341. What Happens Next? A Financial Guide After Death

Losing a loved one is emotional enough without having to navigate legal paperwork, financial accounts, and estate settlement decisions at the same time. Yet for many families, those responsibilities begin almost immediately after a death occurs, often without clear guidance or preparation.

In this episode of the A Wiser Retirement® Podcast,  Shawna Theriault, CFP®, CPA, CDFA®, and Estate Planning Attorney Arun Gupta, discuss what really happens after someone dies, common estate planning mistakes, and how families can avoid unnecessary stress, delays, and expenses.

Related Podcast Episodes: 

Ep 314. The Simple Estate Planning Error That Could Hurt Your Family

Ep 329. Digital Estate Planning: What Happens to Your Online Life?

Related Financial Education Videos:

Prevent Family Conflict with Legacy Planning 

A Financial Advisor's Role in Legacy Planning

Other Links:

AG Law, LLC

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Transcript

The First Questions After Death

SPEAKER_04 0:00

What actually happens in those first days, weeks, and months after someone dies? Who's in charge? Who gets paid first? And what mistakes can quietly cost families thousands? Today we're breaking it all down. Stay tuned.

SPEAKER_00 0:12

Welcome to a wiser retirement podcast, where we cut through the noise and bring you real, honest conversations about investing, retirement, and building lasting wealth. No sales pitches, no gimmicks. Just insights to help you stop guessing and start planning your financial future.

SPEAKER_04 0:32

Welcome to a wiser retirement podcast. I'm senior financial advisor, Shauna Therrialt, and today I'm joined by estate planning attorney, Arun Gupta, to discuss what happens next, a financial guide after death.

SPEAKER_03 0:44

Hi, Shauna.

SPEAKER_04 0:45

Good morning.

SPEAKER_03 0:46

Good morning.

SPEAKER_04 0:47

It's one of those sad topics today. Yep. You know. Every time you're on, it's a sad topic.

SPEAKER_03 0:51

It's sad, but it doesn't have to be. The planning side doesn't have to be sad.

Why Wills Get Avoided

SPEAKER_04 0:55

True. That's why it's good to have a plan so that when something happens, it's like you can kind of just, it's still sad, but it's at least there's like something to follow. Yes. Right? Well, today we're just going to look at, you know, what happens after someone dies. Um, just a couple of key statistics here. 70% of Americans don't have a will.

SPEAKER_03 1:16

Yeah, that that kind of tracks with probably, you know, if you if you kind of zoom out and think about it, obviously, you know, my clients, I'm prepping those documents for them, but you know, when you go through probate, so I guess 100% of your clients have it, right? No, no, not a hundred. Not until they sign the government. As I was gonna say, there's and then if you lose it and there's all kinds of complications that can come, even when you have a a will, maybe it's invalid. But sure, generally speaking, when you go through through probate and you see how many people don't have them, it that tracks to me.

SPEAKER_04 1:48

Yeah. So 70% of Americans don't have a will. Probate can take six to twelve months or longer, and then costs can reach three to seven percent of an estate's value. So uh is that do you do you see probate taking six to twelve months on average?

SPEAKER_03 2:03

You know, I always tell clients, you know, it short answer is it depends. I'm guessing that's that's probably on a on a national scale. Uh Georgia relative to to other states is um not that bad. I say not that bad in in quotation marks, not that bad. Um because you know, something that is super straightforward, maybe it maybe it'll take five, six weeks. But one little tiny thing that throws it off, all bets are off.

SPEAKER_04 2:30

So you just do it quickly anyway. So they should call you.

SPEAKER_03 2:32

Well, it's not, you know, it's not it's not even about the attorney sometime. Yeah, that's I was gonna say it depends on the court to a lot of factors.

SPEAKER_04 2:38

Sure. So so really, you know, most families are figuring this out in real time, so and often under stress and all of that. I just something I like to point out is that, you know, there it's not an emergency. You don't have to rush anything. Exactly. I mean, if you need access to money or something like that, you know, but it's not it's not like you have to go and do something tomorrow.

SPEAKER_03 3:01

Yes. And that's what I try and tell people, you know, when when I hear the news is you're this is an extremely emotional time, and it's appropriate to focus on on that. The responsibility part, the paying debts, the what do I do, what do I do? There's a there's a a grace period and uh the law allows that also. Uh there's sufficient time to to gather that info, but you know, immediately um focusing on your feelings, I think, is probably really the most important thing. I know that's beyond just uh a legal opinion, but from my experience, that's at least what I try to communicate with clients.

