According to Benjamin Franklin, “In this world, nothing can be said to be certain, except death and taxes.” These words and just as true today and quite often, the two come as a package deal.
In other words, when a person dies, those left behind may have to negotiate the Arizona probate process as well as a confusing series of financial, tax, and legal steps in order to sort out the affairs of their loved one who has died.
In this post, you’ll find out some of the hurdles your surviving relatives will have to face when it comes to your estate and assets.
Will vs. No Will
Whether or not you’ve written a will makes a significant difference to what happens to your assets when you die.
If you’ve written a will, it’s usual to name an executor. It’s their job to administer the transfer of any assets, ensure your debts are paid off, file your income tax returns, and distribute any remaining assets according to the terms laid down in your will.
If there’s no will, any remaining assets pass to the decedent’s heir, in accordance with the state of law. An executor will be appointed by the court.
It’s important to note that an executor is not always needed. One case where this applies is if an asset is owned jointly with the right of survivorship. An example of this type of asset is a couple’s bank account that was jointly owned. When one spouse dies, the surviving partner gets the account.
Another situation in which an executor is not essential would be if you hold all your assets in a revocable living trust or your assets don’t exceed a certain threshold. What this threshold is depends on the state.
How Many Copies of the Death Certificate Will be Needed?
Multiple copies of the death certificate will be required. A good number of copies to get would be 10. The death certificate is needed when your loved one notifies financial institutions, insurance agencies, and government agencies of your death.
Debts Are Not Usually Passed on to Family Members
Your family is not usually liable for any of your debts when you die. However, your estate will be.
There is, however, an exception to this rule. When debts are in joint names, the surviving party is responsible for the debt.
It’s better if you can pay off any of your debts before you die because your loved ones will still feel the effects, even though they’re not responsible for your debts. Any money or assets in your estate must be used to pay off your debts before anything is handed out to survivors.
Various Agencies Have to be Informed of Your Death
It’s usual for the executor to inform various agencies of your death. These might include the Social Security Administration to ensure Social Security payments are discontinued. If this agency is not notified, your estate will have to pay back any money paid.
If you’re a veteran, the executor also has to contact the VA. This is because there may be a death benefit payable as a result of your death.
Who Else Must be Contacted?
The executor of your will must also get in touch with:
- Mortgage providers
- Savings providers
- Insurance companies
- Credit card companies
- Utility companies
- Phone, TV, and internet companies
- Your employer
Filing a Tax Return
It is the executor’s responsibility to file a final income tax return for the decedent. When completing the return, the executor must indicate on the form that the decedent is deceased.
In addition, if the decedent’s gross estate is greater than $5,430,000 they must file an estate tax return within nine months of death.
If an estate tax is due and no return is filed, there is the risk of a penalty and interest will be added to any amounts due. If an executor distributes assets without filing the return, the government may have recourse against the executor.
If You Leave a Home in Your Will
If your house has a mortgage debt when a person inherits it, they become responsible for making the mortgage payments. They also have the option of selling the home to pay off the existing mortgage.
Should the mortgage be greater than the value of the property, your executor could try and get the bank to agree to a short sale. The other option is for the bank to foreclose.
If your house was rented, your lease agreement doesn’t automatically terminate upon your death. If the property is rented month-to-month, a written notice of your death acts as a 30-day notice and marks the end of the lease.
With a long-term rental, your estate is responsible for rental payments until the expiration of the lease.
Knowing what happens to your assets when you die is important because it allows you to put plans in place so your loved ones are taken care of and have no stress.