Settling Estate: What Do I Do When Someone Dies?
Settling the estate can be a trying process, particularly for those grieving. By following these practical steps and being aware of state law, you can ease the process for everyone involved. Settling the estate means safeguarding your loved one’s property during the administration process, paying debts and taxes, and distributing the assets of the estate to those who are entitled to receive it.
Note: The following legal and logistical information is most readily applicable to residents of California. However, where California’s laws or procedures differ greatly from those of the majority of other states, we have made an effort to make our out-of-state readers aware of this.
Handling the estate starts with a few practical tasks:
Determine Who Is the Executor or Trustee
Consult with an attorney if it is unclear who has been appointed by the will or trust.
Arrange for Temporary Care of Minor Children and Other Dependents
Your first task is to set up temporary care for any minor children and other dependents of the person who died. You might need to look into day care, hospice, or pet care services for temporary assistance until a longer-term solution can be found. For information on the legal process, see 3. Minors and Dependent Adults below.
Obtain Certified Copies of the Death Certificate
You will need death certificates for a variety of purposes, so it’s a good idea to have plenty of copies. Read our section about the Death Certificate in Immediate Help for more information.
Look for a Will or Trust
Locate a will, trust, or any other important after-death documents. For tips on locating these documents, see our section on Locating Important Documents in Immediate Help.
Collect the Mail
Collecting the person’s mail protects his or her privacy, but it also serves an important administrative function. The mail will help you identify the person’s property, because account statements and other documents relating to his or her property will arrive by mail. Bills will arrive by mail too, which will help you identify potential creditors.
Paying the Bills
After a death, bills will continue to arrive for expenses incurred during the person’s lifetime. These may include medical bills, credit card statements, utility and cell phone bills, invoices for mortgage payments, tax bills, insurance premiums, and so on. Here are a few tips for how to handle bills:
Secure the Residence, Automobiles, and Tangible Property
Lock the person’s residence and car, and allow no one to take tangible personal property that belonged to them. Tangible personal property includes furniture, antiques, artwork, as well as personal effects like clothing, jewelry, and personal documents. If there are people you do not know who have keys to the house, consider changing the locks. If you cannot reliably secure the residence, consider packing up the tangible personal property and moving it to a secure location such as a storage locker. If people you do not know have extra sets of keys to the car, move the car to a locked garage.
Notify Credit Card Companies and Credit Reporting Agencies
To protect against fraud, notify credit card companies that the person has passed away, and that no one should be permitted to make additional charges to the credit cards following the date of death. Let them know that the Executor or Trustee intends to close the accounts. Send a letter to each of the three major credit reporting agencies, Equifax, Experian, and Transunion, letting them know that the person has passed away and instructing them that no one should be allowed to use his or her name or social security number to apply for new credit.
Notify the Employer
If the person was employed at the time of death, notify the employer. Arrange for delivery of the final paychecks, and deposit the income checks into a bank account held in the name of the person or the person’s living trust. Ask the employer to identify the benefits provided by the employer to the person, such as health insurance coverage, life insurance, and retirement plans.
Notify Social Security
If the person was receiving social security checks, notify the Social Security Administration immediately. Often the funeral home or service provider will send a notice as a courtesy. Otherwise, call the Administration at the phone number provided on their website www.ssa.gov. Some family members may be eligible to collect a portion of the person’s Social Security benefits. Ask the Administration to provide you with information on survivor benefits, or consult with an attorney.
Notify Veterans Affairs Administration
If the person was a U.S. war veteran, call the federal Department of Veterans Affairs and have any veteran benefit payments stopped. There are cash benefits of $300 to $2,000 to the family members of veterans depending on the type of duty and the situation at death. Also, ask the VA about burial benefits, or visit the VA burial benefits page here. You will need the person’s VA number or service number and active dates of service.