SPEAKER_04 3:40

Sometimes I feel like clients are they kind of stay in the details of the after just as like avoiding that period of time for the feelings, you know. I know it's not like a obviously we're not um therapists here, but I feel like, you know, it's like, okay, what do I need to do? Because it kind of gives them a checklist of course, what do I need to work on so I don't have to focus on the pain right now?

SPEAKER_03 4:01

And that's a coping mechanism for people, just like you're saying. And busy. Yeah, and that maybe it can be a good thing, but just in terms of you know what's best for you. Yeah, exactly. Everyone's everyone handles these things differently.

Family Conflict And How To Reduce It

SPEAKER_04 4:12

But it's it doesn't have to be stressful, um, financially speaking, you know, as long as there's a plan in place. So with that, because 70% of Americans don't have a will, about 30% of US adults do have estate planning documents in place. Um, but over 60% of families report conflict during a state settlement, too. So why do you do you do you find there's a lot of conflict during during the settlement?

SPEAKER_03 4:36

I would think that it would be probably a little higher than that, actually.

SPEAKER_04 4:39

Really?

SPEAKER_03 4:40

I guess it all depends on what what counts as a conflict. But usually, you know, when when someone dies, um it's a highly emotional time and you're more prone to conflict. You may be upset about something that happened 40 years ago when you know mom and dad treated the other sibling better and it all kind of comes out. And obviously, when when money's on the line, you'll see a lot more people feel strongly about things too.

SPEAKER_04 5:06

So that that's why it's so important to have everything in order, because if it's written in black and white, sometimes there's gray areas, but you know, having a plan and having it written down so that the intentions are there is so important to help avoid potentially, I say avoid, avoid those conflicts. I don't know that it does because you still have personalities involved or things that people don't see eye to eye on. But it means very clear in the documents what's going to happen and everything is set up properly, then that's should what should happen. Um, why do you think so many people avoid planning, even knowing the consequences?

SPEAKER_03 5:42

You know, I I it's one of the things is hey, you know, most of the time when you have a deadline on something, I would guess most of the time it's done right before the deadline, right? Um and this is the longest deadline you'll have in your life, technically speaking, and maybe it's or the final deadline or we hope it's long. Yes, and when you die unexpectedly, you didn't you didn't get there, right? And that's when that's when things can can get messy. So I mean, procrastination's definitely one of the things. And then another one is no one likes thinking about what happens when you die. Uh, it's overwhelming. This stuff is also it's not intuitive. Um, someone may think that they've got everything set up and and they just don't, um, because there's a lot of things, uh, the way assets are distributed that may not, you know, make a lot of sense. Um, someone may think if I just put this one person in charge, they'll take all my money and give it to everyone who I want. I wrote it down, I let them know, you know, that's not how it actually works. Um, and there's consequences for that person, but that person may think, oh, I did what I was supposed to do. And, you know, they're just not aware of how all of this works.

SPEAKER_04 6:49

Yeah, I feel like it's one of those things that people put off. It's like, oh, I'll get I'm not, you know, not dying today. So you never plan on doing, especially you, you know, being younger. But you and I have done, you know, podcasts before we've talked about that. It's like naming who's taking care of your children, even if you're young. It's like, you know, there's certain things, but um, I think, you know, avoiding avoiding conflict and and making sure that you have a plan in place is so important. I mean, I feel like that's the loving thing to do for your family too. So they're not left with, especially if something happens unexpectedly and then, you know, they're left figuring out, wait, what just happened? And they're mourning you, and now it's like, you know, things aren't in order. That's I think that would be harder. It is harder.

SPEAKER_03 7:34

And even when there's a, you know, great loving relationship and something like this happens and someone dies and unknowingly didn't have everything the way they intended it to be, and then it can cause anger amongst loved ones and they're mad at the person that's passed away, and it it causes all kinds of issues. Yeah, it it it can get messy. And you know, that's that's the thing with this. No matter what, there's no perfect plan because you're never gonna know what the results actually are, right? You just do the best you can based on your current situation and your prediction for the future. But even if you've thought about every single scenario, I can guarantee you something is gonna happen later on that you wouldn't have expected it to.

SPEAKER_04 8:22

I feel like that's true with a lot of financial planning, right? It's like, okay, do the taxes, the estate, all that, you know, it's like do the best we can of what we know right now. Um, that's why this, you know, this industry is so amazing to me because it's you never know everything. It's never the right answer. It's like it depends on the situation and you know, why I fell in love with it. But um, I do feel like this is where an attorney, an advisor, you know, can add so much value to help with these. Cause these are, to be honest with you, it's like you and I have sat in so many rooms, you know, where loved ones were sick or, you know, or someone had just recently passed away. It's a very tender moment. It's where we can actually hold their hand and walk beside them during these times. It's it's one of the hardest parts of my job, and I assume yours, but it's also where we can add the most value.

