A number of financial aspects need to be attended to after the death of a spouse. I cover just a few in this article.
Assuming that basic estate planning was done, you have a living trust. (If there was no living trust prepared, it may be a wise investment now. Even though there will be no estate tax benefit, the trust will avoid your heirs going through the probate process and expense later.) Let's look at four areas that need attention:
The Trust --your living trust calls for dividing the estate into two pieces--the survivors trust and the bypass trust. You need to decide which assets to place in each trust. In general, it's best to place growth assets in the bypass trust and leave them untouched. Live off and even spend down the assets in the survivor's trust first. That way, you shrink the survivor's trust assets below $675,000 (the exclusion amount in 2000) and avoid estate taxes later.
The IRA --If the deceased spouse had an IRA or retirement plan and you are the beneficiary, roll it over into a new IRA account. You will be able to then establish the best beneficiary for that IRA, which may be a different beneficiary than any IRA you already have in existence. Additionally, if you are past age 70 and have started taking distributions on your own IRA, the manner of distributions and beneficiaries are fixed. By establishing a new IRA, you gain flexibility as to beneficiary and manner and division of distributions.
Taxes --If joint assets were properly held in a trust or held as community property, you have received a stepped-up tax basis. If you want to sell assets, do it now. For example, if you bought land 30 years ago for $10,000 that is now worth $1 million, you can sell it now and pay no capital gains tax. The stepped-up basis is available only if the assets were properly titled--check with your local CPA.
Estate Planning --before accepting assets that your spouse left to you, consider a disclaimer. You may not want to inherit assets if in fact you have a sizeable estate (e.g. $1 million or more). By adding more assets to your own estate, you only create an estate tax problem later for your heirs. Therefore, you may want to disclaim any inheritance now and have it pass directly to your heirs and eliminate a future estate tax. As an example, there may be a large insurance death benefit that is coming to you. It may be wise to avoid adding those assets to your estate by using the disclaimer.
These are just of few of the financial issues to attend to. If you would like to have a full review to help you cover all of the areas that need attention following the death of a spouse, please call to set a free appointment now. Many of the above issues have a time deadline (e.g. disclaiming property) and needless delays could eliminate options you have available now.