How the assets of the person who died are administered depends on whether he or she left a will or a trust. To administer his or her property, you must meet specific legal requirements. Failing to follow the process can result in personal liability for the Trustee or Executor. We strongly recommend that you consult with an attorney who is experienced in trust and estate administration to advise you on the legal requirements. The attorney should be licensed to practice law in the state where the person was residing at the time of death. To find attorneys in your area, look up Legal Counsel on our Local Resources page.
Revocable Living Trust
A revocable living trust, also simply called a living trust, has become a widely used estate-planning tool, partly for the purpose of avoiding probate, which is further discussed below. A trust is an agreement between a “Grantor,” the person who creates the trust and transfers property into the trust, and a “Trustee,” the person who holds the property and administers it for the benefit of “beneficiaries.” When a Grantor sets up a “revocable living trust” for his or her benefit, he or she typically also serves as the initial trustee. After the Grantor dies, the trust becomes irrevocable, and a named successor steps in to serve as trustee. The successor trustee must hold or distribute the trust property for the named beneficiaries and in accordance with the instructions set forth in the trust agreement. The trust administration process occurs privately, for example, without Court involvement or oversight.
What if Property is not in the Trust?
If the person set up a revocable living trust, but his or her property was never transferred into the trust after death, you should consult with an attorney. Depending on the circumstances and state law, such property could potentially be confirmed to be property of the trust. If not, such property will be subject to probate, as discussed below.
Last Will and Testament
If there is no trust, but the person left a will, the assets of the estate must be administered through “probate.” Probate is the Court process for settling the estate of someone who died. A family member must petition to have the will admitted to the Court and ask for an Executor to be appointed. Once the Executor receives “letters of administration,” he or she must fulfill the legal duties set forth under state law (For example file an inventory of assets, notify creditors, and pay debts and taxes.), and after the administrative tasks are completed, the Executor must distribute the estate property in accordance with the instructions in the will and under the supervision of the Court. Probate fees can run into the tens of thousands of dollars, depending on state law, and probate can take one to two years to complete. High fees and long delays are two of the reasons why many people decide to set up revocable living trusts—property in a trust generally is exempt from probate.
No Estate Plan
If the person left no trust and no will, he or she is said to have died “intestate.” An intestate estate is subject to probate, too. Under intestacy, the person’s property must be given to whoever is entitled to receive it under state law. Typically, a surviving spouse and descendants are the first in line to inherit. If the person had no surviving spouse and no living descendants, then his or her parents would generally inherit next, and if parents are no longer alive, siblings and their descendants are typically next in line. The specific rules of intestate succession vary by state law.
Small Estate Administration and Spousal Petitions
In some states, there are exceptions to the probate requirement. If your loved one’s estate is a “small estate” as defined under state law, a simpler process may be available to transfer assets to the beneficiaries. In California, for example, if the estate has no real property with a date-of-death market value of more than $50,000 and the estate has a total value of less than $150,000, the beneficiaries of the property can have the assets transferred to themselves by completing affidavits. Also in California, if the person is survived by a spouse, the surviving spouse can use a spousal petition to take title to property he or she is inheriting, instead of having to conduct a formal probate proceeding.
Joint property, such as real property titled in joint tenancy with right of survivorship or joint bank accounts, transfers automatically to the survivor upon the death of either joint owner. Joint property typically is not subject to probate under state law. If you are the surviving owner, you must complete paperwork to remove the owner who has died from the title. For example, for real property, an affidavit of death of joint tenant must be recorded with the County where the property is located. The affidavit removes the name of the person who died from the property and places it entirely in the name of the surviving owner.
Pay-on-Death Account or a Totten Trust
Pay-on-death (“P.O.D.”) accounts or a Totten trust automatically transfer to the payee upon the death of the owner. Like joint property, these type of accounts bypass probate. You should notify the banks where the person held accounts of his or her death, and provide them a copy of the death certificate. The banks will then contact any beneficiaries directly. If you are the beneficiary, the bank will likely ask you to complete forms to transfer the account to your name.
