finances
BE PREPARED
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by John D. Eadie
CPA, CFA, CFP®, PFS, CLU®, CIMA, CKA® Founder and Managing Director – Covenant, a Registered Investment Advisor
The old Boy Scout motto is the best advice possible when having to deal with the financial implications of losing a close loved one. I can speak firsthand to this as I recently lost my wife of almost thirty-seven years. I am in the business of being financially prepared for anything and I have still been overwhelmed with the number of tasks that need attention at this challenging time. CAN YOU ANSWER THESE TWO QUESTIONS? 1. Do you know where all the important estate documents are located? 2. Would you know what to do if your loved one passed away suddenly? If the answer to either one is “No”, then please gather your family and meet with your advisor as soon as possible. Being prepared for the possibility of sudden loss can ease an already tremendous burden and simplify difficult responsibilities. While there are many, many things that need to be done when a loved one passes, we will stick to the financial ones here as those are challenging enough. Because we all tend to put off complex tasks when they don’t affect our present life, I would encourage you to be honest with yourself about your level of preparedness if tragedy were to strike today. ORGANIZATION Getting organized is the best advice I can give to anyone. Whether it is for general financial purposes or being prepared when a death takes place, early and frequently updated organization will make everything easier for you and the family in this difficult time. Coordinating with your attorney is a great starting point to assure you have current lifetime documents like wills, trusts, and powers of attorney. But there are a lot of other documents you may need access to so you can retitle assets or reposition bank or investment holdings. For example, you don’t want to be in a position where you cannot get access to cash simply because those accounts are not in your name. Life insurance policies, credit cards, safe deposit box information, account passwords, automobile titles, burial instructions, are just a few of the documents to which
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you should have easy access. Other family members should know those documents exist as well, such as an oldest child. Be prepared and get organized. At Covenant, we have organizational tools such as our “Document Location Record” to help simplify the process. PROBATE & EXECUTORS One of the first things you will need to do is get plenty of death certificates and go through the probate process. Probate is simply the proving of the will. You will likely need 10-20 death certificates depending on the complexity of your financial situation. The probate process requires getting your estate attorney involved so he or she can represent you in probate court. The initial part of probate involves making the court aware so they can affirm the executor of your estate and issue Letters Testamentary. The Letters Testamentary are the legal document allowing the executor to do their job. Once you have these documents and an executor is in place, you can really start getting tasks accomplished as authority has been legally granted to do so. Now the work begins, particularly if you are the executor of the estate. Being an executor is a lot of work, so when setting up your lifetime documents, be sure you understand everything involved with being the executor of an estate or even the trustee of any trusts created in those documents. As executor, you will be responsible for retitling assets, moving money around based on the provisions in the will or trust documents, having the estate tax return filed if necessary, and keeping the family informed of all that is taking place. And understand, family will want to know what is going on. As executor, you will also be responsible for creating an inventory of all assets and debts of the deceased so that information can be submitted as a part of the probate process. This information will also be needed for your tax preparer to use in completing the estate tax and/or estate income tax returns; even more reason to be organized in advance. If trusts are created either before or after death and you are the trustee of those trusts, you will have ongoing responsibility for managing these entities. Trustees must invest trust assets, make distributions according to the trust document, file tax returns, and take care of all the administrative tasks associated with the trust. There are many more tasks and financial responsibilities that may arise when a loved one passes away and I am right in the middle of all of this. My best advice is be prepared. If you are not, or are unsure if you are, take some time today to set up a time with an advisor who can walk you through the process in even more detail. The more prepared you are, the more present you can be during the grieving process for the sake of your family and yourself. BBM John is the founder and a managing director of Covenant. In his several leadership roles with Covenant, John serves as the firm’s CEO, chief wealth advisor, and leads all client service efforts. John has lengthy experience assisting families with their investment, income tax, wealth transfer planning, family governance and philanthropic strategies. Throughout his career, John worked with Fortune 500 executives to assess and implement complex compensation strategies—including deferred compensation, restricted stock, stock option, and other employee benefit planning. John was named a Barron’s 2012 and 2013 Top 100 Independent Financial Advisor. He has also been recognized since 2012 as a Five Star Wealth Manager. Earlier in his career, John was named by Worth magazine as one of the Top 100 Wealth Advisors in the country.
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The contents of this article are provided for informational purposes only. It is not an exhaustive list and is not intended to provide any legal or tax advice. Please consult your respective legal, tax and financial advisor before taking any action.
B oerne B usiness M onthly | May 2021