SPEAKER_03 9:10

I agree. People want to feel cared for. And, you know, when you have a team of people that are on the same page with you and can help guide you through these things, it's very reassuring. And at least, you know, for me, especially when I'm I'm in the same room with you and we're talking to a a family who whose loved one is just passed, and you can tell they're, you know, obviously inappropriately, they're they're grieving. But um, you know, at the very least, at least they know that, you know, there are people here that that can help them. Even if things are not in order, there are still ways out to make the best of what you can. Yeah. Um, you know, you don't have if you don't have a will, that doesn't necessarily mean it's doomsday. Um you know, there are laws in place that control where where things are gonna go, and sometimes it it honestly may work out just fine. You never really know.

First Steps After Someone Passes

SPEAKER_04 10:02

Right, right. But don't leave it to chance. So so immediately after someone passes away, you know, the next steps, um, you know, you get the death certificates. Usually you get five to ten copies are needed or so. Most people don't, most brokerage firms or financial companies don't require originals. They just want to be able to see the ray seal or what have you.

SPEAKER_03 10:24

Yeah, and that's that's I think as time goes on with you know digital scans. Um, but I still think it's a good idea to, you know, five to ten, I think is it is about right. That's usually what I what I tell clients. You can always order more. Um uh there sometimes, you know, by mail they can take a little bit longer to get, but you can you can go in person, you can have your contact your attorney, they can they can go in person and and I can you know I've obtained death certificates, you know, same day if needed, but it's always a good idea to have those handy.

SPEAKER_04 10:53

And and then the notification process. So really, you know, notifying family, I assume, notifying just know that when you notify financial institutions, they lock up the accounts quick.

SPEAKER_03 11:05

That's what I yeah, that's that those are people that they'll know when they when they need to know, they're gonna know in time. I tell clients, don't let that be your first phone call, don't let that be your 50th phone call. They will know when they need to know. Um, and it can sometimes cause more issues. Um, you know, they can, like you said, they can they can freeze accounts, it can just make things a little bit harder to do, but but they in time they will be informed.

SPEAKER_04 11:33

Yeah, exactly. Um, on average, so this is where when I'm, you know, when you're when you're looking at an overall balance sheet, if I see someone that has tons of accounts everywhere, just know that, you know, on average you have to notify 10 to 15 institutions. But if you and if you like to spread your assets all over, you're gonna have to call all of those. So sometimes, you know, simple is better.

SPEAKER_03 11:58

Yeah, I mean, everyone works differently with that, right? I mean, sure. Personally, easier the better, the less to do. It makes sense for me. But sometimes people, you know, they'll have their accounts titled one way or for or another because that's just how it's always been, even though they can consolidate. Um but yes, the the more accounts you have, the the obviously the more steps it's gonna be.

Beneficiary Traps That Cause Probate

SPEAKER_04 12:20

Yeah. So I mean, you that can really delay things if you have multiple accounts. I mean, you can work through all of that, but um, you know, maybe helping to do that. Is there anything else that you can think of that we've experienced or even not experienced that, you know, kind of mistakes made early that can delay any settlement or anything like that?

SPEAKER_03 12:40

Well, you know, when you really when everything's not buttoned up in the sense of you have maybe you have some some accounts that have designations that that haven't been updated in a long time. Meaning beneficiary accounts. Beneficiary designations and some some types of accounts like retirement accounts, life insurance policies. Usually when you set those up, you submit your beneficiary designations right then and there. So usually there's probably something on file for those. And maybe you just thought when you updated your will that it all kind of takes care of it through that. But uh usually, uh more often than not, um, you know, a beneficiary designation is going to supersede the terms of a will no matter what. So even if you think you did everything, may maybe maybe you didn't.

SPEAKER_04 13:23

Yeah, I can think of one. So it's like if you have everything with a spouse, it's like, you know, to your point, married filing joint or or excuse me, joint tons of rights to survivorship, or you know, they have beneficiaries on everything except for one account. Yeah. It's just randomly sitting out there. Everything would have passed outside of probate by designation, beneficiary designation, or by titling, but then you just have this one account over here that has no benefit. Now you have to like probate a will just for that one account, you know, something like that.

SPEAKER_03 13:52

And that can happen with fancy planning or just simple beneficiary designations. If you have a trust and you make sure everything is titled to your trust or names your trust as a beneficiary, but later on, five years later, after you die, it's discovered you had a$5,000 checking account. Probate's probably going to be required for that asset.

