Finances are often the furthest thing from your mind when someone you love passes away. You need time to process and grieve. Worrying about the financial and credit steps to take when a loved one dies may take a back seat.
Still, these decisions need to be handled. We’ve assembled 10 of the most important financial and credit steps to take when a loved one dies. Please use this list to help you and your family navigate this difficult time.
Financial Steps to Take When a Loved One Dies
When a person passes away, there is a lot they leave behind. This is especially true when it comes to financial issues and arrangements. Here is a list of the top financial and credit steps to take when a loved one dies.
- Make final arrangements
- Get Death Certificates
- Compile a list of assets, debts, and bills
- Explore benefits
- Closing bank, credit card, and retirement accounts
- Transfer or cancel bills
- Finalize the estate
- File taxes
- Prevent fraud
- Create a budget
- Take time to grieve
We ordered the list above based on priority. While there is no set timeframe for when these need to be completed, sooner is usually better. Next up, we’ll detail how each of these tasks can be accomplished.
1. Make Final Arrangements
Do you know what your loved one’s wishes were? Did they want to be buried, cremated, or have a particular minister provide over services?
If you are unsure, the first financial and credit steps to take when a loved one dies is to check if they pre-purchased funeral/cremation services, bought a burial plot, or discussed their wishes with family or friends. If they didn’t put any plans in place, you’ll need to start making arrangements yourself, including paying for services.
The average funeral costs are just shy of $8,000, according to the National Funeral Director’s Association (NFDA). That’s a significant chunk of change[1].
Thankfully, most funeral homes can work with you, including setting up payment plans as needed. You can also get with family and friends to see if they can chip in. Funeral costs can often be reimbursed from the estate once it is settled.
If you are struggling to come up with the money, you can look into alternatives for funding. Churches and charities are a good resource. Certain government programs may help as well. Crowdfunding is always an option.
If you are entirely out of options, you can always surrender your loved one’s remains to the state. Just be aware that you may have little say in what happens to your loved one’s remains.
2. Get a Death Certificate
A death certificate is an important document that is needed in order to take many of the financial and credit steps you’ll take when a loved one dies, including closing accounts, applying for benefits, and more. The certificate documents when and how your loved one died and provides key statistics, like date of birth and address.
As part of filing for the certificate, you may be asked personal questions, like the birthplace of your loved one and what their parents’ names were.
Usually, funeral homes help with filing and ordering copies of death certificates.
If you don’t receive copies of the death certificate or you need additional copies, you can request copies of the death certificate from your state’s vital records office.
A death certificate usually costs $5 to $25, depending on your state. For instance, in Texas, the first certificate costs $20, and additional copies are $3 each[2]. While in New York, there is a flat fee of $15 (plus processing fee) for each death certificate[3].
3. Compile a List of Assets, Debt, and Monthly Bills
Another one of the essential financial and credit steps to take when a loved one dies is documenting major assets, debts, and bills, as it helps you organize what payments need to be made and what financial institutions need to be contacted. It can also give you guidance on how the probate process needs to be handled (and if it can be skipped).
Some examples of major debts and assets include:
- A home
- Land
- Vehicles
- Retirement accounts
- Bank accounts
- Medical debts
- Loans
- Credit card debt
If your loved one had a will, this step may already have been taken care of, but you’ll still want to double-check that the information is current.
As part of listing out the debts and assets, you’ll want to make a separate list of household bills, especially the bills that will still need to be paid (mortgage, utilities, etc.) while you settle the estate.
4. Explore Benefits
Did your loved one leave behind a plan to provide for their family?
Many people take out insurance policies, especially if they have a young family, someone who depends on them for financial support, or when they are concerned about their family inheriting debt. According to a Forbes survey, 3 in 4 adults have some kind of life insurance[4].
If your loved one didn’t have a plan in place and you or other family members depended on them for financial support, you may be stressed and worried about the future. But you should know that programs are in place to help with this.
Insurance Claims
If your loved one did have life insurance, you’ll want to contact the company to start the claim filing process. Filing will require a copy of the death certificate, and you may need to fill out several insurance forms. The claim will most likely be paid out within a few weeks.
Other types of insurance may also apply depending on how your loved one died. For instance, if death resulted from a car accident, you may need to work with the auto insurance company.
Employer Benefits
If your loved one was still actively working, you’ll want to contact their employer. First and foremost, to notify them of the death and to inquire about benefits and final paycheck.
