“Can you write up some instructions for my heirs, telling them everything they need to do when I’m gone?”
I get asked this question periodically and the answer is always no. There are so many things a person has to do when their loved one has passed that I would have to write up more than just a few pages. In fact, given that circumstances may have changed by the time the client is deceased, in order to cover all the possibilities, I would basically have to write a book.
I suppose I could write a book, and title it something like “What To Do When Your Loved One Dies In Alaska,” but then I would have to constantly update the book, and I wouldn’t have time to do other things like, say, practice law.
This reticence is not because I’m so anal that I must cover everything in great detail. It’s because there are so many variations on the question. For instance, did this person have a will? Did they have a living trust? Was there a surviving spouse? Are any of the beneficiaries underage? Did they own any real estate? Did they die in an accident? I could go on and on, but you get the point.
There is one task, though, that is universal for all survivors. Someone is going to have to check their accounts.
Back in the day, most people just had one account, typically at a bank. Today almost everyone has multiple accounts. One person might have a bank account for their personal checking, a credit union where they have some money in certificates of deposit, a brokerage account for their 401k, some investments with a different brokerage, and an account at another credit union they used to finance their car loan. And when that person dies, somebody is going to have to check every one of those accounts, regardless of what estate planning arrangements they have made.
The good news is, it isn’t that difficult. One of the heirs has to get some original death certificates, which are usually ordered for them by the funeral home, and go around to the various branches to find out what they have. Of course, this is assuming they know what institutions the deceased had accounts with; in today’s world of paperless statements, that isn’t always easy. You should have a list somewhere that shows all of your accounts.
The difficult part is that what that financial institution tells you, when you show them the death certificate, can be confusing. There are a lot of different ways any given account can be passed along to heirs. So as a free preview of the book I’ll probably never write, here are the possibilities:
Joint with right of survivorship. If it is a joint account, assuming the other owner is still alive, that person is entitled to the account. It doesn’t matter if there is a will, trust, or other arrangements. Since this overrides everything else, if you put somebody on an account with you, be careful how you do that.
In a living trust. When people create a trust, they sometimes put their accounts directly into the trust. In that case, the terms of the trust will control what happens with that account. The trust documents should say who the substitute or “successor trustee” will be, and that is who collects the funds from the account. The successor trustee then distributes or holds the funds according to the rules set out in the trust.
Beneficiary designation. When people open an account, they have the opportunity to designate a beneficiary on the account, also known as a TOD (transfer on death) or POD (payable on death). This could be one person, or it could be several people, or it could even be the living trust. If there are designated beneficiaries on the account, the institution will contact those folks directly to give them their inheritance.
Before I move on, there are two very important points about TOD’s. First, you need to check your TOD’s regularly. Your monthly or quarterly statements are not going to show who is on there, and people often misremember who they designated. Second, if the account is tax-deferred, such as an IRA, 401k, or TSP, the heirs will have to pay income tax on that, so they need to be careful how they handle those funds. A mistake in how it is withdrawn can cost those heirs a lot more income tax than they should have had to pay.
Affidavit for collection. Sometimes none of the above applies; the account is just in one individual person’s name, not in a living trust, and there are no designated beneficiaries. In that case the financial institution will typically tell you to get a court order. But before you start printing out the paperwork to open a probate case, try to find out whether the accounts add up to less than $50,000. If they do, there is a small estate procedure called an “Affidavit for Collection of Personal Property” you may be able to use. It is done with a form from the Alaska Court System website and is pretty easy.
Probate court. This is the last resort. If none of these other options applies, you have to obtain orders from the probate court. That can be expensive and time-consuming, but it’s the final option when all else fails.
This is the short and simple (or if you prefer, “quick and dirty”) version. But it’s the starting point for almost everyone.
Kenneth Kirk is an Anchorage estate planning attorney. Nothing in this article should be taken as legal advice for a specific situation; for specific advice you should consult a professional who can take all the facts into account. “Kirk’s book is brilliant and witty” — Rex Beauregard, Wasilla Review of Books.
