By Sandra D. Adams, CFP
More and more these days, my clients are facing the grueling task of handling their parents’ estates after their deaths. If their parents worked with professional advisers, this can be a fairly simple and straightforward process. However, many clients are asking for help because their parents simply didn’t have things in order and they don’t know where to start.
What kinds of things are they finding?
- Accounts at multiple institutions and a variety of types of accounts. We call this “diversification by location” — it did nothing to diversify the actual investment portfolio, it only spread the assets to different providers and custodians, making it that much more difficult for the executor to get a handle on the assets.
- Accounts with registrations and beneficiaries that haven’t been updated. Perhaps Dad passed away ten years ago and your parents had a joint account. Now Mom has passed away and you find there are accounts with both names still on them (joint accounts that now have two deceased people on them). Or accounts in your mom’s name that still have your dad listed as the beneficiary.
In many cases, as long as you still have a death certificate for your father it is just a little extra paperwork for the joint accounts. For the beneficiaries, as long as there are contingent beneficiaries still living, the accounts would go to them since your father is not available to receive the assets. However, if no contingent beneficiaries are listed, the assets would then go to Mom’s estate and would be directed by her will through the probate court process… not ideal.
- Physical stock and bond certificates. Huh!?! Yes, there are still people, mostly older, holding physical stock and bond certificates. In many cases, the actual shares were deposited, at some point in the past, in an account at a broker-dealer or with a stock transfer agent in a dividend reinvestment program. The trick here is to determine whether the stock certificate is representative of actual shares, if the shares are held elsewhere, or if they were sold at and no longer exist. If there are no notes or records with the certificates, and you cannot track the stock in any of the other investment account holdings, you now need to become a detective.
- Stock certificates for companies that no longer exist. Or stock certificates for companies that you no longer recognize. Likely, these are companies that have changed names, merged, or been bought out by other companies. Again, it takes some detective work to find out what happened to the company and whether the “new” company is still something your parent’s estate may hold or if it is something that was sold over the years.
- Collectibles. Signed baseballs. Gold and silver coins. Jewelry. Novelty collectibles. Rare guns. China. These types of items and so many more are things that my clients find in their parents’ homes when cleaning them out to sell. The difficult part here is that many family members no longer want to keep these as family heirlooms to pass on to the next generation. So, there is a need to sell the items and pass on the cash. As the executor, finding the right professionals to provide an accurate value of items can be a challenge. Many financial advisers and attorneys are asked this question so often that they will have resources they can recommend.
- Parents’ home. This can be a challenging situation. Many issues surround the home — financial, emotional, and more. If no deed (quitclaim or lady bird deed) is in place or it was not included in a trust, ownership is likely directed by the will and the probate court system.
If the home is to be divided amongst children equally, for instance, it likely will be sold and the proceeds split. Complications can arise if there is a family member who would prefer to keep the home. In my experience, this has caused some of the biggest family disagreements.
If all can agree to sell the home, the process is still time-intensive. One of the biggest efforts is going through the home to find all important documents and valuable family heirlooms. Once those items are removed, there is determining what other items should be given to family members, and what should be donated, recycled, or thrown out. In addition, there’s the option of an estate sale. The good news is that there are companies willing to help you do that — and they are well worth the price!
And then there is the selling of the house, which creates challenges of its own.
Are you overwhelmed yet at what you could be facing? We haven’t even talked about all of the paperwork. For every account held at a provider, broker dealer, bank, and insurance company there is paperwork that likely requires either a copy or an original death certificate and other documentation, including documentation proving your authority to sign and the capacity in which you are serving to represent your parents’ estate. This could be your full-time job for the next several months.
What can you do to prevent this situation?
Have difficult conversations with your parents about their current financial and legal affairs. Let them know that it would be helpful to have an idea of how their estate is set up and how their financial affairs are structured to make sure that things will be simple and easy to handle as they age. (You can always tell a story about a friend who had to handle things for their parents and really struggled because things weren’t in order and you don’t want your family to struggle in the same way).
Bring in the help of professionals, as needed: An estate planning attorney to update documents; A financial adviser to help simplify, create, and put in place a comprehensive financial and aging plan. Both of these professionals are great resources when it comes time to handle your parents’ estate. They can provide guidance, resources, and help with paperwork as you go through the process. This is not something when DIY (do-it-yourself) is the best option.
If you or someone you know is expecting to handle a parent’s estate in the near future and wants assistance in getting things in order proactively, guiding them to work with professional advisers can be your best advice.
About the author: Sandra D. Adams, CFP®
Sandra D. Adams, CFP®, can be reached at 248-948-7900, Center for Financial Planning, Inc., 24800 Denso Drive, Ste. 300, Southfield, MI 48033. Securities Offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc., is not a registered broker/dealer and is independent of Raymond James Financial Services.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
Any opinions are those of Sandra D. Adams, and not necessarily those of Raymond James.