I’m finally ready to write about distributing my father’s estate. As many of you may remember, Dad passed away in November 2017 after more than nine years with Alzheimer’s Disease. For over six of those years, Dad was in a full-care facility while I handled his finances.
It only took
a few six months to handle his estate and finish his income-tax returns, but it’s taken me another 13 months (and a lot of keyboard therapy) to internalize everything.
I’ll discuss the mechanics of distributing an estate, as well as the lessons learned. In a future post, I’ll talk about how Dad’s death improved our own Ohana Nords estate planning.
We don’t talk enough about financial literacy in polite society gatherings– let alone aging and estate planning– yet almost everyone in the room is dealing with the caregiver burdens and the concerns of losing a loved one.
This was a painfully tough post to write, but I feel that it’s an important challenge. Financial independence gives you a lot more control over your time (and energy), but the unicorns & rainbows are always interrupted by real life. If we’re going to talk about awesome FI lifestyles then we also have to address the hard topics.
I’d particularly like to thank Dew-Anne Langcaon and Bonnie Castonguay at Ho’okele Health Innovations for helping me navigate Dad’s dementia symptoms all the way back in 2009. They were always standing by over the years. I’d also like to thank Cameron Huddleston (again!) for just letting me talk. I’m no expert but I can pass on a lot of good advice.
My blinding epiphany of the blatantly obvious
You’re never ready for the death of a loved one. Even though I had years to prepare Dad’s finances for his death, my brother and I still weren’t emotionally ready. Dad and my brother were in Denver and I was in Hawaii, but thousands of miles of separation made no difference in the pain and the other feelings.
We also weren’t ready because Dad had survived so many medical scares. The month before he died he had just begun showing some of the symptoms of end-stage Alzheimer’s, yet it’s quite common for late-stage Alzheimer’s to continue for several years of progressively worse issues. When Dad first started having trouble with very low blood pressure and a sudden loss of physical coordination, we expected that he’d pull through this “health crisis” just like several times before.
Two days later, on the doctor’s advice, Dad was in hospice care and (at additional expense) a 24/7 care nurse.
While my brother and I were girding ourselves for weeks of medical assistance, on Friday evening Dad was given a small dose of morphine to calm his restlessness. He slept soundly through the night, and on Saturday he never woke up.
Hospice and the nurse service were exactly the support we needed. They knew what to do next, and they helped my brother through the first day after Dad died.
When the doctor suggests it, I strongly recommend hospice. (Medicare may cover it.) Even if you know what you’re doing as a caregiver, you’re in no emotional shape to do it.
We already knew that Dad wanted to be cremated after he died– but now the question was which cremation facility and when it would happen. Hospice and the care facility referred my brother to several mortuaries (with prices), he let me know the one he chose, and then hospice took care of Dad’s body.
Dad’s 1950s military training didn’t qualify him for veteran’s status, so he was not eligible for military funeral honors or other benefits.
We could have selected a mortuary years ago, but we never thought that far ahead. I’m not sure we ever would have been able to have that conversation.
The memory-care facility tactfully offered to help pack up Dad’s belongings and store them. The subcontext: they wanted the room for another patient, and Dad’s death helped relieve the caregiver stress of yet another Alzheimer’s family.
Personally, my first emotional reaction was a huge release of caregiver stress. After more than six years I was no longer dreading a ringtone with “the call”. Of course, I immediately felt guilty about feeling relieved.
The mortuary asked my brother about death certificates, and I’d read that families usually wished they’d had more certified originals. I recommended buying 20 of them. That was our most expensive mistake of the whole estate process because it turned out that we really only needed a handful.
My very first lesson was that you can’t make death notifications on weekends or holidays. People will answer the phone, sure, but they’re just taking messages for the next business day.
My reflex reaction (as a submariner) was starting a death log. (This is in addition to the death checklists.) It’s essential to help you remember who said what and when about where, how, and why. (You also think you’re handling yourself just fine during a conversation, but then your emotions sneak up on you again.) I used the log several times to remind supervisors of exactly what their employee said they were going to do and when it would be done.
