What to do after a death?
Coping with a death in the family and all the duties that fall to family members afterward is always challenging. The closest survivors, especially the spouse, are often responsible for significant financial tax and legal decisions that can impact their long term financial security.
If you are here, then in all likelihood you have a loved one that has passed away. First off, I want you to know that I am sorry for your loss. I am not saying this in a trite, corporate way; many of us at Keystone have lost family members and loved ones and we understand the unexpected pain, sadness, and grief that follows. I truly hope and pray that you will, at some point and at your own pace, be able to find peace after your grieving.
In the immediate grieving process, there usually isn’t anything LEGAL that must be done in the first few days. Just take care of your family.
The most important things to take care of during the first week or two after someone dies, are:
- make sure the funeral arrangements are in place;
- confirm the house is secure and items aren’t starting to “walk off”;
- request 6-12 death certificates;
- secure their paper records; and
- forward their mail.
After the funeral or other services are complete and you are ready to tackle the job of winding up their affairs, one of the most important steps is to create an accurate INVENTORY of their assets (property, financial, personal, etc.). To begin that, you need to find out how each asset was owned.
There are 2 broad categories of title registration options: title and beneficiary. Some assets allow the use of designated beneficiaries to receive the asset upon the death of all title owners. Because some assets transfer immediately to beneficiaries, understanding how an asset is titled will help provide for immediate financial needs.
The different options discussed below can apply to assets including real estate, bank accounts, life insurance, and investment accounts. Most of these title registration options do not apply to IRAs, 401(k)s or other tax qualified accounts because these are always registered and titled in the name of an individual person. Also, the title registration should not be confused with the beneficiary designation.
The first title option we will discuss is joint tenants with right of survivorship. This title registration is common between two or more owners who have an equal and undivided interest. When one owner dies, the other owner or owners immediately have possession of the property. However, the title must be “cleared” prior to any transfer or sale, usually by providing a certified copy of the deceased owner’s death certificate. When there is only one survivor left on a JTWROS title, the property will pass through probate when that surviving owner dies.
The next title registration option is tenants in common. Each person named on the title owns a vested portion of the title which does not end after death. In other words, each tenant on the title can transfer their portion of property or their percentage to a new tenant without first getting permission from the other tenants. Each tenant’s interest is subject to probate upon incapacity or death.
Arizona is a community property state. That means the state recognizes that married couples may own property as community owners. Most property acquired during marriage is presumed to be community property. However, any property a spouse acquires by gift or inheritance is the sole and separate property of that spouse. Each spouse owns an equal undivided interest in community property regardless of which spouse paid for the property.
Arizona also recognizes community property with right of survivorship, or CPWROS. Like joint tenants with right of survivorship, the property passes immediately to the surviving spouse on the deceased spouse’s death. However, one-half of the value of the property will be included in the deceased spouse’s estate for tax purposes.
Beneficiary designations typically apply only to certain types of financial assets or accounts like life insurance, IRAs, 401(k)’s, annuities, other retirement accounts, and transfer-on-death accounts. The account holder names the beneficiary or beneficiaries on a form provided by the financial institution.
If no beneficiary is named, then the account will pass to the decedent’s estate and go through probate. When a beneficiary is properly named, the account or financial asset passes to the named beneficiary immediately upon death. The account is still included in the decedent’s estate for estate tax purposes however.
Review beneficiary designations frequently, because they are often not revocable by other documents. For example, if you get divorced, your beneficiary designations probably will not change automatically.
Another common title registration option is to title the asset in trust. With a properly drafted trust, assets will pass to the trust beneficiaries without going through probate.