Business To Know When a Family Member Dies

Business_in_Death_Loved_One

When you are dealing with illness and grief you might not be able to pull together what to do when your husband, wife, parent or sibling dies. You might look for a will, cremations and funeral pre-arrangement plans, or the location of bank accounts but decisions likely pass in a blur. This column is to help when tragic events happen.

  • Probate or Not. Even if your family member had a Will you should recognize whether it is necessary to probate the Will, that is to record it with the Register of Wills and follow an estate administration. Often spouses do not need to probate if all assets were jointly titled and the surviving spouse was the beneficiary of life insurance and IRA’s, 401(k)’s and similar assets. They would just file a claim as beneficiary. Often others do need to probate.
  • Non-Probate Does Not Necessarily Mean No Tax. Pennsylvania has a 0% tax rate for spouses. However, for beneficiaries who are not spouses, the inheritance tax rate varies depending on relationship, regardless whether the Will needs to be filed. For instance for children of the decedent the rate is 4.5%, for siblings 12% and for more distant relatives and for non-relatives the rate is 15%. Some potential beneficiaries believe that, if they receive the inheritance directly such as through joint ownership or living trust and do not probate there is no tax owing. This is not the case. There is a separate category referred to as “Inheritance Tax only” with the Register of Wills and tax is to be paid even if there is no probate. If you do not know, then be sure to seek legal advice. Life insurance proceeds are the one major category of assets not subject to Inheritance Tax.
  • Social Security. If your family member was receiving Social Security benefits, there may be a reckoning with Social Security for the last month of benefits since the government might take back this payment. It is best to keep the account open for a few months to be sure. Funeral directors are often helpful both in notifying Social Security, so you do not have to, and in providing death certificates. Ask for as many as you think you might need since it may be more difficult to obtain later.
  • Social Security – If you are a spouse. If your husband or wife passes and his or her Social Security was higher than yours, then the net effect will be that you will ultimately receive the same monthly benefit that he or she would have received. If your benefit was higher, it will stay the same. There is also a $255 death benefit that you can claim from the government in either case.
  • Creditors. You should not assume that, because you are the closest surviving relative of the decedent you are responsible for that person’s bills. You might decide to pay them as a matter of personal pride or perceived moral obligation but legal responsibility is something different. In some cases where no estate is filed, there may be nothing against which creditors could make a claim.If you are dealing with an insolvent estate, the State where your loved one resided at death lists an order of distribution in which bills are to be paid. In Pennsylvania at the very top are costs of administration such as filing fees, Executor’s fee and attorney’s fee and payment of funeral bills and the costs of cremation services. Do not pay credit card bills first if you do not think there is enough in the estate to pay all bills. In Pennsylvania, medical bills, including payments from Medicaid for medical care incurred within six months of the person’s death are given higher priority than older medical bills. Credit card bills are unsecured debt and are on the bottom of the pile. Usually other people do not owe on the decedent’s debts but there are exceptions. Although collection agencies may call following the death of a loved one, they are often not attuned to who owes what and under what conditions nor do they often care so if you are unsure of your rights check with an attorney or someone who knows the rules. There are people who can be accountable on a decedent’s debts. If you cosigned a loan or guaranteed payment on a debt, you might be held accountable because it was your loan also. Get help if you are unsure.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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