5 Estate Planning Musts After a Spouse Dies
When a spouse passes away, the remaining spouse is often left to grieve the loss of their partner and to wade through a seemingly unending list of things to do. If you’ve lost a close family member, you’ve probably experienced needing to make final arrangements, settling final bills, going through financial records, etc. While it may not be at the very top of the list of things to do, surviving spouses should look at several estate planning considerations in the year following the death of their partner.
1. Settle the Deceased’s Estate
If your deceased spouse’s assets were held jointly, had named beneficiaries, or were owned by a trust, the estate will be able to be settled outside the probate courts. If not, the estate will need to go through the probate process. The process differs by state, so it’s important to work with a knowledgeable probate attorney to get this settled.
Additionally, if your spouse had a trust, it’s essential that you follow the trust’s instructions at his/her passing. Sometimes a family trust is formed, or assets are distributed in a specific manner. If you’re named the successor trustee, it’s important to follow the trust’s instructions.
2. File IRS Form 706 – for the Portability Election
The current federal estate tax exemption for 2021 is $11.7 million per person with portability between spouses. Portability is one spouse’s ability to use the unused portion of the deceased spouse’s exemption amount. However, this is not automatic; portability needs to be elected (within nine months from the date of death) by filing Form 706 with the IRS.
Many widows with estates significantly less than $23+ million don’t think they need to file for portability. However, the estate tax exemption amount changes with the political climate and is currently set to sunset in 2026 to $5 million. Again, we recommend working with your financial advisor and an attorney to wade through these complex issues.
3. Jointly Titled assets
If you and your deceased spouse had jointly held assets, at his/her death, they transferred to you through that joint ownership. Once it’s transferred to you as an individual, you can transfer on death instructions to those assets to ensure a smooth transition at your passing.
4. Beneficiary designations
Many times, spouses name each other as beneficiaries on retirement accounts and life insurance policies. As in the case of joint assets (above), it’s important to review who (if any) the contingent beneficiaries are on these assets are.
5. Powers of Attorney, Wills and Trusts
Was your spouse named as your power of attorney for healthcare and property? When the dust settles with the settling of the estate, it’s time to review who is named on your own personal documents and make updates as needed. If you have adult children who can now take on the responsibility of some of these roles, it may be a good idea to communicate your wishes with them and let them know they will play these crucial roles for you.
In summary, although these estate planning items are not always the most urgent things on your list, it’s nonetheless crucial to review at some point after your spouse passes. At BDF, we help all of our clients (widowed or not) review their estate plan regularly. Lastly, remember that you’re not alone; there are many professionals out there to help you!
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Jenny Chung, CFP® is a Wealth Manager at BDF. She uses her background as a teacher to help individuals and families understand their investments and financial plans. She also works on the firm’s Divorce Practice Group which helps divorcing individuals navigate through the process. Jenny earned a master’s degree from the University of Illinois and has over 20 years of experience working in financial services.