Losing a spouse is devastating. To help reduce stress on the legal and financial front, we are sharing practical tips to consider for a surviving spouse. You can start by gathering important documents including your spouse’s death certificate, will, marriage certificate, property deeds, vehicle titles, tax returns, bank account and credit card statements and insurance policies. Having these documents ready will help make the most of your time with our attorneys.

1. File the Will

It’s always a good idea, and in some states a legal requirement, to file the will of the first spouse to pass away with the the local court. Even though the will might not be probated, having it on file with local court ensures its safe-keeping if assets are later discovered which require probate. Some examples might be an unanticipated income tax refund, an inheritance, or a life insurance policy or retirement account without a beneficiary designation.

2. Who’s in First?

It’s a good idea to update existing planning documents and remove a deceased spouse from first position on such documents as a will, healthcare proxy, and power of attorney. This can avoid the need to present a death certificate of the deceased spouse when these documents are used; and save time, hassle, and money. A fresh set of documents can also provide for a backup to the person who is now named first.

3. What is the Basis?

Adjustments to cost basis may be available for investment accounts, real estate, and business holdings owned by the decedent. It’s always good practice to obtain appraisals for any businesses or real estate assets, even if jointly owned, as this will provide clear documentation of cost basis adjustments due to the death of a spouse that may end up saving substantial amounts in capital gains taxes, whether that be from repositioning securities in a portfolio, or from the sale of a closely held business interest or real estate. IRS regulations require an appraisal of business or real estate interest to be done by a qualified appraiser; a broker valuation or property tax assessment are not sufficient.

Particular attention should be paid to LLCs and partnerships as a timely, section 754 election may need to be made to allow assets owned by the company to benefit from a step up in tax basis.

4. Change in Tax Status 

Surviving spouses should be able to file as a qualifying widow or widower in the year of their spouse’s death, but thereafter, may be looking at a very different set of tax brackets. Thought should be given as to whether or not assets can be sold, or retirement accounts converted to Roth IRAs in the year of the first spouse’s passing so as to avoid bracket creep when the surviving spouse files as a single taxpayer.

5. Spousal IRA

Spouses often name each other as beneficiaries on their retirement accounts, so the surviving spouse will need to roll over any such retirement accounts and designate new beneficiaries. The rules that govern required minimum distributions for surviving spouses can be complex. Your attorney, accountant, or financial advisor should be consulted to make sure that that minimum withdrawals are taken annually in a timely fashion.

Also, spouses often name each other as beneficiaries on their life insurance, annuities, and other accounts that may flow via beneficiary designation. These beneficiary designations should be updated to reflect the death of the first spouse, and consideration may be given to cashing in accounts and closing or consolidating them if the account is of relatively small value, for example, $10,000 or less.

6. Social Security Benefits 

Surviving spouses who receive a lower Social Security payment than their deceased spouse may be eligible to take the greater of the two benefits. Adjustments may be made, however, if the surviving spouse took his or her benefit prior to reaching full retirement age. You should consult with your regional Social Security representative to determine the substantial benefits to which you may be entitled.

7. Time to Simplify  

As attorneys, we often tell clients that whether an account has $5,000, $50,000, $500,000 or $5 million in it, the work needed to be done to close out the account is about the same. The reality is that each account requires interfacing with financial institutions, each of which have their own rules and forms, and then subsequently accounting for the funds in that account to beneficiaries and the tax authorities. 

We estimate that each account incurs somewhere between $1,000 and $2,000 in legal and accounting fees to close and report the account. Thus, if you have a number of accounts at different institutions, consider consolidating them to the greatest extent possible. 

Ideally, we like to see clients having one retirement account, one after -tax investment account, and a checking account. Other than insurance products, such as life insurance and annuities, this is all that is necessary for 99% of our clients. Having multiple accounts at multiple institutions only makes executor’s task more complex, and often unnecessarily so.

them. 8. Involve the Next Generation  

When your spouse dies, recruit help from the next generation to assist you with day-to-day tasks. Having a second set of eyes to help avoid senior scammers, keep tax records straight, and assist with paying bills can be a godsend in your golden years. It’s also a good idea to have paper statements mailed, even if there is a small fee, as this will help assist your family members if they need to step in on an emergency basis.