A few days later I realized that the log’s keyboard therapy was also helping me through the grieving process. Much of this post comes from that 19-page chronology.
My next reaction was to empty Dad’s checking account at ANB Bank. (Yeah, I’m naming names. ANB Bank worked very hard to earn a zero-star review.) I’d dealt with their uncooperative and excessive bureaucracy since the day I received my conservator’s appointment, but even then I was very reluctant to switch his pension deposit and Social Security deposit to any other bank or credit union. Dealing with the bank was frustrating, but it still seemed less frustrating than the unknown of changing deposits to another account.
For over six years, I’d kept that ANB checking account balance at $100 and only used their online system. When any of Dad’s deposits arrived then I’d transfer them out the next day. On the morning that Dad died, I transferred out another $99 and left a dollar in the account. I figured that would avoid any trouble flags or minimum-balance fees.
I was wrong, but we’ll come back to this problem.
[UPDATE: A few days after this post was published, ANB Bank contacted me. See the details below.]
I also left a voicemail with Dad’s lawyer about filing Dad’s will with the probate court.
Who does what?
Decades ago when Dad updated his will, I was still on Navy active duty. We all agreed that my brother would be the executor of Dad’s will.
When Dad entered his Denver full-care facility in 2011, my brother was appointed as Dad’s guardian and I became his conservator. My brother (a Colorado resident) continued as Dad’s executor. We didn’t even consider other options.
When Dad died, our appointments ended. However, that just replaced our annual piles of probate-court forms with seven more of their forms. We even had to petition the probate court to terminate our appointments… despite the fact that they’d already ended upon Dad’s death.
Fortunately, Dad’s estate did not require probate. Years before he began losing his cognition, he set up his investment accounts as “Payable On Death” or “Transfer On Death”. This distributed the accounts through beneficiary designations and put them outside of the probate process. The remainder of Dad’s estate was less than the probate threshold, so Colorado law (and the Denver probate court) did not need to probate his estate. Even though my brother was the executor (excuse me, the “personal representative”), there was no need to execute anything. Dad’s lawyer simply filed his will with the probate court.
Although I was legally no longer allowed to mess with Dad’s finances, I still had a separate pile of conservator paperwork to send to the probate court. My brother had the same list of Dad’s assets (and account numbers, and balances, and phone numbers), yet I knew exactly how to make the notifications and handle the disbursement.
In addition, my brother had his hands full with the logistics of handling Dad’s remains.
Each of us was still struggling with grief, recovering from caregiver stress, and second-guessing what we could have done differently during Dad’s final days.
We agreed that when it came to the probate court, contrition was easier than permission. Even though my brother was the one with the authority, I continued to handle all of the finances and I kept him informed. That turned out to be a good thing because he might have been tempted to passively resist even more of the financial bureaucracy. We’ll come back to those issues too.
The first (business) day after death
On Monday morning I spent over three hours making 16 notification phone calls. I was talking to special teams at some of these corporations, with names like “Survivor Relations” or “Inheritor Services”. I quickly grew tired of hearing strangers recite their scripts with sentiments like “We’re sorry for your loss.”
Here’s the call summary from my death log:
- Dad’s lawyer (to file his will with the probate court),
- Social Security (who also notified Medicare and Medicaid),
- Equifax, Experian, and TransUnion (TransUnion was easiest),
- Dad’s pension management corporation,
- Dad’s Medicare supplemental insurance company,
- Dad’s prescription insurance company,
- Dad’s doctor, pharmacy, and dentist,
- ANB Bank (who immediately locked me out of the last dollar in Dad’s checking account),
- USAA, Navy Federal Credit Union, and Fidelity Investments, and
- Two life-insurance policies.
The next three weeks
It took that long for the state and the mortuary to give my brother the death certificates and for his priority-mail envelope to get to me.
I’d already prepared the forms and cover letters, and I sent them out with certified originals (or copies) of the death certificates. Only two companies insisted on certified originals and several companies didn’t want any paper. (They said that they used the Social Security Death Index.) I used priority mail so that I could track arrival dates and follow up on anything that got “lost in the mail”.
