Make a list of financial issues that will need to be addressed in the coming weeks and months, and focus on those actions that you must take soon or that lay a sound foundation for financial decisions that need to be made later.
Obtain Multiple Certified Copies of the Death Certificate
A death certificate allows for much-needed financial resources. You'll need to file an individual death certificate to:
- Apply for death benefits
- Apply for retirement and Social Security benefits
- Settle the estate
- Assume sole control of assets such as bank accounts, investments, residence, vehicles and a safe deposit box
Make Funeral Arrangements
To help in this, find and read the will and any letter of instruction, which may provide funeral directions and other guidance to survivors. Also, see if any advance arrangements were made with a funeral home.
Review Living Wills & Powers of Attorney
Families of those who are severely injured should locate and read any living will, health care power of attorney and other related powers of attorney. These can help you make important decisions and, in some cases, provide legal authority to carry out vital financial actions.
Control Spending & Create an Emergency Budget
Cash will be tight for many families until additional financial resources, such as life or medical insurance benefits, become available. You may have lost critical income if your loved one was a significant earner. You may face new expenses, such as babysitting or housecleaning, as well as funeral expenses and other one-time costs. Identify current income sources you can depend on and try not to let expenses exceed that income.
Find Immediate Cash or Assistance
Whether or not you currently work, you may have more financial benefits and resources than you realize.
- Personal Savings Accounts
- Life Insurance Cash Reserves
- Local or State Agencies
- State Unemployment Compensation
- Friends & Relatives
Please Note: Try to avoid dipping into retirement accounts or selling investments for cash.
Quickly take control of bill paying if you were not doing that task previously. You don't want to lose your good credit.
Continue Health Care Coverage
Don't let coverage lapse for yourself or your children. If your health insurance coverage was through your loved one, contact his or her employer within 30 days of his or her death. You probably can continue coverage under the group policy, through what's called COBRA, though you'll have to pay for the entire premium.
Buy an individual policy if you can't continue employer coverage. You can either buy it on the open market or perhaps by converting from the existing group coverage. You usually can get one without an exam or waiting period for pre-existing conditions as long as your loved one was covered under the group policy for at least 18 months.
For families who have their own policy, informing the carrier of your loved one's death may reduce premiums.
Handle Business Affairs
You may need to give some attention to critical management issues or other impending business transactions if the deceased or injured owned an interest in a business. Consult with the company's attorney, any partners and key employees.
Notify Financial Institutions
Notify banks, investment accounts, your mortgage holder, department of motor vehicles and other institutions of your loved one's death as soon as possible. This reduces the potential for scam artists to use the deceased's name illegally.
One exception to this, suggest some financial advisers, is your credit card company. You could lose the card or find the credit limit reduced if the card was issued based on your loved one's income or two incomes.
Apply for Death or Disability Benefits
First, determine what benefits you are eligible for. This could take some effort, particularly if you were not previously managing the household finances.
For known life or disability insurance policies, contact your insurance agent or the company. If you can't find the policy or aren't sure what coverage your loved one had, dig through financial records, such as checkbook records for checks written to insurance companies. Talk to your loved one's employer, parents and other relatives, attorney and perhaps seek professional advice.
You can also inquire about policies you can not locate by calling the Life and Health Insurance Foundation for Education at 202.464.5000.
Note dates and names of all conversations when contacting representatives regarding what benefits are available and claim procedures.
- Personal Life Insurance
- Employee Life Insurance
- Business Ownership Life Insurance
- Travel Insurance
- Social Security
- Veterans' or Active-military Benefits
Less obvious may be death benefits attached to credit cards, payment protection for loans such as auto and home, funeral homes, auto insurers, membership in unions or professional organizations and previous employers.
Collecting Life Insurance Benefits
When applying for life insurance benefits, you may need to decide how you want to receive those benefits. Some of these decisions are irrevocable, so choose carefully, preferably after seeking independent professional advice.
Lump Sum Payment
Often this is the best option, unless you have creditors waiting in the wings or a large tax obligation.
Leave the Benefits with the Insurer
Leave the benefits for a while and receive interest payments. You can take a lump sum payment later. Just be sure the financial health of the insurer is good and that you can't earn higher interest elsewhere.
Installment payments of interest and principal over a period of time.
Many financial planners advise against this until you've had time to explore all the options in light of your particular needs. Annuitization is not always the best choice.
Social Security Survivor Benefits
- Surviving spouses, and sometimes ex-spouses, caring for children under age 16 or who were disabled before age 22 can start collecting monthly benefits from Social Security.
- Unmarried children under age 18, up to age 19 if still in high school, or disabled before age 22 also are eligible for benefits.
- Widows or widowers, and in some cases ex-spouses, no longer caring for children may be able to collect monthly benefits, starting as early as age 50.
- Dependent parents 62 or older may also be eligible.
- In addition, you can collect a small death benefit.
Check as soon as possible with the Human Resources Department of your loved one's employer to see what benefits or money may be due to surviving family members.
- Unpaid salary, bonuses, commissions or deferred compensation
- Unused vacation or sick days, paid out in a lump sum
- Life insurance benefits. (The employer may not be in a position to help, so you may need to directly contact the insurance company for the group plan.)
- Stock options
- Regular monthly income based on a percentage of the worker's salary, paid to the spouse and dependent children. If offered at all, this may last only a limited time or until specific events occur such as the survivor's retirement.
- Personal financial planning for survivors
- Pension benefits. A surviving spouse usually qualifies for immediate benefits under the working spouse's pension plan even though the loved one was not retired.
- Some pension plans allow for disability retirement.
- Qualified plan benefits. Plans such as 401(k) or 403(b) plans will pay out the account's value to the designated beneficiary, typically as a lump sum, though the plan may offer the option of fixed payments for a certain period or for life.
- Some of these benefits may be reduced by benefits received from Social Security.
Veterans & Military Survivor Benefits
As a surviving spouse or child of an active-duty member or retiree, you may remain or be eligible for certain military benefits.
- Funeral Benefits
- Medical Care
- Commissary Exchange
- Dependency & Indemnity Compensation
- Survivor Benefit Plan Annuity (whether the deceased was retired or not)
- Veterans Mortgage Life Insurance
Medical & Disability Benefits
For those with loved ones severely injured or disabled, several income sources may be available:
- Short-term disability payments of up to 26 or 52 weeks from the employer; payments could run as high as two-thirds of salary
- Employer long-term disability coverage; this could be up to 80 percent of salary when combined with Social Security payments
- Workman's compensation covers medical bills and loss of income if injured on the job
- Social Security, but only if the disability is permanent
- Personal disability policies
- Service-connected military benefits
- Payment protection for loans such as a mortgage
Address Tax Payments
Check the IRS's Web site for specific deadlines that apply to your situation.