9. Avoid Risks and Potential Scams

Family members need to pay particular care when a senior remarries later in life, or brings in a live-in romantic partner, or hires more help around the house. Unfortunately, in our experience, seniors often fall prey to those who aim to exploit the elderly. It’s always a good idea to make sure that personal financial and electronic records are secured in a locked room; that finances are not discussed with people who are new in the senior’s life, and that easily movable valuables, such as the family silver or valuable jewelry, are placed under lock and key.

Similarly, if major work or renovations are to be undertaken, contractors should be carefully vetted, and insurance certificates obtained prior to any major work being commenced. Having a child nearby to check in on the senior, or having a trusted friend or neighbor stop by on a regular basis can be a great way to make sure that your newly single family member is not being victimized.

 

 

 

 

 

 

Life is a journey marked by significant milestones: marriage, the birth of children, career advancement, and retirement, among others. Each of these milestones not only represents a personal achievement but also prompts a need for financial reassessment and planning. One critical aspect that often goes overlooked in this process is the regular review of beneficiary designations. At Donohue, O’Connell & Riley, we emphasize the importance of keeping these designations up to date to ensure that your estate planning aligns with your current wishes and life circumstances.

Why Beneficiary Designations Matter

Beneficiary designations are a crucial component of financial and estate planning. They dictate who will receive the assets of accounts such as life insurance policies, retirement funds, and brokerage accounts upon your death. What makes beneficiary designations unique is their ability to bypass the probate process, allowing for direct transfer to the named beneficiaries. This immediacy and simplicity underscore the importance of ensuring that your designations are always current.

Life Changes and Their Impact

Changes in your life can significantly affect your financial planning. A marriage or divorce, the birth of a child or grandchild, the death of a previous beneficiary, or changes in your relationships can all prompt a need to update your beneficiary designations. Failing to do so can result in assets being distributed to someone other than your intended recipient, potentially leading to family disputes and legal complications.

For example, in many jurisdictions, a divorce may not automatically revoke the designation of a spouse as a beneficiary on a life insurance policy or retirement account. Imagine the potential conflict and distress this could cause if the assets were inadvertently passed to an ex-spouse instead of the intended heirs or current spouse.

Reviewing and Updating Designations

Given the potential consequences of outdated beneficiary designations, it's advisable to review them regularly—at least every few years or following any significant life event. This review should encompass all accounts with beneficiary designations, including:

• Employer-sponsored retirement plans like 401(k)s
• Individual Retirement Accounts (IRAs)
• Life insurance policies
• Annuities
• Payable-on-death (POD) and transfer-on-death (TOD) accounts

When reviewing your designations, ensure that each reflects your current wishes. If updates are necessary, contact the account custodian or insurance company to request the appropriate change forms. Additionally, consider the benefits of naming contingent beneficiaries, who will inherit the assets if the primary beneficiaries are unable to do so.

Coordination with Your Estate Plan

It's also vital to ensure that your beneficiary designations align with the broader goals of your estate plan. Discrepancies between your will or trust and your beneficiary designations can create confusion and potentially undermine your estate planning objectives. Working with an experienced estate planning attorney can help you navigate these complexities, ensuring a cohesive and comprehensive estate plan.

Professional Guidance

The process of reviewing and updating beneficiary designations, while seemingly straightforward, involves careful consideration and planning. At Donohue, O’Connell & Riley, we are committed to providing our clients with the expert guidance needed to navigate these decisions. Our team can help you understand the implications of your choices, ensuring that your estate planning reflects your current life situation and future goals.

In Conclusion

Regularly reviewing your beneficiary designations is more than just a best practice; it's a crucial step in safeguarding your legacy and ensuring that your assets are distributed according to your wishes. Life’s changes are inevitable, and your estate plan, including beneficiary designations, should evolve to reflect these changes.

If you have questions about your beneficiary designations or any aspect of estate planning, Donohue, O’Connell & Riley is here to assist you. Contact us today to ensure that your estate planning needs are met with professionalism, compassion, and expertise. Together, we can ensure that your financial legacy is protected and passed on according to your wishes.