I started reading about income tax returns:
- Dad’s 2017 federal and state tax returns, and
- Dad’s federal and state estate income tax returns for “Income in Respect of a Decedent”.
No estate tax returns were due because Dad’s assets were well below the threshold for paying estate taxes.
My brother finished scattering Dad’s ashes at his favorite hiking spots. (Scattering ashes in national parks is regulated and might be illegal in some state parks. Don’t get caught.) He donated Dad’s clothing, books, and puzzles to the care facility and a thrift store.
After that my brother seemed to step back from the rest of the estate process. His business was struggling with employee turnover (and training the new hires) so he was working overtime. He was slow to answer e-mails and texts. Nobody wants to deal with the unpleasant parts of the process, especially when we have to make financial decisions while we’re grieving.
I completed seven different forms for the probate court. My conservator’s appointment was formally terminated in January (two months after Dad’s death). Once my brother and I reported (on yet another form) that we’d received our inheritances, the probate court issued its “decree of final discharge” in May.
The inheritance paperwork details
Executors are supposed to notify potential creditors of the death so that they can file claims against the estate. A newspaper notice is usually all that’s required, and the probate court’s pro se (self-help) staff can cite the local laws for creditor announcements.
Every company has its own form for disbursing POD/TOD inheritances.
Some companies insist that you open an account with them so that they can transfer the funds “in house”. (You can always move the money later.) Other firms will wire the money anywhere you want (for a fee).
The Prudential insurance company was particularly slimy in their payout. They heavily marketed their “special checking account” for beneficiaries, which strongly encouraged leaving the money with Prudential and only writing checks when you needed the funds. Their multi-page form (in a tiny font) made it very difficult to find the check block for “Pay out all the insurance money now.”
I knew to watch for this issue because Prudential took advantage of Gold Star survivor families. They settled the class-action lawsuit in 2014 but in 2017 their forms seemed just as confusing and intimidating.
My brother and I were struggling to keep our minds on the financial part of the estate process. (My death log includes entries like “Had enough for today” and “I’ll deal with this later.”) I’d already told him that no probate was required, but twice (when the probate court mailed him notifications) he called with concerns about having to hire a lawyer and petitioning for the estate’s personal representative. We talked through it, and then we’d go over our “To Do” list again… until next time.
Paperwork became a challenge. My brother was not completing the POD/TOD affidavit forms I’d sent him, or he was “losing” them. Our progress deteriorated to the point where I finally changed my attitude and decided to be a good staff action officer again. From then on I filled out all of the forms and sent them to him, tabbed by “Sign here” stickers and with addressed/stamped envelopes. I’d follow up with phone calls about signing and mailing the forms to the financial companies or back to me.
For the next several months, I was perpetually about one phone call (or missing letter) away from flying to Denver to walk us both through the paperwork.
My brother and I get along, and we agreed on what needed to be done. I can only imagine what settling an estate must be like if one of the heirs completely withdraws from the process or even argues about the decisions.
I learned about policies I’d never encountered before. NFCU’s photo-deposit software wouldn’t accept a $21K check. We had to drive to a local branch and use their ATM. It turns out that many banks and credit unions limit their photo deposits to $10K to minimize fraud. Considering the hassle of dealing with paper checks, I greatly preferred electronic fund transfers and even wire transfers.
[2 August 2019 update: reader Brian Henry was able to phone NFCU’s customer-service number to arrange a temporarily larger deposit limit. Thanks for the tip, Brian! If you know that a large check is coming, or if your only alternative is a long drive, then consider contacting your bank or credit union to see if they can accommodate your higher limit for a photo deposit. I personally wish that financial institutions would stop sending five-figure checks to my mailbox for any passerby to pilfer (or for the U.S. mail system to lose). Electronic transfers or even properly-authorized wire transfers would avoid this additional stress.]
I searched the national and state websites one more time for any lost or unclaimed accounts. They work– when I was searching for my Dad (and for his Dad), I found a $125 utility deposit refund that was owed to my brother.
I used TurboTax to file Dad’s final federal and state income tax returns. I’d already done that for seven previous tax years, so these returns were straightforward.
