly important throughout this time will allow prioritizing urgent matters, most importantly, dealing with emotions and getting through the day one step at a time. The surviving spouse should wait until he or she is no longer in shock to make financial decisions and understand their financial needs. 

Here are steps couples should take to prevent frozen accounts when faced with death or illness:

1.    Hire a financial planner who specializes in estate settlement and an accountant to file tax returns for state and/or federal estate tax returns. Establishing a financial advisor, that both spouses like and trust, can reduce these overwhelming decisions that one might need to make without an advisor. Each spouse should be confident and comfortable with this person.

2.    Make sure both spouses give the executor permission to manage digital assets. Enabling both spouses to have access to and control over assets will reduce potential problems in the situation of death or illness. Another way to ensure immediate access is by stating “transferable on death.” This may be done when the couple sets up the account. 

3.    Stay up to date with your online service software to track every account and asset. This will ensure secure accounts and assets. Assets that are jointly held or are held in the survivor's name alone are protected, unless the survivor co-signed or guaranteed the debts.

Here are steps a surviving spouse should take when dealing with death or illness:

1.    Order multiple copies of the death certificate to use to reassign financial accounts and settle the estate. The death certificate will allow you to contact the spouse’s employer to ask about a 401(k), pension, stock options and life insurance, etc.  

2.    Contact the estate attorney, accountant and financial adviser. Update your will after shock has worn off. 

3.    Gather and rename household bills, bank, brokerage, insurance, and credit-card statements in your name alone. 

4.    Create a new financial plan after you have understood immediate expenses and are able to make long-term decisions. 

Credit given to:  Tergesen, A. (2019, March 29). Estate Planning for the Uninitiated. 

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.  

This Week’s Author – Brianna Anello

–until next week.