Dealing with the loss of a loved one can be difficult. And, in many cases, having to deal with their financial affairs can make it even harder.
It's for that reason that many financial experts and lawyers recommend people get their finances in order before it's too late.
"A little time and effort spent planning now can save your family from a lot of trouble down the road," said Rachael Burns, a certified financial planner at True Worth Financial Planning.
"Without a plan, your wishes can get misinterpreted, creating conflict among family members over who's in charge or who receives what assets."
But if your loved one passes away without a plan in place, these six steps will help you navigate the process more smoothly.
1. Seek out help
Coping with loss can be stressful and overwhelming. Waves of grief can hit at any given moment, making it all the more challenging to take care of finances.
"You don't have to do it alone," said Daniel Kopp, a certified financial planner and founder at Wise Stewardship Financial Planning, who specializes in helping widows and widowers.
Consider working with a financial professional, such as a financial adviser or planner, to help you make some of the major or more emotional decisions, like selling a home or changing jobs. They can also assist you with navigating items like life and health insurance, taxes or even coming up with a plan on how to manage your money better going forward.
To find someone who can help, start off with recommendations from family, friends or colleagues. You can also use an online adviser search or locate an adviser through professional associations, such as The Financial Planning Association or The National Association of Personal Financial Advisors.
It also might be worthwhile to seek out a grief counselor, who can help you navigate through your feelings and mourning.
"Understand that this will be a process to determine what the new normal will look like," Kopp said.
2. Obtain death certificates
One of the most important documents you'll need after the death of a loved one is the death certificate. Death certificates serve as legal proof when you are trying to take control of financial affairs on behalf of a decedent, such as closing certain financial accounts, transferring property or applying for insurance benefits.
You can request a death certificate through the funeral home handling the arrangements or from the office of vital records in your state. Just be sure to request multiple copies.
"Every financial institution will ask for one before they will process any requests," Burns said.
3. Notify institutions
Once you've secured the death certificate, start notifying the appropriate institutions right away. This may include the individual's employer, the Social Security Administration, life insurance companies, banks or credit agencies.
4. Identity and gather financial documents
Take the time to locate and gather together your relative's financial documents. Some of the common information you'll need includes: bank and investment account statements, retirement account statements, insurance policies, mortgage and loan statements, utilities, tax returns and bills.
"This can be tricky since many statements are sent electronically," Burns said.
In this case, you'll also want to track down any passwords or digital accounts when gathering financial or estate planning documents. And be sure to close out all appropriate accounts held by the decedent, such as bank or brokerage accounts, and any recurring subscriptions they may have had.
5. Settle all debts
Debts are typically paid off by the estate. But, in some cases, the surviving family members may be on the hook to pay off any remaining debts. For example, any co-signed loans with the decedent or secured debt, such as a mortgage or car loan. Usually, the person inheriting assets, like a home or car, will continue to make the debt payments or sell those assets to pay off the loan.
On the other hand, unsecured debt such as credit card debt may be wiped out. Generally, credit card debt is paid by the estate.
"If there is not enough money in the estate to pay off credit cards or other unsecured debt, the family is generally not responsible and the creditors are out of luck," said Burns.
However, there are some exceptions. If you or a family member are a joint account holder or co-signer of a loan or credit credit, you are still responsible for paying the debt off.
No matter the scenario, be sure to do the following: stop using the credit cards (if you are an authorized user), notify the credit card companies and alert the three consumer credit bureaus that your loved one is deceased.
Payment of medical debt or student loans after someone dies can vary. Just as with credit card debt, medical debts are paid off by the estate. Survivors are typically not responsible, but that's ultimately determined by state laws and whether the decedent's estate is insolvent (when the debts of the deceased outweigh the total value of assets). In these cases, medical debt is usually written off.
As for student loans, it depends on the type of loan. Federal student loans are generally discharged after proof of death is provided. Private student loans depend on the private lender's policy. In some cases, private student loans are discharged, but in the case where there is a co-signer, that person will be held liable for the remaining payments.
6. Plan ahead
Having the talk about end-of-life planning can be uncomfortable and a conversation you might be tempted to avoid. But it can also be extremely valuable.
"Preparing ahead of time can be the final act of love for those you care about," Kopp said.
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