SPEAKER_04 14:09

Which is annoying because you're like, it's$5,000, which is worth it, but it's at the same time it's going to cost money to do it. So it's like sometimes you see these like couple hundred dollar accounts, and it's like, well, it's not worth it to probate. It's so no sits, it's kind of like a waste.

SPEAKER_03 14:24

Yeah, you're right. And you know, I think you you'd mentioned that you know there's a percentage of of an estate that goes through fees. That's exactly what we're talking about right now. Attorneys, accountants.

SPEAKER_04 14:33

Yeah.

SPEAKER_03 14:34

Um there's a a lot that goes into this, and the the messier it is, the more you're probably gonna end up paying to clean it all up.

SPEAKER_04 14:42

Absolutely. So having everything in order is gonna make it smooth and you know, and checked. Yeah, just because you go to an attorney um who should do a button-up job and tell you exactly how to title things and how to do beneficiaries, some of them don't, I have found. Or they just give you a paper and say do this, which is appropriate because the client has to do it. But did you actually do these things and change your beneficiaries and retitle these accounts? So making sure and checking up on it and making sure that you actually did it.

SPEAKER_03 15:11

Yeah, that's that's the tough part because, you know, um only generally speaking, only you can update the beneficiaries on your on your checking account if you have a payable on debt beneficiary, an attorney or a financial advisor is not gonna be able to do that for you.

SPEAKER_04 15:25

Because they should not be able to add a beneficiary.

SPEAKER_03 15:27

Um and you can you can tell someone to do something, but and life happens, you know. Uh it's it's there's a million things on everyone's to-do list. Sometimes this stuff just gets buried, right?

SPEAKER_04 15:36

Well, sometimes what I've seen, you know, if you have an employer and they change who they're doing their 401k through. Yes. And it's like, okay, you have to rename beneficiaries and you think you already did it, and they changed, you know, their TPA, third party administrator or something, and then all of a sudden they're not on there.

SPEAKER_03 15:54

That's very frustrating. And I that always gives me pause because let's say the example that you said right there, there's a it's a new um custodian for for retirement accounts, and you thought you had it before and you just never got around to your HR emails and you just never did it. And the new custodian's default is going to be to your estate if you don't have a beneficiary and then it has to go through probate. Um, again, it can, it can, it can create a mess. So just checking in on these, you know, generally speaking, simple things, just how are my accounts titled? Do I have beneficiaries? Do I need beneficiaries? Um, either a conversation with your financial advisor or if you manage your assets yourself, um, you know, doing these things is uh is important.

SPEAKER_04 16:40

Mm-hmm.

SPEAKER_02 16:41

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SPEAKER_04 17:05

So the role of the executor. So, you know, some some people say, well, my executor can handle this, and you know, or I'm the executor of something. What would you know? First of all, what I think was some people don't know is that if you don't probate a will, there's no executor. There, there is a named executor in the will, but if everything is passing by beneficiary designation or by titling, your will's not being probated. The executor has no power.

SPEAKER_03 17:32

Yeah. And that's right. You know, technically speaking, the executor is is uh to for them to actually act, like they have to be certified by a probate court. They get it, what's called letters testamentary or letters of administration, which basically acts as a certificate that gives them the ability to transact on on behalf of the estate.

SPEAKER_04 17:51

Um and that's only given when somebody passes away and then you take that will to the court to get those letters, and that's when the power is evoked. That's right.

SPEAKER_03 18:01

Yes, that's right. Now, if you have a joint account and you you you pass away and the surviving account holder, generally speaking, it's going to default to them. You're an executor, really that's not part of you know their job, it's automatically gonna default to the uh surviving account holder.

SPEAKER_04 18:17

Great point. So their responsibilities are only the assets that flow through the estate.

SPEAKER_03 18:22

Yes.

SPEAKER_04 18:22

So if you have a retirement account that has a beneficiary, if you have a life insurance that has a beneficiary, and if you have a joint tenant account that passes the other person, an executor is not gonna have any control over these assets. It's only what flows through the estate.

SPEAKER_03 18:36

That's right.

SPEAKER_04 18:36

That it doesn't have a beneficiary or that names the estate to go through the will.

SPEAKER_03 18:40

Yes, that's right. Now, you may hear trustee uh and executor, personal representative. Sometimes these terms kind of get exchanged for another, but generally speaking, yes, executor is uh appointed by a court. Um, a trustee is created through either a revocable trust uh or a or a trust created under a will. Um, personal representatives and executors, different states have you know different terms for these, and someone can somewhat step into the shoes of a personal representative, even if they're not actually appointed. But but yes, generally speaking, an executor has to be appointed by a court in order for them to actually have power.

