The following is adapted from Inheriting Chaos with Compassion.
When a loved one passes away, there are two major roles involved in the handling of their estate. There’s the executor, whose job is to make sure an estate is divided and distributed properly in accordance with how the will states things should be.
Then there’s the beneficiaries: the recipients of assets from a will, trust, retirement account, or insurance policy. Upon a person’s death, beneficiaries named on their accounts become the automatic owners of those assets.
In this article, we’ll look at how both roles play into the process of distributing assets.
An Executor Organizes Everything
If you serve as the executor of a will, there’s a chance you might inherit a financial mess when your loved one passes away. There will be papers everywhere—both printed and digital—that will need to be pulled together to form a complete picture of the person’s financial life. This is a huge task that could require several weeks of work depending on how organized and prepared the deceased was before their death.
Once you have gathered all the papers you can find, begin to group them by institution. You may not yet know what each account is, or what’s important, but organizing like papers together will give you a picture of all the institutions involved.
A financial advisor can review these documents with you and guide you through the process of calling each institution to see what accounts your loved one held there, and what steps need to be taken to transfer those assets.
Once you have the paperwork grouped by institution, create a list of all the institutions you need to call. You can tackle all the accounts at that institution on the same phone call. In my experience, working with one institution at a time gives order to the chaos.
For these calls, you’ll need to provide a copy of your affidavit of executor or power of attorney to prove you have authority to act on those accounts. You also need to provide information about the account holder: Social Security number, birthdate, and address.
Next, you’ll ask about the account that you know is with the institution.
Each institution can search the Social Security number for any other accounts in your loved one’s name, so ask if any other accounts exist for them.
Finally, you’ll ask what paperwork the institution requires to move the assets into another person’s name. They may require additional proof, such as a copy of the death certificate, and typically these documents will need a notarized signature.
More steps may be added to get paperwork notarized before it can be submitted.
Of course, it’s never easy to get through all the bureaucracy and processing time it takes to approve paperwork. Breaking down all items on your list into bite-sized tasks will help make a larger task seem more manageable. Imposing an arbitrary end date for completing all tasks can be tempting, but in my experience, it only adds unnecessarily to the stress, as you’re bound to run into roadblocks. Having been an executor, the best way I’ve found to make this work less painful is to do it bit by bit.
Once all the accounts have been identified, transferred to the appropriate beneficiaries, and reported to the commissioner of accounts, the job of the executor is done. For the beneficiaries, the next step is to organize and consolidate the assets they’re inheriting.
Beneficiaries Should Look to Simplify Assets
With the transfers completed, the heirs can simplify their inherited accounts by gathering the funds into as few accounts as possible to make investments and disbursements.
Here’s where a financial advisor can become invaluable, by taking all the confusion of transferring and investing money and making some sense of it. A financial advisor can tell you what paperwork is needed, fill it out for you, describe what it means, tell you where to sign, and take care of all the necessary steps. They can lighten the load.
Inherited finances become easier to manage when they’re gathered into as few accounts as possible. Accounts of the same type can be consolidated.
For example, separate IRA accounts can be combined into one. However, you can’t mix different account types, such as an IRA with a taxable account.
The key is to minimize the number of accounts you’re managing.
The process to collecting assets into one place can be complex, and it varies depending on the institution holding the asset. A new account must be opened in the heir’s name at the same institution where the deceased person’s account is already held.
The executor then signs a letter of instruction to the institution, letting them know the new account is open and how the assets are to be distributed.
Once the new account is funded, investments can be made. If you’re transferring these assets on your own, you’ll need to learn the steps required by the institution you’re working with and decide how you wish to invest the inheritance.
A financial advisor will walk you through all the steps to pull all these assets into one place with one custodian, such as TD Ameritrade. It’s also possible to manage your own investment action through a brokerage platform like E-Trade.
The key to conquering this complicated approach is to simplify as much as possible, as early as possible. No matter what, the process is going to require a lot of patience to get it done properly. One step at a time, you will get closer to resolution.
For more advice on handling the estate of a loved one as an executor or beneficiary, you can find Inheriting Chaos with Compassion on Amazon.
Jennifer Luzzatto is a Chartered Financial Analyst®, a Certified Financial Planner®, and a NAPFA registered financial advisor. She began her career in financial services thirty years ago as a fixed-income trader in a regional brokerage firm and went on to manage personal trust accounts, institutional portfolios, and a municipal bond mutual fund at a commercial bank. In 1999, she founded Summit Financial Partners, transitioning from banking to financial planning and investment advisory services. Jennifer holds a BA in Psychology and an MBA from the University of Richmond. She lives in Richmond, Virginia, with her daughter and their dog.