Article Highlights:Collecting Paperwork Decedent and Survivor Social Security Benefits Probate Decedent’s Estate Decedent Final Tax Return Other Tax Returns Surviving Spouse Survivor BenefitsSurviving Spouse Filing Status The death of a loved one is one of life’s most difficult times and a time for reflection and grieving. However, it also triggers unique financial and tax events that must be dealt with by the survivors. For a surviving spouse, this is an especially difficult time and can be devastating if the death was sudden with little or no time to make financial preparations.This material is divided into several sections dealing with the various aspects of a passing and provides information to help you work through the various financial problems and details that must be attended to with the death of a loved one.Collecting Paperwork – Gathering the proper paperwork is the first step in settling a decedent’s affairs. These documents will be necessary to file and collect benefits, file taxes, etc. This task is generally the responsibility of the decedent’s surviving spouse or, if unmarried, whoever is responsible for the decedent’s affairs.Death Certificate - The death certificate will be needed for many financial procedures that will be encountered. Request several copies (ten is recommended in most cases). These are usually available from the funeral director. If not, they will be available from the county health department.Decedent’s Insurance Policies - These will help you determine the benefits entitled to by the survivors. In addition to looking for life insurance policies, don’t overlook veteran’s policies, mortgage insurance policies and death benefits associated with car loans, credit cards, installment accounts, health policies, employer plans and retirement plans.Surviving Spouse’s Insurance Policies - If the decedent is the beneficiary of the spouse’s policies, the surviving spouse may wish to file change of beneficiary notices with the insurance carrier.Marriage Certificate - A surviving spouse will sometimes need to provide proof of the marital relationship to apply for certain benefits. If you are unable to find one, a copy can usually be obtained from the county offices of the place where the couple was married.Birth Certificates - For dependent children birth certificates may also be needed when applying for certain benefits. If copies cannot be found, one can be obtained from the county or state in which a child was born.Certificate of Discharge from the Military - If your spouse was in the military, you may need his or her certificate of discharge to collect certain benefits. If discharge or separation documents are lost, veterans or the next of kin of deceased veterans may obtain duplicate copies by completing forms found on the Internet at https://www.archives.gov/personnel-records-center/military-personnel and mailing or faxing them to the NPRC. Alternatively, write the National Personnel Records Center, Military Personnel Records, 1 Archives Drive, St. Louis, MO 63138. It is not necessary to request a duplicate copy of a veteran’s discharge or separation papers solely for the purpose of filing a claim for VA benefits. If complete information about the veteran’s service is furnished on the application, the VA will obtain verification of service.The Deceased's Will or Trust Documents - The decedent may have had a will or trust. A copy of the will or trust will be required. The decedent’s attorney will have copies of these documents.Decedent’s IRA and Pension Plans - Compile a list of the decedent’s IRA accounts and retirement plans and determine who the beneficiary or beneficiaries are for each.Spouse’s IRA and Pension Plans - If the decedent is the beneficiary of the spouse’s IRA or retirement plans, the surviving spouse may wish to file change of beneficiary notices with the plans.Complete List of All Property - Generally, the assets of all decedents will go through state probate, estate, or trust proceedings and a complete inventory of the decedent’s assets will be needed. The date-of-death value of each of the assets owned by the decedent will need to be determined for the probate or trust administration. For some assets, such as real estate, a professional appraiser may need to be hired to determine the amount. In most cases it is advisable for the surviving spouse, executor and/or trustee to meet with an attorney, as well as their tax and financial advisors, who will guide them through this process.Frequently, taxpayers maintain their most important documents in a safe deposit box. Where possible, the contents should be removed before the decedent’s passing. Depending upon the jurisdiction, sometimes the boxes are sealed upon the owner’s or joint owner’s death. If the box is sealed, it will require a court order to gain access to the box.Social Security – The Social Security Administration (SSA) should be notified as soon as possible when a person dies. In most cases, the funeral director will report the person's death to the SSA. The funeral director must be furnished with the deceased's Social Security number so that he or she can make the report.Some of the deceased's family members may be able to receive Social Security benefits if the deceased person worked long enough under Social Security to qualify for benefits. Get in touch with the SSA as soon as possible to make sure the family receives all the benefits to which they may be entitled. The following is information on the benefits that may be available. A one-time payment of $255 can be paid to the surviving spouse if he or she was living with the deceased; or, if living apart, was receiving certain Social Security benefits on the deceased's record. If there is no surviving spouse, the payment is made to a child who is eligible for benefits on the deceased's record in the month of death.Certain family members may be eligible to receive monthly benefits, including:o A widow or widower aged 60 or older (age 50 or older if disabled).o A surviving spouse at any age who is caring for the deceased's child under age 16 or disabled.o An unmarried child of the deceased who is:§ Younger than age 18 (or age 18 or 19 if he or she is a full-time student in an elementary or secondary school); or§ Age 18 or older with a disability that began before age 22.o Parents, age 62 or older, who were dependent on the deceased for at least half of their support; ando A surviving divorced spouse, under certain circumstances. If the deceased was receiving Social Security benefits, the