I am often asked by family members of a loved one who is on his/her death bed what steps should be taken from an estate planning, tax and non-tax perspective that will make the individual more comfortable, save taxes, preserve assets and make settling the estate easier for the family. Here is a non-exhaustive list of tax and non-tax suggestions:
- Are income tax filings up-to-date?
- Are estimated income tax payments up-to-date? If the individual who is dying cannot sign checks and there is no power of attorney so someone has to lend money to the individual to pay taxes and other expenses, be sure to keep track of the amount loaned and who loaned it.
- Would gift-giving save estate or inheritance taxes? Funds must be debited from the dying individual’s accounts before death to be complete.
- If the individual has an IRA or qualified retirement account and has not taken his or her required minimum distribution think about whether to take the “RMD” or not take the RMD before death. A consideration will be the tax brackets and available deductions of that individual as compared with those of the beneficiaries of the IRA or retirement account.
- For assets which have depreciated in value between the date of purchase and a date shortly before death, consider whether it would make sense to sell the assets to realize a capital loss rather than to hold onto the assets until death and then sell them but without the capital loss because of the step-down in basis at death.
- Consider gifts to charity, especially of tangible personal property as to which the benefit of the income tax deduction is meaningful.
- Consider converting traditional IRAs to Roth IRAs. In addition to other benefits of Roth IRAs, this will generate an income tax liability which can be deducted for estate and inheritance tax purposes.
OTHER ESTATE PLANNING AND NON-TAX CONSIDERATIONS
8. Make sure that all life insurance premiums are paid and up-to-date and that original policies are available.
9. Are wills and revocable trust agreements up-to-date? This is of course only relevant if the individual is able to sign new documents.
10. Do you know where the original estate planning documents are located and who the estates lawyer is?
11. Are beneficiary designation forms for life insurance and retirement accounts up-to-date? – again only relevant if the individual is able to sign new forms.
12. Because powers of attorney become ineffective at death, you might consider prepaying for the funeral, interment and/or cremation before death to avoid scrambling to make payments after death.
13. Are healthcare and end-of-life instructions clearly communicated to health care providers? Has any advance directive for healthcare been provided to medical personnel?
14. Consider removing valuables and cash from residence but make clear to the executor or family where the items have been removed to.
15. Make sure homeowners insurance is paid because liability to caretakers and other “business invitees” can be heightened.
16. A responsible person should obtain computer usernames and passwords and keep them in a secure place.
17. Obtain code to house alarm.
18. Obtain password or PIN to home voicemail.
19. Make sure someone collects the mail (especially 1099s if its tax time and dividend checks if it’s anytime).
20. Make sure residence is secure and that only responsible individuals have access to keys. If the lock to the residence is a key pad, limit number of persons who know the code to enter.
21. Make sure vehicles are secure and that a responsible person has access to car keys. Move the car periodically.
22. Make sure firearms are secure and perhaps removed from residence.
23. Make sure smoke and carbon monoxide detectors are operative.
24. Consider installing a generator or otherwise make sure there are flashlights if power goes out.
25. If there is a safe deposit box, consider whether it would be appropriate to close it.
26. Determine the individual’s desires concerning funeral, burial, cremation and related issues.
As you can see there are many things to think about when the end is near – certainly more than I have outlined above. The most important non-medical aspect of preparing for the death of a loved one is to make sure that information is communicated clearly and regularly to those in that person’s inner circle, that tasks are delegated in a coordinated way and carried out efficiently and well and that the needs and comfort of the individual who is dying are the top priority for family, friends and professionals.