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Dealing with the Death of Your Spouse

By Randall K. Barton

On the death of your spouse, your church friends and family will have plenty of well-meaning advice. However, it is important to avoid making important, irrevocable decisions for at least 6 months—preferably a year—after your spouse’s death. Don’t sell your home, move closer to your children, get a job, go back to school, pay off your mortgage, etc., until your emotional roller-coaster has come to a stop or at least has leveled off.

WhoM Do I Call?

Those to call immediately: family, friends, and relatives; church and funeral home; executor named in spouse’s will and/or trustee of spouse’s trust—there may be funeral or other special instructions; whoever holds your spouse’s power of attorney. (The power of attorney is no longer valid.)

Those to call/items to handle after the funeral: check on retirement or other funds; spouse’s employer to check on wages, accrued and unpaid vacation time, sick pay, death and retirement benefits; Social Security office for benefits; insurance agents on policies and claim forms; banks, brokerage houses, and other financial firms for account status and ownership; trustee of any trust; Department of Veterans Affairs if applicable; lawyer to determine if a probate is needed (if living trust or nonprobate transfers occur, or in a small estate, a probate may not be necessary); credit card companies.

Destroy your spouse’s cards. You may use credit cards held in both your names, but the company may request a new application. Some credit card companies provide death benefits.

Gathering Documents and Information

Have the following documents in a central location: will, trust, and letters of instruction; life insurance policies; retirement plans and IRA information; birth certificates; military discharge papers; marriage license; deeds on real property owned by your spouse; vehicle registrations for motor vehicles, trailers, and recreational vehicles; recent bank and financial account statements; recent tax returns; loan documents, including mortgages and other loans; list all outstanding debts, as of date of death, such as credit card bills and utilities. Copy the most recent bill received right after date of death; Social Security cards; financial statement or list of assets as of date of death.

Probating Your Spouse’s Estate

Probate is the legal process where a court determines if a will is valid or that no will exists and provides distribution of assets to beneficiaries as designated in the will or by law if no will exists.

You may not be required to probate your spouse’s estate. Even if a probate isn’t required, most states require you to file the will (with the probate court or the county recorder’s office) within a certain number of days of your spouse’s death. Call the probate court or contact an attorney.

Probate is not needed in the following situations:

•Property held in trust. (Many people today plan their estates to avoid the costs and delays of probate through a revocable living trust. Property that has been conveyed and titled in the name of a trust need not be probated.)

•Joint tenancy with right of survivorship property (often bank and financial accounts and sometimes real estate) pass to the surviving joint-tenant free of probate. This is sometimes called "tenants-by-the-entirety" for a husband and wife.

•Payable on death (POD) arrangements. Financial accounts or other assets often pass automatically to a third party through a POD designation.

•Life insurance, annuities, and retirement benefits usually have a beneficiary designation which controls the distribution of that asset free of probate.

•Small estates—most states allow the surviving widow or beneficiary of a small estate to simply file a form affidavit.

If a probate is needed, contact an attorney who is familiar with probate law. He or she will guide you through the simplest and most cost-effective way to handle the probate of the estate.

Paying Taxes

As a general rule, property you receive by inheritance comes free of income and estate taxes. A major exception is retirement funds in qualified plans, such as MBA accounts [403(b)] or IRA’s. To avoid paying an immediate income tax on retirement funds, be sure to review your options to roll over or receive periodic payments.

The year your spouse dies, you still receive favorable joint return tax rates and standard deductions. If a probate is necessary, and the probate estate has enough income, an estate income tax return may have to be filed. If not, the income earned after date of death is simply reported by the beneficiaries of the assets.

An estate tax return has to be filed with the IRS if the estate (including probate and nonprobate assets) exceeds $600,000.

Some states have an inheritance tax. Check with an accountant on the income, estate, or inheritance taxes and/or returns that must be filed.

Paying Bills and Bills You SHOULDN’T Pay

Before paying any bills, determine if it is your debt, your spouse’s debt, or a joint debt. You are responsible to pay your debts and joint debts. You aren’t responsible for your spouse’s debt, since your spouse’s estate will pay those debts.

Loan agreements you have signed with your spouse, credit cards held in both names or used jointly, property taxes on property you both owned, and household expenses are joint debts. Hospital bills, funeral expenses, and legal fees incurred because of your spouse’s death are estate debts.

You should continue to pay your bills and joint bills. You may use your money, money held in joint accounts, and funds you receive directly without a probate to pay bills and to cover all living expenses. You should not dispose of or spend assets in your spouse’s name that have to go through probate. Don’t forget the $255 one-time death benefit from Social Security. If you are short of income or assets because they are tied up in probate, once the probate begins you may be entitled to a monthly "widow’s allowance" from the probate estate.

Looking Ahead

While important decisions should be delayed, it’s never too early to start looking ahead.

Estate planning. Examine your will or trust. Perhaps you should consider a revocable trust so probate can be avoided at your death.

Disability planning. If you become disabled or incapacitated, does someone have a durable power of attorney or durable power of attorney for health care to help you?

Financial planning. Do you have enough income for now and the future? Should you take a lump-sum distribution of retirement funds or installment payments? Watch out for adverse income tax consequences.

The Assemblies of God Foundation provides counsel and planning options to help you reduce estate and income taxes while maximizing your ability to care for yourself. Dedicated Christian consultants are available to meet with you personally (at no charge) to help guide you in looking ahead. Unfortunately, millions of dollars are lost by widows and widowers every day through unnecessary taxes, excess estate and probate expenses, litigation, poor investments, and con games.

In a multitude of counselors there is wisdom. On the death of a spouse, wise counsel is a necessity, not an option.

Randall K. Barton, J.D., is president of the Assemblies of God Foundation, Springfield, Missouri.