Life Insurance Policies and Retirement Plans
Life insurance proceeds and retirement plans are paid directly to the beneficiaries named on the policies and plans and are not subject to probate. If the person failed to name beneficiaries, however, the life insurance proceeds and retirement plans will have to be paid to the person’s estate, which could trigger a probate. Contact the institutions holding the life insurance policies and retirement plans, and inform them of the person’s death. The institutions will contact the named beneficiaries directly.
Guardian of the Person
If the person who died left minor children, and the other parent is no longer alive, a guardian “of the person” will have to be appointed for the children by the Court. The guardian of the person is the individual who is granted physical custody of the children and is responsible for their care and upbringing until they reach age 18.
Nomination of Guardian by Person Who Died
If the person left a will, check whether the will included a nomination of guardian. A nomination of guardian is the parent’s expressed wish for who should take custody of the children in the event that both parents have died. Courts typically place great weight on the wishes of the parents when appointing a guardian, but keep in mind that the wishes of the parents will not necessarily be determinative. The Court may appoint a different person if the Court believes that doing so would be in the best interest of the children.
Assets of Minors
If both parents have died, their minor children will also likely inherit their property. Minors, however, cannot legally manage their own assets. If the parents left the property to the children in a trust, the Trustee will be in charge of managing the assets for the minor children under the terms of the trust. If there is no trust, the Court will likely have to establish a guardianship “of the estate.” The guardian of the estate is responsible for managing the minor’s assets until age 18.
If the person who died was caring for an elderly parent or another dependent adult, check whether the dependent adult has a general durable power of attorney or a living trust. If so, the adult’s affairs should be handled by his or her agent or trustee. Contact that agent or trustee, and contact the adult’s attorney, and inform them of the person’s death. If there is no power of attorney and no trust, the Court may have to establish a conservatorship for the adult. A conservatorship is similar to a guardianship, except that the subject is an incapacitated adult, instead of a minor child. A conservatorship gives the conservator authority over the incapacitated adult’s physical care and financial matters.
To learn how to establish a guardianship for a minor or a conservatorship for an incapacitated adult, consult with an attorney.
If you are serving as Trustee or Executor, you should consult with legal counsel and an accountant about whether estate tax returns must be filed. The estate tax is a tax on all property owned by the person at the time of death. In addition, you may include in the estate certain gifts made during life for estate tax purposes.
Federal Estate Tax
In any given year, there is an applicable federal estate tax exemption. The value of the estate that exceeds the exemption is subject to the tax. Under the Tax Relief Act of 2010, the applicable exemption for 2011 was set at $5,000,000, and in 2012, the exemption increased to $5,120,000. The 2011 and 2012 maximum federal estate tax rate is 35%. In 2013, however, the exemption is scheduled to drop down to $1,000,000, and the maximum rate is set to increase to 55%. Anyone whose estate at the time of death has a value in excess of the applicable exemption amount in that year is required to file an estate tax return. You may need to have property appraisals done to determine accurate date-of-death values. In addition, for a married person who passes away in 2011 and 2012 with a surviving spouse, an estate tax return may be filed to preserve the “portability” of the person’s federal estate tax exemption, even if the value of the estate is below the exemption amount. For help deciding whether to file an estate tax return, please consult with an attorney or accountant.
State Estate Taxes
Also ask your attorney or accountant whether the state where the person who died was living has a state-level estate tax. The state-level applicable exemption amount and tax rate may differ from the federal estate tax. A few states, like California, have abolished the state estate tax.
A personal income tax return must be filed for the first part of the last year of the person’s life through the date of death. The surviving spouse may file as married jointly on behalf of both spouses. For the second part of the year, a fiduciary tax return will have to be filed for income earned by the person’s estate or trust after the date of death. For example, if the person owned rental property held in a trust, the trust would have to file an income tax return, reporting rental income for the second part of the year following the date of death. Special rules apply to income earned during life but received only after death. Seek the assistance of an attorney or an accountant to prepare the income tax returns.
