Settling the Estate
Settling an estate involves completing the probate process, which is the procedure
for resolving the outstanding financial affairs of the deceased. The probate process
allows all of the participants in the will, and any other interested parties, to
assert their rights and concerns. The courts approve the final settlement of the
estate.
The first step is to complete an inventory of all assets that are subject to probate.
This will include any assets that are not already designated to beneficiaries outside
the will. Many investment accounts such as 401(k)s, IRAs, and annuities have their
own beneficiary designations and are dealt with outside the probate process. The
second step is the payment of any taxes owed and the repayment of outstanding debts.
The final step is the transfer of physical property (art, jewelry, etc.) as specified
in the will, and the division of the remaining estate among the heirs.
Making Plans for the Future
Once the probate process is complete, the challenge becomes dealing with the permanence
of the loss of a loved one and managing all of the personal and financial challenges
that arise from that death.
Providing for ongoing living expenses is the primary concern. The first step in
getting a handle on how these expenses will be addressed is to draw up a budget
for the remaining family members. Be sure to itemize all of the costs of living,
including housing, transportation, food, clothing, insurance and other necessary
expenses. Consider, too, the long-term financial needs of the family. There may
be children to educate or family members with special needs requiring long-term
care. Be sure to take a realistic inventory of the family’s financial needs over
time.
The next step will be to assess the value of the estate left behind and the total
amount of income that family members can expect to receive, either in a lump sum
— from insurance policies, for example — or in installments or ongoing payments
— from Social Security or salary and wages, etc. Be sure to check with the decedent’s
former employer regarding any final settlement of salary and benefits due. Many
times there are employer-paid life insurance policies and other supplemental benefits
that can be of tremendous value. At the same time, it will be useful to inventory
the financial assets of the family, things like the amount of equity in the family
home, the value of cars, bank accounts, and other assets.
Choices to Make
Once the picture of the financial situation is clear and complete, it is appropriate
to begin making some decisions about how to move forward. It’s often useful at this
point to pull an accountant or other financial professional into the loop; at this
difficult time a professional, practical opinion can be of great benefit.
If the spouse who died was the primary financial provider for the family, and the
surviving spouse does not earn enough to live on, this financial analysis may prove
a bit daunting. Facing the challenges of replacing income can be difficult, but
the obstacles are not insurmountable. You might need to consider taking a job or
returning to a former career in order to meet the financial needs of the family.
If returning to the workforce is on the agenda, participating in training programs
or even returning to school to complete a degree or do post-graduate work might
make sense. Naturally, there are some costs related to schooling, which include
tuition, books and other fees, but the increased earning power will likely make
those expenses a smart investment for the future.
There are also other expenses. These can include care for elderly parents or children,
increased transportation costs for commuting to work, the need to purchase a professional
wardrobe, and other costs. If moving or selling a home is on the agenda, expenses
will be incurred before a home is sold or when paying moving expenses. Be sure to
take all of these expenses into consideration in the planning process.