Many employers offer various forms of life insurance to their employees. Some employers may even pay directly for limited benefits, like a small life insurance policy.
It will also be the employer’s responsibility to make notifications to any elective benefits your loved one utilized, like health insurance, retirement plans, etc.
Social Security Benefits
Social Security offers a wide variety of benefits available upon someone’s death. This includes a lump sum death benefit of $255, which goes to a living spouse, if there is one, or next of kin. You can initiate an application for this benefit in person or via phone.
Social security also offers survivor benefits, which focus mainly on dependent-age children and spouses. Below is a list of those who may qualify for benefits, but you should check the Social Security Administration’s website for a complete list.
- Minor children
- Spouses 60 or older
- Spouses caring for a child under 16
- Divorced spouses
- Children up to 19 who are still in secondary school
- Spouses 50 or older with a disability
- Adult disabled children (if the disability occurred before their 22nd birthday)
- Dependent parents 62 or older
- Dependent grandchildren or stepchildren
You can apply for these benefits in person or via phone and will likely be mailed several forms to fill out and return. Note: there is a family maximum for benefits.
Canceling Benefits
If your loved one was receiving social security benefits at the time of their death, these benefits must be terminated immediately. Failing to notify Social Security does not mean you get to keep benefit money. The Social Security Administration can and will claw back any overpayments.
Additionally, they may take back/hold the last month’s payment until they identify the proper beneficiary(i.e., a spouse or child).
Veterans Benefits
If your loved one served in the military, they may be eligible for VA burial benefits.
Those who died from a service-related injury are eligible for a maximum benefit of $2,000. Additionally, transport costs can be reimbursed if they are buried in a VA cemetery.
If the cause of death was not service-related, but they were in the care of the VA (hospitalized) at the time of death, you may be eligible for a $796 burial benefit. For those not hospitalized at the VA at the time of death, the benefit amount is $300.
A separate $796 interment benefit exists for those buried outside a national cemetery.
The VA details eligibility requirements and the claim process on the Burial Benefits page.
5. Closing Bank, Credit Card, and Retirement Accounts
Did your loved one have a bank account, credit card, or retirement account? If so, these financial institutions need to be notified so steps can be taken to close accounts and disburse funds as needed. These are the following credit steps to take when a loved one dies:
Banks
Upon notification, most banks immediately close or freeze any debit or credit cards associated with a deceased person’s bank accounts.
How the account closure is handled will depend on the type and ownership of the account.
If, for instance, you are the joint owner of the account, then full ownership will transfer to you. You do not have to worry about the account closing and losing access to your funds. This process is called the right of survivorship.
Accounts that are solely owned may have a designated beneficiary, making the account payable on death or POD. If you are the beneficiary, the bank will issue you the funds upon notification of death. They’ll also close out the account at this time.
If your loved one did not specify a beneficiary, the account will become part of the estate. Once an executor is set, they can contact the bank and use the account funds to pay off creditors as needed and disburse the funds according to the will (or laws of inheritance).
Credit Cards & Loans
If your loved one had any credit cards or loans open, you’ll need to contact the lender and ask about the credit steps that need to be taken when a loved one dies.
The estate must continue paying the debt for vehicle loans and mortgages until ownership is settled.
For credit cards and other types of revolving debt, the account will need to be paid in full before it can be closed. This can include having the estate pay the bill or negotiating a settlement with the creditor. Some credit card companies may charge off the remaining debt.
Creditors can issue debt claims against the estate during the probate process.
Outstanding debt does not transfer to loved ones unless the debt was co-owned, co-signed, or your state has specific community property laws. Any late or missed payments will also not appear on any other individual’s credit report.
Retirement Accounts & Pensions
The company or broker handling the account(s) needs to be notified of the passing so that the accounts(s) can be closed and/or paid out. The process for closing out the account will depend on the type.
401ks and IRAs usually have a preset beneficiary. If you are the beneficiary, when you notify the account holding company (or your loved one’s employer), you’ll be given options for handling the funds, including rollovers and disbursements.
A rollover may set you up for your own later retirement and help protect you from a hefty tax bill. Annuities can also lessen your tax liability when compared to lump sum payments. (in a box)
If no beneficiary is set, the account will revert to the estate and must be disbursed according to the will or through probate.
Pensions are more complicated. Rules for processing these depend on the type of pension, how your loved one chose to be paid, and whether or not there is a surviving spouse.
Spouses may qualify for a survivor’s pension, while other beneficiaries may be eligible for lump-sum payouts.