Spring signifies renewal and rejuvenation, making it the perfect time for a thorough cleaning, not just of our homes but also of our legal documents. As we sift through the physical and digital piles of paper that contain our most crucial information, it's vital to understand what to keep, update, or discard. This task, while seemingly daunting, is essential for maintaining an organized and effective legal and estate plan. Donohue, O'Connell & Riley is here to guide you through this process, ensuring your legal documents reflect your current wishes and circumstances.

Understanding the Importance of Legal Document Hygiene

Just as neglecting the upkeep of your home can lead to disarray and dysfunction, ignoring your legal documents can lead to outdated information that complicates your estate plan. This can cause unnecessary stress for your loved ones during already difficult times. Regular reviews and updates align with life's inevitable changes, such as marriages, births, purchases of property, and more.

What to Keep

Certain legal documents should always be kept up to date and in a safe, accessible location. These include:

• Wills and Trusts: Your will is the cornerstone of your estate plan, outlining your wishes for asset distribution and guardianship of minors. Trusts, if part of your estate plan, require similar safekeeping.
• Power of Attorney and Healthcare Directives: These documents designate individuals to make decisions on your behalf should you become incapacitated. They are vital for ensuring your wishes are respected.
• Life Insurance Policies and Retirement Account Information: Keeping these documents current ensures that your beneficiaries are correctly listed and that your estate plan aligns with these designations.
• Property Deeds and Vehicle Titles: These documents prove ownership and should be kept updated to reflect any changes or transactions.

What to Update

Life's milestones prompt a review and potential update of your legal documents. Consider updates if you've experienced:

• Changes in Relationship Status: Marriage, divorce, or the death of a spouse or partner can significantly impact your estate plan.
• Changes in Assets or Financial Status: Acquiring or disposing of significant assets like homes, vehicles, or investment accounts warrants an update to your legal documents.
• Changes in Family Structure: The birth of children or grandchildren, adoption, or changes in guardianship preferences necessitate revisions to ensure your documents reflect your current wishes.

What to Discard

Safely discarding outdated legal documents is just as important as knowing what to keep. Holding onto old versions of vital documents can lead to confusion and possibly the execution of wishes that are no longer relevant. Here's what you might consider discarding:

• Outdated Wills and Trusts: Once you've updated your will or trust, there's little reason to keep the outdated versions. Ensure you destroy these documents securely to prevent any confusion about your current intentions.
• Old Financial Records: While it's important to keep some financial records for tax purposes, generally, you can discard bank statements, credit card statements, and utility bills that are over seven years old.
• Expired Policies: Any expired insurance policies, including those for health, auto, and property, can be discarded. These documents are no longer relevant and only add to clutter.

Digital Documents

In our increasingly digital world, it's crucial to apply the same principles of 'spring cleaning' to your digital estate. This includes:

• Emails: Regularly review your email for any digital receipts or statements that can be archived or deleted.
• Online Accounts: Make a list of all your online accounts, including social media, and ensure your digital executor knows how to access these in line with your wishes.
• Digital Assets: Cryptocurrencies, blogs, or online businesses should be included in your estate plan, with clear instructions for your heirs or executors.

How to Organize

Organizing your legal documents doesn't have to be a daunting task. Consider these steps:

• Create a dedicated space for physical documents, such as a fireproof safe, and inform trusted family members or executors where it is.
• For digital documents, use secure, encrypted storage options and ensure that your executor or a trusted individual knows how to access them.
• Maintain a comprehensive list of all your important documents, both physical and digital, and review it annually to ensure it remains current.

In Conclusion

Spring cleaning your legal documents ensures that your estate plan accurately reflects your current situation and wishes, providing peace of mind to both you and your loved ones. Regularly reviewing, updating, and safely discarding outdated documents can save your family unnecessary stress and confusion during challenging times.

At Donohue, O'Connell & Riley, we understand the importance of keeping your legal affairs in order. Our team is ready to assist you with reviewing your estate plan, ensuring it aligns with your current wishes and circumstances. Contact us today to ensure your estate plan is as refreshed and rejuvenated as your home feels after a good spring clean.

Remember, an up-to-date estate plan is one of the most loving legacies you can leave your family. Let us help you protect what matters most.