After doing everything right, including having an estate planning attorney prepare estate plans for her parents, a woman managed her mother’s affairs after her death in a matter of months. She expected the same when her father died, but some unexpected events occurred. A recent article from Business Insider, “I thought I was ready to wrap up my parents’ finances when they died. I was wrong,” provides some cautionary insights.
As their Power of Attorney, she managed her parents’ finances for several years before they passed, including placing most of their assets into irrevocable trusts. When her mother died, the trusts specified how the assets would be divided. A third went to the surviving spouse and a third to each of the two children. She was able to complete the transfer by phone with the investment company. She also filed her mother’s final tax returns and paid any outstanding bills.
She expected to have the same experience when her father died. However, she found that settling the second spouse’s affairs more complicated, even though she’d previously helped settle a second spouse's estate for her father-in-law.
Her father’s estate was more straightforward: he lived in an assisted living facility with few possessions. Transferring the remaining trust assets to her sister and herself took one phone call and outstanding medical bills were paid in a matter of months. However, problems arose.
Her father’s bank account wasn’t in the trust, and neither she nor her sister could access his bank account without a will. He had a trust but no will, so her sister had to go to court and be legally declared his next of kin before she could close the bank account.
Filing the final tax return was also a challenge. While getting his traditional mail was always a challenge, she had been able to find any paper documents in the past. She could not log into his online accounts, since digital assets were never addressed.
Getting a transcript from the IRS has been a long and complex process, and she’s hoping to get tax information in time to file by the tax extension deadline. As he died in 2023, she’ll have to do another set of tax returns next year.
Lessons learned:
Having a will and trust documents prepared by an estate planning attorney will make life easier. Designating an executor and/or trustee ahead of time can ease potential friction between siblings.
Gather all the paperwork. If parents are well enough and willing, gather financial paperwork, from tax records, bank and credit card information and login information to online accounts while they are still living.
Set realistic expectations. Don’t expect to complete all tasks quickly. It will take a few months and maybe longer to finalize taxes, sell property and deal with any outstanding legal or financial issues. Knowing it’s going to take time may make the process less frustrating.
Losing a parent is hard, and losing a second parent is often harder. Preparing for the estate planning aspects in advance can make a tough time a little easier.
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