Tax ID Number
You’ll need to get a tax ID number for the Estate or Trust in order to file a fiduciary tax return. For more information on how to obtain a tax ID number, visit www.irs.gov, or ask your attorney or accountant.
Capital Gains Tax
Capital gains taxes are based on an appreciation in value. For example, if someone purchased stock in 2002 for $300,000 and then sold it in 2012 for $400,000, there would a capital gain of $100,000. That “capital gain” of $100,000 would be subject to a 15% federal capital gains tax, as well as state capital gains tax. The purchase price of $300,000 in this example is called the “basis” and the sale price of $400,000 is called the “amount realized.”
For property that is inherited, however, the basis is “stepped up” to the full fair market value at the date of death. In the example above, if instead of selling the stock, the owner dies when the stock has a value of $400,000, and the heirs of the person then immediately sell the stock for $400,000, the basis would be stepped up from $300,000 to the $400,000 value on the date of death, and there would be no capital gain. Capital gains tax could be due, however, if the value appreciates between the date of death and the date of sale. If you have inherited property and are considering selling it, consult with a tax professional about whether a capital gains tax could be due.
What, if any, insurance policies of the person who died should be kept in effect following the date of death?
Homeowners and Renters Insurance
You should maintain the homeowners and renters insurance policies so long as the property remains in the Estate or Trust, to protect the Estate and Trust assets in case of property damage or lawsuits. Cancelling the coverage could actually expose the Executor or Trustee to liability for breach of fiduciary duty, if property damage or lawsuits deplete the assets as a result of lapsed insurance coverage. The Executor should inform the insurance company of the death in writing and request that the Estate be added to the policy as a “named insured” as soon as possible in order to secure the same rights as the person who died.
You should consider maintaining the insurance policy on the car if the rates are favorable. Most auto insurance companies will continue to cover the vehicle and the new legal owner at the same rate under the “permissive use” clause of the insurance agreement. Alternatively, if the car will lay idle during the administration period, or if it will be sold, you can consider registering the car for “planned non-operation” with the state DMV and cancelling the insurance policy, to save expenses for the Estate.
Thanks to COBRA (Consolidated Omnibus Budget Reconciliation Act, 1986), if the person who died received employer health insurance, surviving spouses and dependents will be eligible for continued coverage following his or her death, if they were originally covered. You can contact the insurance company or the employer in order to remove the person from coverage, while continuing coverage under the existing policy for qualifying family members.
Certain assets raise unique issues that the Executor or Trustee may need to address.
If the personal residence of the person who died was a rental, to save ongoing expenses, the Executor or Trustee may decide to terminate the lease, vacate the premises, and place all of the tangible property in storage until they are distributed. If the person owned his or her own home, check whether the will or trust hands over the residence to anyone. If not, the Executor or Trustee should determine whether any of the residual beneficiaries wish to take ownership of the property, provided there are other equal assets that can be distributed to other beneficiaries.
Alternatively, the Executor or Trustee may sell the property and distribute the net proceeds. A title search should be done to find out whether there are mortgages or liens against the property. If the residence is underwater, the Executor and Trustee would have to decide whether to pursue foreclosure, a deed in lieu of foreclosure, or a short sale as a means of disposing of the property. For assistance with underwater properties, you should seek the advice of an attorney and a realtor.
If the surviving spouse, minor children, or other family members were residing with the person at the time of death, they might have the right to continue living there during the administration of the estate or trust, depending on state law. Consult with an attorney about whether occupants can be allowed to remain in the person’s home and for how long, or whether they will have to move from the premises.
Other Real Estate
If the person who died owned other real estate, check whether there are tenants occupying their property. If so, look for a copy of the lease agreement among his or her papers, and arrange for rental income checks to be sent to the Executor or Trustee. Find out whether the person had hired a property management company, and if so, request a copy of the property management agreement. If the property will be sold, you should consult with an attorney and a realtor as to whether steps should be taken to remove the occupants from the premises before the property is listed for sale.