Just be aware that some pensions can’t be transferred, and benefits will cease upon notification of death. And, just like social security, any excess payments made after death can be recovered.
Other Debtors & Assets
Other kinds of significant debt or assets to be on the lookout for include:
- CDs
- Brokerage accounts
- Reverse mortgages
- Retirement or life insurance loans
- Business loans
- Student debt
- Medical debts
- Real estate
- Safe deposit boxes
- HELOCs and home equity loans
To help locate all assets and debts, you may want to check your loved one’s bank statements, contact local banks, look at your loved one’s taxes, and/or contact a probate attorney.
6. Transfer or Cancel Bills
As part of finalizing the estate, many of your loved one’s bills may need to be transferred or closed out. If you haven’t already gathered a list of bills, try reviewing your loved one’s bank and credit card statements.
Changes might not need to be made for bills with a joint account holder, like a utility bill. Other bills will need to be updated. In some cases – like removing a loved one from a family mobile phone plan – this may save you money.
If a bill was only in your loved one’s name and you still need the service, you will need to transfer the account or might need to set up a new account. For instance, if the electricity bill was only in your deceased spouse’s name, you may need to close it and open a new one in your name.
Solo-owned accounts you no longer need can be canceled, often with a quick call or online chat. Some examples include:
- Subscription accounts
- Phone bills
- Internet
- Health insurance
- Cable
It is worth noting that you should avoid canceling certain solo-owned bills and insurance policies until you have opened new accounts in your name. For example, you don’t want to leave a car uninsured during a transition period.
7. Finalize the Estate
Hopefully, your loved one had a valid will. In this case, if your loved one’s assets are probate-exempt or fall below a certain threshold, you may be able to skip the probate process and settle the estate yourself (if you are the executor).
If your loved one’s assets were significant, and/or they passed intestate, meaning without a will, the estate will need to go through a probate process.
Probate processes differ by state and can tie up an estate for months or years.
8. File Taxes
Have you heard the saying that the only certainties in life are death and taxes? Well, unfortunately, it’s true, and one doesn’t cancel the other.
If a loved one passes away, taxes will still need to be filed on their behalf for that year. If your loved one passed before filing the current year’s taxes, you’ll need to file these as well.
You may be able to skip tax filing if a loved one’s income was below a certain threshold for the year. Check out the IRS’s interactive tool for more info.
9. Prevent Fraud
One of the financial and credit steps to take when a loved one dies that is sometimes overlooked is to prevent fraud. Scams are all around us, and preventing them is one of the key credit steps to take when a loved one dies. If you haven’t already done so, cut up all of a loved one’s debit cards and credit cards. Not only will this prevent someone from accessing their funds, but it can also help prevent identity theft.
Another good step to prevent identity theft is to report your loved one’s death to the credit bureaus. The credit bureaus are sometimes notified automatically through the Social Security Administration or via lenders.
You can also contact the credit bureaus yourself. Each credit bureau has its own process, but all will require a copy of the death certificate and proof that you have legal authority (i.e., executor).
It’s worth noting that credit profiles are not immediately deleted. Instead, they are flagged to prevent new inquiries and accounts from being opened. The credit profile will remain until all accounts have fallen off (usually 7 years).
You should also be on the lookout for scams targeting your family. Common scams include posing as Social Security or the IRS, offering to give you access to inheritance if you pay a small fee, or posing as debtors threatening legal action.
10. Create a Budget
If you depended on your loved one for financial assistance, crafting a new budget is critical. Are there expenses you need to cut or lifestyle changes you need to make? Even if you received a substantial life insurance payout, you’ll still want to take time to budget.
Individual bills might significantly increase or decrease. For instance, your car insurance. Removing a driver and/or vehicle may reduce your bill, but you may also lose discounts like multi-car or multi-driver.
Managing your financial affairs and understanding the crucial financial and credit steps to take when a loved one dies is essential, especially if you are set to receive a significant inheritance. This can include reevaluating your budget, speaking to a financial planner, planning for your taxes, etc.
Take Time to Grieve
These financial and credit steps to take when a loved one dies are important, but taking time to grieve is just as important.
When my mother passed away, I threw myself into organizing her finances and estate. It wasn’t until I had finished the process that I broke down. I hadn’t taken time to properly grieve before then.
Everyone reacts differently to grief. Some try to keep busy, while others need to step back. There is no right or wrong way to grieve, nor is there a set timeline for finding your new normal. Pay attention to your feelings and look for help if you need it!
