Paying the Bills
For many of us, mounting bills would be cause for some anxiety, but there are definite rules for how and when to pay bills held in the sole name of the decedent. This chapter will help you sort through the pile, pay appropriate bills and conserve the assets of the estate.
First, don't be in a rush to pay off the bills. And although you might feel like you're being helpful, absolutely don't pay off the decedent's debts from your own funds.
The estate is responsible for satisfying debts of the decedent and the available funds should go first to pay for funeral expenses, then attorneys and lastly creditors.
In other words, if the estate runs out of money before the creditors (including hospitals) get paid, you may not have to pay them. Bottom line: consult with your attorney before paying any bills.
First, Pay Funeral Expenses
These may be deductible from the decedent's federal estate tax return so care must also be taken to gather proof of payment of all of the related expenses, including those for travel, the funeral director, burial plot, headstone or cremation.
Notify Creditors & Determine Balance Due
Contact all creditors and check for insurance on outstanding loans, mortgages and credit cards. The deceased may have carried life insurance on those borrowings. If there was insurance on any of these installment loans, the entire balance due may be paid off by the policy.
Terminate Vehicle Leases
If you don't want to keep the decedent's vehicle, see if the lease has a death clause. If so, you may be able to get out of the lease at no cost and simply return the vehicle. If not, the lease remains a liability of the estate, not the survivor, so long as you did not sign or co-sign the lease.
Terminate Cellular Phone Contracts
If you no longer need the cellular phone, check to see if the contract has a death or buy-out clause. If so, you may be able to terminate the contract without any further obligations. If not, the contract obligation remains a liability of the estate, not the survivor, so long as you did not sign or co-sign the contract.
Transfer Mortgages and Notes Payable
Generally speaking, mortgages and notes payable follow the asset to which they are attached. So, whoever is awarded ownership of the decedent's property will be responsible for satisfying the corresponding mortgage or lien against it. Don't forget to check on any possible mortgage insurance benefits!
Close Online Accounts
Consider closing or updating the user information for online retailer accounts, web-based subscriptions with magazines, research or virus protection service providers.
Meet Charitable Pledges
It is both a contractual and an ethical obligation to "make good" on any outstanding pledges to charities. Review the decedent's checking account for the past two years and look for monies sent to charities. This will help you identify those charities that were supported through Annual Giving programs set-up by the decedent.
Managing Income Taxes
A surviving spouse may file a joint tax return for the tax year in which the death occurred. For the next two years after the death, a spouse with dependent children may be eligible to file as qualifying widow(er) with dependent child, giving you joint return tax rates but you must meet eligibility requirements.
Ask your accountant or tax preparer if you qualify. The IRS booklet, Publication # 559 Information for Survivors, Executors and Administrators may be helpful. You can order a copy of this publication by going online to www.irs.gov
Paying Estate Taxes
If a federal estate tax return must be filed, taxes are due within nine months of the date of death. If the estate tax is not paid within that time, you will owe substantial interest and penalties. Under current legislation, estate taxes will be gradually eliminated by 2010. Contact your accountant or tax attorney to understand your options and determine the most beneficial course of action.
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