When a loved one is facing a terminal illness, a range of emotions and concerns can crop up that can cause oversights and omissions of crucial steps to take before that loved one passes. The laws and tax guidelines to address these kinds of situations are not straightforward, so some advanced research can make a sizable difference. Wills are subject to probate, but it does not cover all assets.  

Aside from financial issues, there are a range of other post-demise matters that surviving family members often must deal with. The scenario can become even more complicated when spouses are estranged and children are in the middle. 

A Dying Parent’s Final Wishes

A Reddit poster, aged 20, finds himself in  a comparable position. His terminally ill mother only has a few weeks left.  The mother wants to leave him her 401-K, which is worth $450,000, and all of her other bank accounts. The parents are separated, and his father has already made arrangements to cover all of his college costs. Nevertheless, the young man is distraught and is unsure how to handle the money. 

On the positive side, he has not binge spending problems and expresses a desire to grow the money and manage it wisely. He is reaching out for advice on Reddit as it would appear it’s not a comfortable topic of discussion to have with his father. As Socrates is believed to have said, “The only true wisdom is knowing you know nothing.”  It seems like the poster has taken that first step and is now trying to catch up before it’s too late. 

Preparations While The Clock Is Ticking Down

There is a surprisingly extensive checklist of elements that need to be conducted while the poster’s mother is still alive, in order to avoid legal difficulties in the aftermath. 

• 401-K accounts are not included in probate, and must have a separately updated beneficiary form signed by her, otherwise, the previous beneficiary of record (perhaps the father) would get the account, despite the mother’s verbally expressed wishes. The beneficiary form supersedes any names cited in a will. 
• Signed Payable on Death (POD) and/or Transfer on Death (TOD) forms similarly allow bank accounts and brokerage accounts to also bypass probate. All of these forms are crucial for making sure that the proper beneficiaries are named so that there are no inheritance issues. This has become a common estate issue among heirs, especially when younger siblings from a second marriage are not included on earlier beneficiary forms and the deceased erroneously assumed that the will covered everything. 
• Passwords for all of the mother’s smartphone, email and social media accounts to protect from ID theft and to officially close accounts post-demise.
• Authorizations to shut down autopay on any recurring bills, such as utilities, cable TV, wifi, health insurance premiums, and/or other regular expenses.
• If the mother does not have a Health Care Proxy, one should be designated so that  DNR, organ donation, and other medical related procedures and policies are conducted in accordance to her wishes. 
• A discussion with the mother and father regarding the extent of coverage for medical bills by insurance and what funds should be used to pay for any hospital bill overages, as well as legal and funeral bills going forward. If these need to be paid from the other bank accounts, then an estimate  is required ro calculate sufficient funds. If the 301-K needs to be tapped, then hardship claims need to be planned for in order to avoid taxes. 

After the Funeral

1) In order to submit POD, TOD, 401-K beneficiary forms, and any other documents to financial institutions, the following information belonging to both the beneficiary the deceased needs to be submitted concurrently:

• Original copies of death certificates will be required, which sometimes cost as much as $30 each from a funeral home.
• The deceased’s Birth Certificate copy.
• Deceased’s Social Security card (or at least, her number).
• The deceased’s Driver’s License and/or Passport or State Issued ID.
• A notarized copy of the beneficiary’s driver’s license and/or passport or state-issued ID is required.
• Close accounts in the mother’s name upon completion of each successful transfer. 

2) Medical, Hospital, Legal, and Funeral Bills

• Careful review of hospital bills is advised, since billing errors are a common expectation, and they are inevitably overcharges or charges for procedures and services never rendered. The same for legal and funeral bills.

3) Management of Funds Options

The poster has several avenues from which to choose with regard to managing the funds, depending on his requirements.

• Inherited IRA rollover – unless the mother was at an age where RMD could become a factor, the poster can do an Inherited IRA rollover of the funds into his own name. He then can withdraw the funds over the course of 10 years paying the corresponding income tax on each payment. 
• Incremental Roth IRA Conversions – Depending on the poster’s need, proceeds can convert to his personal Roth IRA, where the accumulating funds can be invested in index  ETFs that can generate at least 5% APY. These funds’ growth can compound and will be available to him tax-free after age 59 ½. 

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