Surviving as a Surviving Spouse

In recent past, my wife and I have seen two people we know lose their husbands. I can’t even begin to think about what my life would be like, if Karen (my wife/girlfriend/dive buddy/cooking partner/etc) was gone, as suddenly as the two husbands I mentioned above. After writing last week’s article, my editorial advisor (guess who…Karen) suggested that I write an article about some things that a surviving spouse needs to think about, aside from immediate things, like arranging a funeral. Since there are many details to address, this article isn’t meant to cover every conceivable one, but lays out a few things to ponder, and take care of.

1-Don’t rush

After the death of a spouse, there are all sorts of things running through the surviving spouse’s mind; grief and potentially anger are a couple that come right to mind. Regardless of the range of emotions being felt, thought processes will most probably be more than a bit cloudy and confused, so it’s important to remember that this is not the time to be making any major financial decisions that you’ll be bound to (and will be costly to undo), or will be regretted later on. Additionally, whatever decisions need to be made, a few weeks or even months of extra thought may not make a big difference, compared to the consequences of an incorrect knee-jerk decision. So hold off on big things, like buying or selling a house, or making big changes to your investment portfolio.

2-Get your @#$% together

I couldn’t resist that one (I’m a New Yorker!). The point is, important documents will need to be dug out of filing cabinets or storage, to be used for various purposes, such as transfers and re-titling of assets. Some of these documents are
-will and trust documents
-insurance policies
-death certificates (get at least ten certified copies)
-social security numbers
-marriage license
-military discharge papers
-statements for retirement plans and brokerage accounts

This list isn’t all inclusive, so be ready to dig for other documents, as requested.

3-Get the estate plan into motion

Since you’ve all diligently followed my recommendation from last week, you’ve engaged an estate attorney, and had a will drawn up, and an estate plan put into place. This is something that should be started as soon as practicable. Obviously it’s not meant to be the first call made, after a spouse passes away, but if the wheels are put into motion sooner rather than later, you’ll feel a lot more settled personally, once the estate is settled. Remember that in cases where an estate return needs to be filed, this must be done within nine months of the date of death.

4-Do you have enough money to live?

I know, in #1 above I instructed everyone to not rush into things, but when it comes to having enough money to live on until the estate/finances are settled, it is necessary to figure out whether there are enough liquid assets available to cover at least six to twelve months of living expenses. In this case, if there’s any life insurance, the claims process needs to be put into motion. The deceased spouse may have some unpaid vacation pay or other cash payments due, so check with the employer. Some investments may need to be sold, in order to provide cash, but remember, you don’t need to liquidate the entire portfolio.

There are lots of other details to think about, at what will probably be a time when one least wants to have to think about it. I welcome any thoughts and comments you have, and would be happy to discuss additional details with you. And please forward this article to people you know, who can use the information.

Estate Planning…It’s Not Just For the Dead

Mention estate planning to people and you get all sorts of reactions. A couple of my favorites are “why should I care, I’ll be dead”, and “estate planning is just for rich people”. Given that a majority of the people living in the U.S. are, in fact, alive, and not necessarily “rich” (use your own definition of this), does that mean that we should discount estate planning for just a select few, in the upper echelons of income and net worth? Absolutely not!

Discussing one’s own mortality is a difficult subject for most people, but the truth is, “estate” planning has evolved into something that not only deals with dispositions of assets (and other matters) after death, it also includes matters that arise during lifetime, such as disability and incapacity.

Consider these scenarios:

1-A couple owns a home jointly, with a right of survivorship upon the death of the first spouse. What happens if one spouse becomes disabled or incapacitated (physically or mentally); how can the house be sold (or the mortgage refinanced) if both spouses signatures are needed on various documents? Similarly, what if a single person owns a home, and then becomes disabled or incapacitated; what happens to the house?

2-What happens when a person is clinging to life after a stroke, and life or death medical decisions need to be made immediately? Who gets to decide whether to ’pull the plug’ or not?

3-Mom and dad die simultaneously in a tragic car accident. Who will care for their two children, and decide about their upbringing and education?

What people don’t realize is that if matters are left to the laws of the state where one resides, the results may not be what was expected, or hoped for, and could ultimately cost a lot more money than what the cost would be to put together a comprehensive estate plan. I’m a CPA and not an attorney, but from all the years that I’ve been working on cases with estate attorneys, I’ve seen what happens when decisions are left to the state of residence, and you don’t want that to happen.

You’ve probably heard terms such as “durable power of attorney”, “living trust”, “healthcare proxy”, and “nominating a guardian”. These are some of the tools that are used in putting together an estate plan, to deal with the scenarios mentioned above. A competent estate planning attorney will be able to discuss these things (and more) as part of putting together a plan. It’s one of the best investments you can make, and something that one should not keep putting off. Make sure your wishes are carried out the way that you planned. Whoever you work with, check their credentials and qualifications, since estate planning is a very technical and tax driven area. Be very wary about somebody who has only been practicing estate planning for a couple of years, or who “specializes” in many different areas of law. If your gut tells you that the attorney doesn’t have enough experience, he/she probably doesn’t. I’ve seen the consequences of inexperience. If you don’t know any estate planning attorneys, I can make a referral (at least for the Northern Virginia metro area and New York City).

Is That Charitable Contribution Deductible?

Like many Americans, you make contributions to charitable organizations out of the goodness of your hearts…and the tax deduction. But is that contribution actually deductible?

This article is an alert to individual taxpayers, but is also a wakeup call to responsible parties of tax exempt organizations. Continuation of your tax exempt status is no longer a given, if you have not fulfilled your reporting requirements.

A few days ago, IRS announced that approximately 275,000 organizations had automatically lost their tax exempt status, because they did not file legally required annual reports for three consecutive years. At the same time, the Service also announced special steps to help organizations apply for reinstatement of their tax exempt status.

In 2007, a filing requirement was imposed on small organizations, where there had been no requirement previously. At the same time, the law allowed IRS to automatically revoke the tax exempt status of any organization that didn’t file the required returns for three consecutive years. Since that time, IRS has made many efforts to inform exempt organizations of these changes, and also gave smaller organizations additional time to file required returns.

All exempt organizations are required to file one type of Form 990 or another. There is the ‘long form’ 990 (Return of Organization Exempt from Income Tax), the ‘short form’ 990-EZ, and the 990-N ‘e-postcard’. For organizations with annual gross receipts of $50,000 or less for 2010, the filing requirement is satisfied by submitting the e-postcard. Not filing at least one of these three returns for the last three years subjects an exempt organization to the automatic revocation of its exempt status. For organizations that have had their exempt status revoked, IRS has procedures for reinstatement that include reduced application fees.

Now back to you, the one making the charitable contribution. Before you take that deduction, check the IRS website, as they have lists of organizations that qualify as public charities, as well as lists of organizations that have had their exempt status revoked. You may only take a deduction for contributions made to qualifying charitable organizations.

If you have any questions about this, please contact me, and please post a comment. And if you have any friends who are involved in small exempt organizations, have them read this article.