If there is no trust, the accounts of the person who died should be retitled to the name of the estate. To do so, the bank will likely request from you copies of the death certificate and the letters of administration, as well as the Estate’s tax ID number. You can consolidate cash accounts into a single Estate account for ease of administration.
If the person was the owner of a small business, check the will or trust for instructions as to the disposition of the business. The death of the owner can result in a sudden and steep decline in the business value. To mitigate against potential loss, you can immediately contact any co-owners or senior staff members to arrange for the continuing operation of the business, and to set up a system for collecting income and paying expenses during the administration of the estate or trust. The executor or trustee should decide as quickly as possible, based on the instructions in the will or trust, whether the business will be closed, sold, or liquidated. If the business is put up for sale, an appraiser may be needed to determine the value of the business. If the person was a licensed professional, for example an attorney, architect, dentist, or psychologist, the state may impose special rules regarding the winding up or sale of the business. Consult with an attorney to discuss the legal requirements.
You should identify items specifically entrusted to anyone in the person’s estate plan documents, and secure such items until they are ready to be distributed to the beneficiaries. If there are valuable vehicles, artwork, jewels, or antiques, consider having those items appraised. All remaining items of tangible property are typically distributed equally to the residual beneficiaries—that is in shares of roughly equal value, as the beneficiaries agree among themselves. For example, one way the beneficiaries can divide up the items is to take turns choosing them; perhaps you can draw cards to determine who gets to choose first. Read our blog post about dividing family heirlooms for tips.
Another option you have is to sell the remaining tangible property-- for example, in an estate sale. There are many companies that manage such sales in return for a fee or percentage of total sales, or you can conduct one yourself. The net proceeds would then be distributed to the beneficiaries. Look up Estate Liquidation & Moving services on our Local Resources page. You can also make donations of the remaining items to one or more charitable organizations. Listed below are resources for donating different types of items:
Similar to batteries and electronics, you should safely dispose of leftover medications. They are generally comprised of a wide variety of chemicals that can be hazardous when combined, and highly environmentally detrimental when they end up in landfills or filter into the water supply. The federal Drug Enforcement Administration recommends taking medications to local take-back centers. To find a take-back center near you, ask your local pharmacy or contact your local water management agency. You can also donate leftover medications to organizations such as the Afya Foundation and Aid for AIDS, which channel unused medications to Third World countries.
Email and Networking Accounts
Consider hiring termination services to terminate the person’s email accounts and social and business networking accounts on websites such as Facebook and LinkedIn. Each company has its own policies as to what happens to online accounts after death, and whether the person’s online personal information or records can be accessed. See 7. Digital Death for more information.
Asset Search Services
Finally, if you think the person who died may have had other unidentified property, you can consider hiring asset search services in order to locate any unknown assets, such as real property or accounts in other states. You can search state databases, or use services like Missing Money to locate unclaimed assets or property.
With so much of our lives online, digital property is becoming an increasingly important part of estate planning and settling the estate, just like physical property. When someone dies, their online accounts, including email and social media accounts, will live on unless otherwise dealt with.
Digital Estate Services
The person who died may have stipulated their wishes in their will regarding their digital property. He or she may have also used an online service. Some companies allow you to create a “digital safety deposit box” with all of your account information stored in one place, and a beneficiary listed for each account. Whoever the person named as a “verifier” will be asked to verify his or her death, and then the beneficiaries of the person’s respective accounts will be notified.
If no arrangements regarding digital property were made, or if you cannot find out if they did, you may still be able to access or delete their online accounts. Currently, Gmail and Hotmail will mail the person’s information to the estate holder. Facebook will not grant access to the account, but if you contact them you can request that the person’s profile be taken down or turned into a memorial page.
Only five states – Oklahoma, Idaho, Rhode Island, Indiana, and Connecticut – currently have laws regarding digital property assets, though more are likely on their way. For information on individual state laws where they exist, visit the Digital Estate Resource page. Or for Digital Asset Services, visit our Local Resources page.
To see the industry experts whose gracious contributions helped make this guide possible, visit our Acknowledgements.