SPEAKER_04 19:16

And so what would you say is their responsibility and legal duty?

SPEAKER_03 19:20

So they are um to, they're supposed to distribute assets pursuant to the terms of a will, but before they can do that, there are you know there are checklist items that they have to do also. They have once they're appointed by a probate court, they have to run a notice in the local paper of the county where the decedent died in that says all creditors and debtors of the estate, um, make your claims. Uh, and then, you know, if if if creditors either file a claim in court or you are notified of a claim, you're obligated to pay those claims. But there's situations where there may be more debts than there are assets. And if you pay off a claim from one creditor, but there's another creditor that may have a higher tier, you could, you could be in, you could technically speaking, you're putting your personally at risk for that. Now that's why there are grace periods allowed. There's no rush to pay off creditors. You should take sufficient time to make sure you you gather all of the information so you can then pay off all you know legal debts and then distribute assets pursuant to the terms of the case.

SPEAKER_04 20:28

So you just taught me something new. I didn't know that there was an order of what debt is more important than the other. And that if you're upside down, then you have to be very careful which money you pay. Yes.

SPEAKER_03 20:38

That's so interesting. Yes, and I mean most of our clients are gonna have more assets than they have debts, but you know, we're talking the grand scheme of things. You said 70% of people don't don't have wills. I would I don't know what the number is, but I would bet you that there are a good chunk where the assets of the estate technically are less than the the the debts that are owed. And so it it can get complicated. It can get complicated.

SPEAKER_04 21:03

Yeah. So I mean, if you don't have a will and you die, it's what what is good dying in test state? Yes, meaning without a will. Yes. I think I said that correctly. Um, then they name one at the courts, but you can petition as the heirs or the spouse to say, I want to be the executor, and the beneficiaries sign off on that. Everybody agrees, this person is representing dad or mom or whatever.

SPEAKER_03 21:25

Yes.

SPEAKER_04 21:26

Um, and so they are a fiduciary.

SPEAKER_03 21:28

Yes, they are. And you die without a will. Uh, the appointed administrator, um they are obligated to pay the assets of the estate according to the intestine laws of the state where the person died. In Georgia, if there's a a spouse and no kids, it all goes to the spouse. If there's a spouse and kids, the spouse and children get everything equally, except the spouse is entitled to a minimum of one third. There's no spouse and kids, it goes to parents. If no parents, siblings, if no siblings, nieces and nephews down the line.

SPEAKER_04 22:00

And every state has that order of operation. Yes.

SPEAKER_03 22:03

And they'll have different ones. That's what Chorges is. But you know, generally speaking, it's it's it's some form of that spouse, kids, parents, siblings.

SPEAKER_04 22:11

How what do you think the time commitment is for an executor? How much time?

SPEAKER_03 22:16

You know, this is this is a hard, hard question to answer because even something that's relatively straightforward, you're still doing things. Uh, even if it's, you know, uh being on the phone with the bank that's on hold for, you know, a half hour that counts as time. When things are messy and there are a few disputes, I can't, I don't even want to know the number of hours spent dealing with something, especially for estates that have been open for years and years, maybe going through litigation or potential litigation. Um, it's it's hard and it's stressful and it's it's it's you know, it's tough to go through.

SPEAKER_04 22:55

Yeah. And obviously name somebody you trust to handle it properly.

SPEAKER_03 23:00

You know, and not everyone has that. You got to do the best you can. And there are professionals out there that they, you know, there's there's fees involved with that. But yes, generally speaking, it's always good to have a trusted person, whether that's a family member, a friend, um, that that you know, listen, when I'm trusting you to make sure that you are doing exactly what I want pursuant to the law.

What Goes Through Probate

SPEAKER_04 23:26

Yeah. So you in talking about just probate in general, um, I know we can talk about the executor and what their role is in probate in general, you know, we we've discussed this before, what it is and when it applies, but um, you know, maybe talk a little bit about what goes through probate, you know, and what does not.

SPEAKER_03 23:46

Yes. So what goes through probate and what I tell clients are it's individually titled assets that have no beneficiary on them. Um if you've got a checking account, you titled under your individual name, no one's on, no one else is on it, there's no beneficiary, it's gonna go through probate. If you've got a joint account titled with somebody else, that's not gonna go through probate. It's gonna default to the surviving account holder unless it's titled in a specific other way. Um retirement accounts, life insurance policies, as long as they've got beneficiaries on them, the beneficiaries are gonna get them. If there's no beneficiaries, then it will go through probate and it will default to the estate.