We didn’t have to file an estate tax return, and I used TurboTax for the estate’s income tax return. (The specific forms were part of TurboTax Business, but that may have changed by now. Check TurboTax’s website before you buy.) I should have hired a CPA or tax-prep firm, but it was the height of tax season and I knew I’d have trouble with the filing deadlines. I also knew enough about the process and the forms to muddle my way through the software.
In retrospect, I had no need to shoulder this burden and should have just asked for an extension.
I updated my death log almost every day: who I’d called, who owed me what, when something was supposed to happen. If the process went horribly wrong, this would be my evidence for legal proceedings.
Here’s an example of how the estate-distribution process can go horribly wrong when corporate policy triumphs over common sense. Luckily it only cost us a dollar.
[A few days after this post was published, ANB Bank contacted me to discuss a solution. The exec didn’t have the details, so I gave them a summary from my log. I suggested that it would be easier for the bank to send the money to my brother (the estate’s personal representative). The exec asked my permission to mail me any necessary disclaimers or final agreements for my signature. That weekend I went on travel and put our postal mail on hold for a couple of weeks. The next week my brother e-mailed that the bank had sent him a check for 53 cents and enclosed a $25 gift card. When I picked up my mail after travel, I’d also received a 53-cent check and a $25 gift card. My thanks to Ms. Nicole Millican for re-assessing ANB Bank’s policy.]
ANB Bank simply refused to disburse the $1 in Dad’s checking account because Dad had never designated that account as POD/TOD. I’m sure it never occurred to him when he opened it, even if POD/TOD had existed in the 1990s (25 years before his death). I couldn’t change it to POD/TOD as a conservator, and my brother couldn’t do it as a personal representative.
The proper procedure would have had my brother petition the probate court for a letter of appointment as the estate’s personal representative. He’d forward that letter to ANB Bank (along with a copy of Dad’s will). We would have then completed our individual forms to receive our shares of the account.
In other words, ANB Bank would have sent 50 cents to each of us… on paper checks in a snail-mail letter with 50-cent stamps. ANB would’ve paid for the stamps, yay.
admonished lectured informed many times that this was company policy to prevent inheritor fraud. In retrospect, I should have just emptied the account instead of leaving the dollar in it.
My brother and I refused to jump through ANB’s hoops, and we simply stopped talking with them. I’d already been locked out of Dad’s checking account and couldn’t do anything else with it. ANB still sends me monthly e-mails from their online banking server notifying me that my account statement is ready. I can’t log into the online account to stop those e-mails.
and nobody from ANB Bank has responded to my letter request to shut them off. It’s policy. In another five years or so, ANB will turn over the “abandoned” checking account to the state of Colorado. (By then it’ll have bloated up to a balance of $1.08.) I’ll let my brother deal with that.
If you learn that a loved one is approaching death (dementia, a terminal cancer diagnosis, cardiac disease) then join a support group. You might not need the support now, but you’ll need it later. (You’re not admitting defeat, either– you’re gathering allies and collecting valuable intelligence.) I’d favor an in-person community group over an Internet forum, although both can help. Attending a support group not only helps prepare you to handle the logistics, but it helps you understand your emotional reactions.
Use a death checklist like this one from USAA. It feels macabre, but it helps you know what you have to do when the worst case happens.
If you have time then pre-plan the death services (cremation or burial, funerals or memorial services) and consider paying in full. This removes one more decision from your checklist after a loved one dies. It can also help avoid an expensive debate among the surviving family members. Nobody wants to discuss this before death, so it helps to have written guidance that lets everyone know their loved one’s wishes.
You might only need five original death certificates, and everyone else will be willing to take a copy.
Social Security’s death database takes care of many notifications. When you’re making phone calls, ask the financial institutions if they use this service.
The executives at financial institutions care about their policies, not the amount of money in the account. (Even if it’s just one dollar.) They care about following the procedures dictated by the corporate compliance lawyers (and avoiding liability exposure). They’ll exert thousands of dollars of effort to protect those policies, even if only $1 is at stake.
You’ll never It’s very hard to reach anyone with the authority to make an exception to the corporate policy.
