It’s also a good idea to tell the creditors of an estate what has happened while you’re waiting for legal standing to oversee it (through a letter of testamentary, a letter of administration or an affidavit of next of kin) or while you’re waiting for the estate assets, says Cohen. Most creditors are pretty patient and understanding, she says. She cautions people against laying out their own money to pay off an estate’s debts because getting reimbursed might be difficult. “You need special permission to pay yourself back,” she says.
Cohen encourages financial advisors to help clients develop spreadsheets detailing an estate’s assets and liabilities. Regardless of whether the relative died with a will, spreadsheets can help minimize everyone’s need to play detective, Cohen says. It also reduces the likelihood that certain items, such as paid-up life insurance policies, will fall through the cracks.
“Even with the best planning, things will surprise you,” she says. She recalls a client who lost track of a security she had in certificate form before she died. After the estate tax proceedings, Cohen’s team received a call from an “heir hunter” who revealed the client had a very significant holding in the stock. The team did its own sleuthing to uncover and confirm information. It collected this holding on behalf of the estate and negotiated a payment to the heir hunter.
Heirs wishing to avoid taxes have nine months to refuse an inheritance and pass it to their children instead, says Cohen. But those who decide to go that route must look at what the estate holder intended and take state law into account, she adds. For example, disclaimed assets may have to pass to the heir’s siblings instead. “Other than that, there’s not a lot you can do postmortem,” Cohen says. “The only way to save on estate taxes is to do significant planning” while the person making the will is still alive.
Cracking The Code
Laurie Kamhi, managing director of HighTower’s LCK Wealth Management in New York City—which manages $350 million in assets for 50 to 60 families, individuals, nonprofits and endowments—has helped many clients piece together estate puzzles following the death of their relatives.
In these situations, she works backward from her financial planning checklist to ask the following questions: Where did decedents hold bank and checking accounts? Did they drive a car and have a car loan or lease? Did they have life insurance, an annuity or other assets? Is there an outstanding mortgage? Unless a home is held inside a trust, it’s easy to do an online title search to establish property ownership, she says.
She also encourages families to review all of the mail of their recently lost members. “You uncover things people have forgotten, all the time,” she says. It could be an automatic renewal for warehouse-club membership or something huge.
Twenty years ago, when Kamhi was starting to work with wealth management clients after a decade on Wall Street, she met with a woman who she says looked like a bag lady. The woman’s father had died more than two years earlier and in his furniture she found stock certificates for companies that had long been dissolved or restructured—icons including Standard Oil, Gulf Oil and American Can Company.
Kamhi and her colleagues researched what had become of the original companies. They also contacted New York state’s unclaimed property division and discovered that for years it had collected stock splits and dividends on the father’s shares. The woman became a millionaire, says Kamhi, but it took much work to prove it.
Another client, who’d grown up poor, received a referral to Kamhi’s practice after her father died and her mother couldn’t find information for the estate. Searching with the man’s Social Security number, Kamhi helped the women begin to piece together bank accounts, brokerage accounts and bonds that he had secretly held.
Significant sums of money passed to the wife tax-free. “She found she was a millionairess many times over,” says Kamhi. But the wife was angry that her husband never told her about their wealth and instead kept her “on a very small allowance in a very bare-bones home,” says Kamhi. She didn’t even want the money at this point and left it to her daughters.
Like a growing number of advisors, LCK Wealth Management uses a digital vault where clients can store everything. A file-sharing app such as Dropbox can also be helpful, says Kamhi. Several estate attorneys told her they’ve talked to clients about writing a letter or making a video to document passwords and financial information.
Kamhi cautions family members not to overlook digital assets when sniffing out the estate trails of older people. Her father was 100% paperless when he died last year at 91, she says. Fortunately, he unlocked his smartphone and told her his two favorite passwords. She tells families to look up the histories on any deceased member’s electronic devices that are accessible.
And people shouldn’t panic if their loved ones have taken passwords to the grave. Many use variations of their favorite passwords for multiple log-ins, says Kamhi, and the most commonly used password is still “password.” She says she was told this by a former FBI security person who she invited to speak at her office.
Although estate planning has many technical aspects—such as drafting wills and selecting the right beneficiaries and life insurance—the real foundation to good planning is family conversations about money, says Kamhi. Her team works with three consultants focused on multigenerational engagement—the Money, Meaning & Choices Institute; RayLign Advisory LLC; and 21/64.
Life Lessons
The woman who spent hours tracking down her sister’s $400 automatic debit emphasizes how important it is to at least write down some notes that someone can find. “This should be common knowledge and it’s not,” she says. “My sister would be very upset if she knew what she was putting my mother through right now.”
The confusion has been compounded, she says, by misinformation from bank and insurance companies. One sent the mourning family a power of attorney although this document is extinguished upon death.
She’s debating whether to follow up on a small credit she was able to negotiate for her sister’s pet health insurance policy. The problem is she already closed her sister’s credit card account. “Is it worth the time? I don’t know,” she says. “It’s all these little things and it all takes a lot.” Her advice, she says, “Don’t die.”