SPEAKER_04 24:24

And some people name their beneficiaries, might put it to my estate, and then that will go through probate. Because if you for if you you direct it to the will or the estate, then that will go through probate.

SPEAKER_03 24:36

That's right. And then real estate, again, same thing. Um, and and Georgia actually now allows transfer on death designations on on real estate. That's a relatively new um uh uh new policy that they've had.

SPEAKER_04 24:50

Um have you had people do that yet, or do you recognize that?

SPEAKER_03 24:53

I have I've had a couple. I I've I haven't had to actually have have it distributed yet. I I've I've set them, it's been when someone's basically on their deathbed and it was really the only asset and it was the easiest way instead of trying to do a trust. And when when things are not in a if there's no health concern and you've got sufficient time to plan and you want to avoid probate, usually a revocable trust is going to be your best bet um to make sure that there is no probate. And most of my clients uh these days do use revocable trusts as their main estate planning vehicle. It wasn't always like that. Um, but uh since COVID happened, um as counties have grown and courts are understaffed, especially the bigger counties, Cobb, Fulton, the Cab, probate's more of a headache than than it used to be. And um clients seem to like the idea of the city.

SPEAKER_04 25:45

Well, and you have states like Florida, it seems like everybody has a revocable living trust there because it's probate's just generally hard there or expensive.

SPEAKER_03 25:52

Yes. So Florida's um their probate fees are more expensive typically than than in Georgia. It it takes longer, it's um it's seen as more of a headache there. So you will see trusts commonly used in Florida more so than you will uh in other states.

SPEAKER_04 26:08

Yeah, yeah. So um, you know, probate is really probate is not always bad. I mean, if it's simple in like Georgia or what have you, some state, it's not always bad, but it does slow things up. If you can avoid it, that's great. And it's also public record, right?

SPEAKER_03 26:23

Yeah, I I I whenever I talk about trust with clients, it it feels like they get real hooked on the idea of using a trust and they like it. And I try and tell them you don't have to do this. Generally speaking, they're gonna prefer to. But yes, probate's not always a nightmare. I don't want people to think that it's the worst thing in the world. Uh yes, it can be stressful, yes, it can be a headache, yes, it can take time. Um, but eventually uh it it you will it'll all end up going to either where it's supposed to go pursuant to the terms of a will, or if there's no will, then buy, you know, by the in intestacy laws of the state where where that person lived. Um but again, you're either paying for it up front with uh a trust and avoiding probate later, or you're punting and your estate will be, you know, paying the costs of it for for probate, and that's more unpredictable. So I think that's another reason why clients uh do like trusts.

Trusts Versus Probate Trade-Offs

SPEAKER_04 27:16

Yeah, absolutely. So just in general, um how assets are distributed, meaning, you know, wills versus trusts versus end state secession. We've already kind of touched on that a little bit, but um you know, how assets are distributed once it's like, okay, this person passed away, I have letters of testamentary, I'm the executor. You know, what's next when notifying the institutions?

SPEAKER_03 27:44

So, you know, once once you've got the letters, you can you know let let the institutions know. Uh and you'll open up an estate account. And you can do that at you know, your local bank, uh, if you've got a brokerage account, uh those can also be estate accounts, and that'll kind of be your holding account.

SPEAKER_04 28:00

So Yeah, because if you have securities as say Charles Schwab, you're not gonna open a bank account and try to do it that way because then you'd have to sell everything, move it. You know, you wanna in kind, yeah. Yeah, uh if they have investable assets, meaning, you know, securities, it may be better just to do it at the brokerage account, maybe. You can do it multiple. You can open it's like an estate account and it's gonna issue a tax ID for the estate. So you can open a bank account and a brokerage account. It doesn't, you can have both. Correct. It's just in the name of, you know, that's just like a trust or a person, you can open the same type of, you know, the same titling of the account with tax ID at two different places.

SPEAKER_03 28:36

That's right. And especially with a large estate, obviously it's gonna be better off invested in a in a brokerage account. Um, but it's good to have a checking account too. If you've got fees to pay here and there, it's all related to the estate, right? Uh once once those are all paid off, um, then it's time to distribute assets per whatever the will says. And there's also executors are entitled to compensation by Georgia's statute unless it's overridden in the will or by some separate agreement. Uh executors are entitled to 2.5% of whatever comes into the estate and 2.5% of what comes out of the estate. It doesn't work.

SPEAKER_04 29:14

I've seen a lot of family members that don't charge things.

