No one likes to think about death, especially of a loved one, but the failure to prepare for it can be self-defeating. Preparation creates emotional and financial security for surviving spouse, removes doubt as to what will happen, and eliminates time-consuming and costly obstacles. CPA financial planners can help individuals with the preparation and execution of the plan, should the worst happen.

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Lifetime Planning

The death of a loved one is never easy, even when it is expected because of illness. When it occurs unexpectedly, it is devastating. Furthermore, when the deceased is the primary breadwinner for the family, the financial issues almost always create uncertainties, which advance planning can go a long way toward alleviating. An initial meeting of the spouses and the collection of information is a great start, backed by a periodic—ideally annual—update meeting. The following checklist can form the basis of an actionable plan should the need arise:

  • Prepare a list of all bank and brokerage accounts, including location and advisors’ names and contact information
  • Discuss total assets and cash flow from all sources, including pensions, Social Security, and potential life insurance proceeds
  • Discuss debt and how to pay it off
  • Determine whether there is sufficient cash for immediate expenses, such as in a joint account or separate accounts with adequate balances. Note that a payable-on-death account might require a death certificate, which may take several days to get or entail a visit to the bank
  • Determine whether there is sufficient cash to cover major spending until the estate is settled, including estate operating fees, legal and administrative fees, and taxes
  • Discuss all credit cards and automatic bill paying linked to accounts and passwords to access them
  • Discuss which advisors the survivor should go to for advice and guidance, as well as any trustees and executors
  • Discuss details of life and disability insurance policies, as well as beneficiary designation and contact information if applicable
  • Determine whether assets and accounts are properly titled and how survivors or beneficiaries will have access to them
  • Prepare preliminary letters to IRA beneficiaries advising them to seek professional advice before starting any distributions
  • Decide on an accessible location for physical copies of wills, living wills, trust agreements, retirement account information, house deeds, and other pertinent legal documents
  • Review healthcare proxy and power of attorney information, making designations if they are not already made
  • Discuss funeral arrangements and where cemetery and deeds to burial plots are, if applicable
  • Prepare a list of people to notify about death and funeral
  • Prepare a list of all screen names and passwords for all web-sites and especially credit cards, bank, and brokerage accounts
  • Discuss location of prior tax returns
  • Determine an estate tax strategy, if any.

The information above often exists in some form, but it is usually haphazard and disorganized. Compiling the information should not be that difficult for the spouse who handles these affairs on a day-to-day basis. Generally, an initial meeting with the CPA financial advisor and getting the information together should take less than three hours, which is much less than it will take an executor to search for that information, as well as much less costly. Getting the information together also forces a review of many of the family’s affairs and can lead to consolidating bank and brokerage accounts, deciding on contact persons and executors, and speaking to those people about any accomodations they may need. The process also reassures both spouses that things will be taken care of.

Immediate Post-Death Steps

The most immediate concern is usually the availability of cash, especially to pay for the funeral. If plans have been made, or if the surviving spouse has sufficient funds in a separate account, this is not a problem. Those who have not made such plans usually call their accountant or other financial advisor to find out what to do. CPAs should calm them down and walk them through the process of coming up with immediate cash. One way is to use credit cards; another is to borrow from a friend or close relative, perhaps a child. The following other steps should also be taken:

  • Contact the clergy or other person who will conduct the funeral
  • Notify people who will need to know about or who would want to attend the funeral
  • Find the will and file it for probate; if there is no will, an attorney must be contacted to explain and handle the local intestacy procedure
  • Once the executor is qualified, the assets need to be accumulated and debts organized
  • Locate life insurance policies and other policies and debts that might have death benefits and submit claims
  • Notify the Social Security Administration, if applicable
  • Determine cash flow needs and expected cash flow
  • If there are minor children and the deceased was the second of the parents to die, inform the children’s designated guardian and arrange for the transfer of care.

Later Post-Death Actions

Often one spouse handles financial matters for a couple. If that spouse is the deceased, CPAs can assist individuals regarding such affairs in many ways. For starters, previous tax returns are a road map to many of the taxable accounts and mortgage debt. The backup data has tax statements showing the payer’s name, account numbers, and account ownership.

Retirement accounts are more difficult to track down, since they are not reported on tax returns if no distributions or contributions have been made recently. The deceased’s current W-2 form will, however, indicate whether the spouse was covered by a retirement plan and if so, the amount of the 401k payroll deduction for the previous year. IRA custodians now send out an annual form indicating the year-end balance in the account and the previous year’s contribution. These should be stored with the tax data. Many people often receive these statements, glance at them, and then throw them away, destroying the trail.

Reviewing the checkbook or bank account statements for the last couple of years can uncover payments for the purchase of assets, life insurance premiums, annuity purchases, and retirement account contributions. The more checkbooks and tax returns the client has, the better, ideally up to five years’ worth.

The Right Person for the Job

Having a preexisting relationship with the deceased and the surviving spouse can make it easier for a CPA to help. In many cases, the family financial advisor has had a long relationship with the couple, but if the surviving spouse is not the one who handled financial matters, then the family advisor may be little more than a “default” choice.

Alternatively, the deceased may have handled everything without outside help at all and left no instructions as to whom to consult. In these cases, the CPA financial planner must be proactive and help the survivor. Supposedly knowledgeable family members are usually not financial professionals versed in managing assets and cash flow or balancing the interests of beneficiaries. Furthermore, CPAs will need good communication skills in order to explain what they are doing and why, as well as to issue clear reports and answer questions, especially if things do not go as expected. Nothing will be perfect, but advance planning offers a much better chance of success than none.

Advance planning offers a much better chance of success than none.

Final Tips

Regarding investments, the survivor should avoid making permanent or long-term changes for at least a few months while they get used to their new circumstances. Doing nothing cannot cause much harm and at worst will only result in lost opportunities, while acting precipitously could cause potentially irretrievable losses.

The immediate post-death process is never comfortable, but prior planning makes things more manageable and provides a calming influence. During this time, CPA financial planners can provide a valuable service for a surviving spouse, giving advice and guidance during this difficult transition.

Sidney Kess, JD, LLM, CPA is of counsel to Kostelanetz & Fink, LLP. He is a member of the NYSSCPA Hall of Fame and was awarded the Society’s Outstanding CPA in Education Award in May 2015. He is also a member of The CPA Journal Editorial Board.
Edward Mendlowitz, CPA/PFS, ABV is a partner at WithumSmith+Brown PC. He is also the author of a twice-weekly blog posted at http://www.partners-network.com.