Tuesday, February 23, 2016

Preventing a Financial Crisis after the Death of a Spouse

My wife and I received some heartbreaking news the day after Christmas.  One of our friends in Bowie passed away unexpectedly.  He left behind his wife and two school-aged children.

Along with experiencing overwhelming grief and sadness, his widow had to sort through all of the assets and financial accounts – including some accounts where no beneficiary was designated.  She had a message for all of her friends:  take steps to be prepared - just in case.

It was about the same time that I was exchanging messages with friend of Bowie Living, Denise Martin.  Denise is an estate planning and probate attorney practicing in Bowie at McChesney & Dale, P.C.  She agreed to write a blog post with recommended steps to take to be prepared for the untimely death of a spouse. The subject matter is too big to tackle in a single blog post, so Denise decided to focus on how to ensure a surviving spouse isn’t left with a financial crisis by making sure assets will be available in a timely manner.

Preventing a Financial Crisis after the Death of a Spouse
By Denise Martin 

A few months ago, I received a call from a man whose wife had passed away unexpectedly at a young age.  Beyond overwhelming grief, the surviving husband and their young children simultaneously faced a financial crisis.  The wife was the primary breadwinner and also the sole owner of many of the couple’s assets.  Here are some tips that will help prevent your family from facing such an emotional and financial crisis simultaneously:

1.      Any assets individually titled in a person’s name without a beneficiary designation must pass through probate; it can take months and sometimes years for probate assets to be distributed to heirs or beneficiaries.  As such, make sure there is a liquid asset available immediately for surviving family members to pay bills, funeral expenses, etc.  Such liquid assets may include:
a.       A joint bank account (the surviving joint owner, such as a spouse or adult child, typically becomes the immediate sole owner);
b.      A bank account with a payable on death (POD) or transfer on death (TOD) designation;
c.       A brokerage account (not a retirement account) that is either (1) jointly titled with a spouse or adult child, or (2) has a spouse or adult child designated as beneficiary; or
d.      Life insurance (won’t be available immediately, as typically the insurer must receive a copy of the death certificate before proceeds are disbursed).

2.      Make sure beneficiary designations are current.  And, unless a tax professional tells you otherwise, name an adult person(s) as the beneficiary, not your estate. 

3.      If you want control over how your assets pass, have a will (and/or trust) prepared.  Otherwise probated assets will pass according to state law to closest relatives.

The author of this article, Denise Martin, is an estate planning and probate attorney practicing in Bowie, Maryland, at McChesney & Dale, P.C.  For more information, feel free to contact Denise at (301) 805-6080 or denise@dalelaw.com.  

When will assets become available?  See the Asset Availability Timeline.

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