SPEAKER_03 29:16

Yes, a lot of a lot of times when the executor's also a beneficiary, one, they don't feel like they should be taking compet uh compensation. And two, if you take compensation, you're that's income tax on that. So it doesn't make sense sometimes. Why would you be paying income tax on something that you're gonna get anyway? Yeah. And uh you your inheritances are not, you're not going to be, at least in Georgia, that uh there's only a few states that have inheritance tax to the to the recipient. But in Georgia, you get something, there's no there's no income tax that you have to pay on that. Yeah. Um, but if you're taking a commission as executor, that would be income that you would you would have to, you know, pay taxes at your ordinary income tax rate on.

SPEAKER_04 29:55

Yeah. I mean, the only tax I can think of as an inherit is if you have like an inherited IRA, like that tax still stays there if you're taking IRA distributions, obviously, but not inheritance tax. Yes, that's right. In the sense of I got this money and so I'm paying tax on it. Nope. I just wanted to clarify just because that can be somewhat confusing. It's like, wait, I thought I had to pay taxes on the IRA, and you do as an IRA distribution, which is a totally different type of tax.

SPEAKER_03 30:18

That's a that's a good point. The IRS, if you've if you've if you funded an IRA and you you put it in there tax-free to get it out in some way, shape, or form, there's there's gonna be a tax consequence. Um, you're not gonna avoid that um because it it happened through through through a will. Um, but but generally speaking, all non-retirement accounts that are non-broth, uh, you're you're not gonna get that. You're not gonna get that concept.

SPEAKER_04 30:42

So it's like when you're distributing assets, so it's like anything that's going through the will would go to the estate account and then to the beneficiaries named in the will after everything's settled and the debts are paid and all of that. You know, if you have a trust account, same concept, it'll go by trust language versus a will. Correct. And then if you have a beneficiary of retirement accounts, life insurance, whoever the name beneficiary is on there, it'll go to them directly from those accounts.

Estate Accounts And Executor Pay

SPEAKER_03 31:06

That's right. And, you know, for uh the estate tax limit right now is the highest it's basically ever been. It's$15 million right now. And we when I say estate tax, I mean the federal estate tax. So if your uh estate is valued at uh over that amount, uh the estate pays 40% on the overage on that, and that's due nine months after the date of death. Most of the time, especially with the you know, with the limit so high, that's not going to apply. It's not as much of a forefront of of planning as it as it used to be. All of that being said, things change. New administration can can you know make up whatever they want down the road. But right now it is scheduled to continue to rise for inflation until basically it doesn't.

SPEAKER_04 31:51

Um, and that's a great segue into just talking about you know the taxes. You obviously have$15 million per person is the estate tax. There's 12 states that have inheritance tax to the beneficiaries or estate tax, um, but most states do not. So you can always check, they can always check on the website, you know, search for the states that have uh estate tax or inheritance tax just to see. Um, one of the other I don't want to say benefits to passing away because there's not a benefit, but one of the tax benefits is the step up and cost basis. Yes, that's a good point. Real estate on brokerage assets. So it's eliminating those unrealized capital gains.

SPEAKER_03 32:32

Yes. And a lot of times people will say, Well, I'm just gonna deed my home to my child so they don't have to go through probate when I when I pass away. And you know, if they live much longer and that situation happens, that the child gets it. Well, if they had just gotten it, the whole thing when the person passed away, they would be in a better tax situation because when they turn around and sell that property, their basis would be higher, theoretically speaking, as long as the so if you if if you know a parent bought a home for 300,000 and let's say it grew to 700,000.

Taxes Step Up Basis And Gifting Mistakes

SPEAKER_04 33:03

So there's an unrealized gain of like 400,000 there, right? So if you're like, okay, first of all, there's so many issues with this. Yeah. So it's like I'm gonna just gonna gift this house, a$700,000 house to my child. So it avoids probate, makes it simple, just goes to them now. That cost basis, that$300,000 stays with the gift recipient. So if you gift somebody something, that is what they're your cost basis, is their cost basis, right? Um, where then there's just transfer tax issues because now you're going against the lifetime exemption, which is the 15 million, but you still have to file that. You know, there's if if somebody needs care and you know runs out of assets, Medicaid is gonna say, Did you transfer something in the last five years? I believe five years a look back. I'm pretty sure about that. So I always get the three and five years. I believe it's five years as a look back. And so, you know, that could be an issue. So there's so many issues surrounding that where if you just held onto the property, or I've seen it, I've seen it where somebody sells the property thinking it'll be simpler and then they pay, you know, you get a$250,000 exclusion, but that was a$400,000 gain. So now you paid capital gains tax on$150,000 where if you just held this property until the person passed away, then they get a step up in cost basis, meaning that$300,000 cost goes to now 700.

