Sunday, May 4, 2014

Death in America (Revisited)

If you are pushing 80 or have one or more serious health problems, it is time to start planning for your death at a level of detail that is beyond what is contained in your will. Put yourself in the shoes of whoever will have durable power of attorney if you become incompetent as well as the shoes of your executor. Have the list of institutions and individuals that will need to be notified ready to go. Estimate the amount of money that the executor will need to control during the few months that will pass before the estate accounts are activated. For heaven’s sake make certain that this individual has joint tenancy on one or more checking accounts, is named the sole beneficiary on some financial instruments, and has access to your safety deposit box.

Although it is outside the scope of this blog post, let me add that every adult should have a will. For the young a $30 Internet will is probably enough to handle your bank account, car, and stereo system. It isn’t important for you. If you pass, the presence of a will helps your parents.

Once a family member passes on a large number of individuals and institutions require notification. In addition, they usually require an official copy of the death certificate and frequently a copy of the Letters Testamentary, a document issued by a court establishing the authority of the executor to manage the estate of the deceased. This is a frustratingly slow process that always seems to require something else before closure is achieved in any step. Here is a partial list of the calls that must be made.

The Funeral Home
House of Worship
Home Health Care Provider
Social Security
Life Insurance Companies (you won’t know all of them)
Health Insurance Companies
Renter’s or Homeowner’s Insurance Companies
Employer’s Benefit Office
Pension Fund (not the same as the employer in this case)
The family attorney
All the deceased’s doctors
Apartment or Nursing Home Management
Investment Houses
Banks (hopefully you will have the safety deposit box key, when my mother in law died, we didn’t)
Credit card Companies (not a pleasant experience)

Planning for the Funeral

Funeral Home (of course)
Minister (this is particularly important if the deceased was part of a minority faith tradition)
Family Members
Friends (this is dangerous as people can get their feelings hurt if handled poorly)

Closing Down the Apartment

Moving and Storage Companies
Apartment Management to Coordinate with Movers
Phone Company/Internet
Cable TV Company
Medical Rental Equipment Companies
Change Address with Post Office
Power Company

Once the family receives the death certificates from the funeral home they can begin the process of official legal notification required to bring the financial issues inside and outside the estate to closure.

Besides dealing with all the emotions of losing a family member death brings a large number of financial problems and difficult responsibilities to the survivors.

Death in America is expensive. My wife had durable power of attorney for her mother. She paid all her mother’s bills with funds from three joint tenancy accounts. When her mother died, durable power of attorney expired. My wife no longer had access to the brokerage accounts that provided funds for the checking accounts that actually paid her mother’s bills. After a will clears probate, someone must be sworn in as executor of the deceased’s will before he will have access to the estate. In the interim, the bills keep coming. At this point a family can only pray that there is enough remaining in the joint tenancy accounts to cover the bills until a separate account for the estate of my can be created to execute the terms of the will.

By the way, a death will create three tax events. The deceased will have to pay taxes until the day of her death. After her death, her estate will pay taxes until it is dissolved. Finally, the heirs will pay taxes as appropriate on any inheritance.

The family attorney informed us that the joint tenancy accounts were not part of the estate. Legally, they belong to my wife. She is not required by law to pay her mother’s bills with that portion of her mother’s money. Such wickedness would have never occurred to me. However, it is easy to see how something like this could start a family fight.

If you are competent at the time of your death you will probably not have a durable power of attorney agreement giving one of your children access to your funds prior to your death or joint tenancy accounts that will allow one of your children access to the funds required to pay your final expenses. This can be easily handled by setting aside a large sum in a CD that names the executor of your will as sole beneficiary. This money will not be considered a part of the estate requiring probate. You will need to instruct the executor that these funds are designated for payment of your bills. If your executor is dishonest, he can take the money and run. There is no way you can avoid trusting someone with your money once you are gone. Hopefully, you have made a wise decision. Burial life insurance policies can also be used for this purpose but they tend not to be very good investments.

There are a lot of bills. A traditional American funeral for my mother in law with a visitation cost $18,000! I wasn’t surprised since I handled the funeral arrangements for my father-in-law eight years earlier. That one cost $16,000. I did not expect prices to go down in the following years. I have instructed my wife not to spend that kind of money on my funeral. It is pretty obvious why cremation is gaining popularity with my generation. A $3,000 funeral, although still too expensive, makes a lot more sense than an $18,000 funeral. My parent’s generation, particularly the women can’t deal with the thought of cremation.

During the final weeks of my mother-in-law’s life my wife was staying in her mother’s apartment in another city. During that time they made three emergency trips to the hospital. Needless to say, my wife let some things, such as remembering to pay all the bills, slip. The final bill from the home health care agency exceeded $20,000. Patients do not receive one bill from a hospital. They receive bills from the ambulance company, the emergency room, individual doctors, and the hospital. These bills are inevitably wrong. They were not submitted to insurance and Medicare or they were submitted improperly. Fortunately, my wife had worked in the hospital system and understood when and what bills to pay.

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