The probate and POD/TOD process is designed to protect the deceased’s estate and distribute it (without probate) according to their wishes. Those designations are not designed to assist the heirs with actually receiving any assets. If a bank wants you to do paperwork before they’ll cut a check, then you have to do the paperwork… or be ready to spend hundreds of hours (and thousands of dollars in lawyer’s bills) attempting to negotiate a compromise.
Many financial institutions insist on having all of the affidavits from all of the heirs before they’ll turn over any money. Keep track of the actions required by other heirs: filling out applications, setting up accounts, signing and mailing in the forms. Don’t be surprised (let alone upset) if family members aren’t doing their part. They may be struggling with grief or trying to understand what the deceased would have wanted to do and how to honor their legacy. It’s all too easy to put aside the forms for “later”. Skip over the arguments and do as much of the paperwork as you can for the other heirs.
If you intend to pass on your estate with POD/TOD designations, then make sure you do it with all checking and savings accounts as well as other assets. This has to be done while the account owner is mentally competent, and it can’t be done with a power of attorney or a conservator’s appointment.
After your loved one’s death, their estate might receive reimbursements and refunds of premiums and other payments. The only person who can open a financial account for an estate is… the estate’s personal representative. After the will is filed with a probate court, personal representatives might require an additional petition for an appointment letter. These are legal protections and procedures for the benefit of the estate (and the deceased’s wishes), not for the heirs.
If you don’t want to go through the personal-representative process, then you have to persuade financial institutions to make out their checks directly to the heirs instead of “The Estate Of…”. Good luck.
Even if the estate is small, open a Tax ID Number for it. You’ll have to do it for the estate’s final tax return anyway, and the TIN comes in handy if a financial institution insists on making a check payable to the estate.
You have to file several income-tax returns, both for your loved one’s final personal returns and for the estate. I did it with tax software, but it’s hard to know when you’re making the right choices. It’s worth hiring a tax-prep professional to make sure that you file correctly and on time (or with extensions).
I’m still going to blog about financial independence.
My spouse and I reached financial independence in 1999, a decade before Dad even started showing dementia symptoms. He never talked about his assets (“I’m fine!”) and in 2011 I was shocked to learn how much he’d accumulated. Once I started paying the care facility’s bills, I was again shocked at how fast his assets diminished.
The inheritance hasn’t changed my life, and I wish our frugal hermit Dad had spent more of his money on himself. I’ve invested my share of my inheritance in a total stock market index fund. Over the (very?) long term, it ensures that my spouse and I are doubly self-insured for long-term care… or for our hypothetical great-great-grandchildren’s college educations.
As I’ve mentioned in another post, our daughter has a durable power of attorney over my inheritance account. It even shows up in her accounts list, so she can log in and tap it as soon as she needs to care for us parents. Our estate plan will ensure that she doesn’t have to seek a conservator’s appointment. I’ll write more about durable powers of attorney and estate planning in a future post.
I’m not sure how Dad’s inheritance affected my brother’s finances, but shortly afterward he sold his business and began enjoying life. His attitude: he’s leanFI, and if he runs low on money then he’ll get another job.
Your call to action
3700 words of advice. Now what?
If you’ve been designated in anyone’s will as their personal representative, then figure out how you’re going to deal with it. Read a (library) book like Nolo’s “The Executor’s Guide”. Browse your state’s probate court website for their pro se (self-help) division to help you understand their process. You should ask your loved one to put their wishes in writing so that you don’t have to argue with family members (or other heirs) about your decisions.
Next, pretend that you’ve just died– and imagine how much work your estate creates for your personal representative. If you don’t want them to have to clean up your mess after you’re gone, then take the time to make things as easy as possible for them.
Start thinking about your estate plan. If you do it right, preparing it will be cheaper than having your will probated. We’re doing a lot of estate planning in my family. We just signed a revocable living trust (among other actions) and I’ll write another post about its setup.
The Military Guide to Financial Independence and Retirement Price: By Doug Nordman: This book provides servicemembers, veterans, and their families with a critical roadmap for becoming financially independent.