SPEAKER_03 34:24

Yeah, there's you and you're bringing up a lot of good points. It it's sometimes doing doing nothing actually is better for you and every other person. And when I say nothing, I mean do it, not doing the thing that you think is better off. I think really the advice is before you make these types of decisions, or thinking about doing them or not doing them, do your research and then talk to somebody that is a professional and get their opinion on it. And they'll let you know, hey, I this is okay that you do this, or you're opening up a can of worms if you do this, do not do it. Um you know, and that probably goes for a lot of financial decisions, right? If you're unsure, if you think something is somewhat tricky and it's not in your wheelhouse, do your research.

SPEAKER_04 35:08

Because sometimes there's just those little nuances that are easy to do. Oh, there's a certain thing. I've seen so many tax things happen. I was like, could have been it, but you can't can't take it back once it's done.

SPEAKER_03 35:17

So you know the IRS is a mess right now. You probably could get away with a whole lot of stuff right now, but it you don't want to you don't want to play that game.

SPEAKER_04 35:25

No, no, no, no, definitely not, definitely not. So, really, we've talked about a lot of the mistakes to avoid, you know, updating beneficiaries, just doing planning in general. Um, we've talked about making it easier for loved ones, you know, making sure that, you know, the documents are in order, that the titling of the accounts is in order, your beneficiaries is in order, just to make sure that, you know, to help avoid conflicts and maybe even sitting down and talking to your family about your wishes.

SPEAKER_03 35:56

Yeah, the communication part I think is is is big. Um, if you've kept everybody in the dark, um, not only beyond the surprises for what they have to deal with, you may have not communicated something that was very important in order for things to to to be smooth. So you don't have to tell everybody everything, but it's a good idea to at least tell the people that are going to be in charge, I've updated my documents. Here's a contact person that you can speak with about it. Uh uh in your own words, things to do, not do. If an attorney prepped these documents for you, they can help you with memos, telling you, you know, how to how to handle post-death and written in the form of, hey, a memo to to kids, uh, to financial advisors, basically, take care of that.

SPEAKER_04 36:46

Yeah.

SPEAKER_03 36:46

It goes a long way.

SPEAKER_04 36:47

Absolutely. If 70% of people aren't prepared, then chances are that someone you know, I mean, even your parents may not be, and starting those conversations. So, you know, really um start the conversation. Yes, you know, create an update your estate plan, check your beneficiaries, but also, you know, if you if you're close with family or loved ones, especially if you hear of one of them getting ill, um, you know, just mention it to them, maybe if you can.

SPEAKER_03 37:17

I I think, and again, if whether you hire an attorney, that first conference that you have with them where you you spit out all the info, that's really the hard work. The rest is putting everything together. And hey, if you you don't want to go through an attorney, sometimes a legal Zoom will is at least better than not having anything in place. So just giving it some level of attention, even if it's just reading about something, there's probably going to be a light bulb that goes off and some action is probably gonna be taken to you know make a situation better than it would have been otherwise.

SPEAKER_04 37:48

Absolutely. Thank you for always coming on and talking about these such important matters. If if any anyone wants to reach you, we have your contact information in the show notes, as well as a couple other videos um, you know, and podcasts in there about digital estate planning and then simple estate planning errors that I think will be helpful. But um always glad to have you on here, you know, and work together and through estates and planning and all of that. So I appreciate you coming today.

SPEAKER_03 38:14

I love coming on here. And um just, you know, again, there's no perfect plan. You can't predict the future, but just talking about these things goes goes a really, really long way.

SPEAKER_04 38:24

I want to stress that. Absolutely. Thank you, Irene. Thanks for listening to today's episode. If you're interested in learning more about wiser wealth management or want to schedule a consultation to meet with one of our fiduciary financial advisors, you can do so by going to wiserinvestor.com or you can click on the link in the episode notes. We'll see you next week.

Communication Planning And Final Takeaways

SPEAKER_01 38:45

Thanks for listening to a wiser retirement podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to wiserinvestor.com and reach out. This podcast is strictly for informational purposes only and is not to be considered as investment advice or solicitation to buy or sell any financial products, securities, digital assets, or any other investment vehicles, or basis to make any financial decision. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guest may personally own securities, digital assets, or other investment vehicles mentioned on this podcast. Neither the host nor guest of the show are compensated for their participation, and no referral fees are paid to or received by any host or guest for clients, listeners, or similar interests. Investments involve risk, and unless otherwise stated are not guaranteed. Be sure to first consult with a qualified financial advisor, tax professional, insurance professional, andor legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.