benefit received for the month of death, or any later months must be returned. For example, if the person dies in July, the benefit paid in August must be returned. If benefits were paid by direct deposit, contact the bank or other financial institution. Request that any funds received for the month of death or later be returned to the Social Security Administration. If the benefits were paid by check (a rarity these days), do not cash checks received for the month in which the person dies or later. Return the checks to the SSA as soon as possible.Probate – This is the legal process of settling the estate of a deceased person, specifically resolving all claims, and distributing the deceased person's remaining property per the decedent’s wishes under a valid will. This process is generally handled by a probate court which protects the wishes of the deceased, confirms the executor (usually named in the will) as the personal representative of the estate, protects the interests of family members who may have claims against the estate, and protects the executor against claims and lawsuits. If there is no will, the court will appoint a personal representative, usually the decedent’s spouse if married at the time of death. In general, the probate process normally entails the following:In most cases, the survivors will engage an attorney to handle the probate and petition the court to begin the probate proceedings. The cost of probate is generally based on the value of the decedent’s assets and is usually set by law. The court will appoint a personal representative. Notices in local newspapers will be published informing creditors, heirs, and beneficiaries of the probate proceedings, allowing them ample time to make claims. The assets will be appraised. The creditors will be paid. The remaining assets will be distributed to the heirs and beneficiaries. Note: Assets held in a living trust are not required to be probated and skip the probate process; this saves the beneficiaries both time and money. Also, assets that are jointly owned by the deceased and someone else are not subject to probate. IRA accounts with a named beneficiary and the proceeds from life insurance policies are also not subject to probate.Decedent’s Final Tax Return -Upon the death of a taxpayer, a personal representative (e.g., estate executor/executrix) takes charge of the decedent’s property. This person may be named in the decedent’s will or trust document, or appointed by the court if there is no will or trust. When the taxpayer is married, that person is generally the surviving spouse. The duties of the representative include collecting all the decedent’s property, paying creditors, and distributing assets to the heirs, or in some cases selling property that was the decedents. In addition, the representative is responsible for filing various tax returns and seeing that the taxes owed are properly paid. The decedent’s final income tax return is filed on a 1040 series return.Filing Requirements - The requirements for filing a return for a deceased taxpayer are generally the same as if the taxpayer were still living--based on income level, age and filing status.Due Date – The due date for a decedent’s final return is the same as for any other individual (generally April 15 of the following year, but extendable to October 15). Note: if either April 15 or October 15 fall on a Saturday, Sunday, or legal holiday the due date is the next business day.Filing Status - Generally, if the taxpayer was married at the time of death, the decedent will file a joint return with the surviving spouse; otherwise, he or she will file as an unmarried individual. However, a taxpayer who was married at the time of death may not file a joint return with the surviving spouse where (1) the spouse refuses to file jointly, (2) the surviving spouse has remarried, or (3) the executor of the estate does not agree to the joint filing status.Refunds - If a decedent’s return claims a refund, Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, should be filed. However, Form 1310 is not needed if the person claiming the refund is the surviving spouse of the decedent, filing a joint return with the decedent, or a court-appointed or certified personal representative is filing an original return for the decedent.Income to Include - Generally, the decedent’s income on the final return only includes income derived up to the date of death. Post-death income is taxable to the decedent’s estate or trust, but the estate or trust will generally pass the taxable income on to the beneficiaries for inclusion in their individual returns if the income has been distributed to the beneficiaries during the same reporting period.Tax Attributes - Tax attributes are exemptions, deductions, and carryover items. Where a decedent was married, the attributes must be allocated to the decedent and the surviving spouse based on ownership and state property laws. For example, a married couple has a capital loss carryover of $10,000. Assuming the losses came from jointly owned property, one-half of the capital loss carryover would belong to the decedent and half to the surviving spouse, allowing the surviving spouse to continue to carry over his or her share of the capital loss. The decedent’s share of the carryover can only be used on the final return and any leftover is lost. The following is the treatment of some of the more common tax attributes:Carryovers – Generally, except as noted below, carryover deductions and credits can be used to the extent normally permitted on the decedent’s final return, but any excess does not carry over to the estate or beneficiaries. The carryovers included in this category are net operating loss (NOL), investment interest deduction, capital loss, business credit, minimum tax credit, passive loss credit, and the charitable contribution deduction. Medical Expenses - Medical expenses paid before death are claimed on the decedent’s final return as an itemized deduction in the usual manner. Medical expenses not deductible on the final return become liabilities of the estate, and they are deducted on the estate tax return (Form 706) if one is required to be filed. However, expenses that were paid out of estate funds within one year after death can be, at the discretion of the executor, treated as if paid by the decedent and claimed on the decedent’s final return instead. To make the election, file a statement with the decedent’s final return that the expenses are not being claimed on the estate tax return.