Settling parent's financial affairs after death

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
My mom just died, and she did not tell anyone about her bills or insurance policies. How do we find out who she owed or if she had any insurance? Help! – Kristy


Dear Kristy,
I’m sorry to hear about your mom. Unfortunately, it’s not unusual for parents to keep financial details to themselves. This is especially true when parents are relatively young and the death is unexpected.

The first thing to remember as you start sorting out your mom’s things is not to rush. State laws vary, but if you are the personal representative or executor, you may be required to wait a given period of time, such as six weeks, for all the bills to come in before you start distributing your mom’s funds. Depending on the size of her estate and other factors, her estate may be required to go through probate. If your mom’s estate does not have enough money to pay all her debts in full, you are required to pay the bills in order dictated by law. Otherwise, creditors who don’t get paid because the estate ran out of money may look to you for the difference.

If any bill collectors call while you are collecting bills and before you disburse money from the estate, don’t let them pressure you into paying them ahead of time. Some of them will try, and they may even tell you to pay with your own funds. Don’t fall for it. They need to wait in line with all the other creditors, and get their share if and when there is cash left to pay them.

There are so many things to do when someone dies. One of the first things to do is find out if she had any life insurance or burial benefits. If she was making premium payments, you should be able to find bills, canceled checks or other evidence of the policy in her files. Some life insurance policy premiums are paid annually, so look through at least one year’s worth of bills and payments.

If you can’t find evidence of a life insurance policy in her files, try searching in the state she lived in. If she moved, you may need to look in more than one state. Surprisingly, there is no national database of life insurance policies. Some states have websites to help you find life insurance policies for people who have passed away. In other states, you must contact insurance companies and ask if she had a policy. The National Association of Insurance Commissioners can help you locate an insurance policy.

To find your mom’s bills, you should make a list of the bills you know about or think she may have. For example, she probably has utility and phone bills, mortgage or rent payments, and so on. The cards in her purse tell you if she had credit card accounts she was using. She may have a bill file, or a stack of mail.

If you live some distance from your mom, you may want to have her mail forwarded to your mailbox for a time, so you can collect all her bills.

A special note on credit card debt: A change in federal law in 2009 could benefit you. The law compels speedy estate settlement and limits fees. Under the law, when the estate administrator requests the credit card balance, the issuer is required to provide it in a timely manner. In the interim, the meter can't keep running, so no late fees or annual fees can be imposed as the administrator is settling the account.

Miscellaneous bills, such as medical bills, can be a little harder to find. Don’t worry if you can’t find every bill immediately. That’s why there’s generally a waiting period before you start distributing funds – it gives creditors a chance to send another statement if one gets lost.

Be wary of bills you don’t recognize. If your mom was sick, she may have legitimate doctor, hospital and lab bills coming in. However, it’s not unheard of for scam artists to send bills to recently bereaved families, hoping they’ll pay. Don’t let anyone take advantage of your family at a time like this.

You’ll also want to notify all her creditors that she has passed away. Some creditors are fine with just a phone call; others want a copy of the death certificate. A few will require a certified copy of the death certificate.

While you’re looking for insurance policies and bills, keep an eye out for your mother’s will, if she had one. It may be in her files, or she may have left it in a safe deposit box or with her attorney.

You’ll also want to notify all her creditors that she has passed away. Some creditors are fine with just a phone call; others want a copy of the death certificate. A few will require a certified copy of the death certificate.

When you have all your mom’s bills, be sure to follow the laws in her state for the order in which you pay them. You generally pay final expenses, such as legal and burial costs, first. Unsecured creditors, such as credit card companies, are usually the last to get paid. After you pay the higher priority bills, if there isn’t enough left to pay the unsecured debts in full, you may need to allocate the remaining funds to the remaining creditors. In some states, you may be required to submit a form showing the names of her creditors, and how you distributed the funds among them. Note that cash is only distributed to heirs after all the creditors are paid.

If this seems overwhelming, or if your mom’s finances are complex, seek qualified legal counsel in her state. The money to pay for legal services should come from her estate. It’s worth paying for professional services if it gives you peace of mind, knowing you have resolved your mom’s financial affairs as well as you can.

See related: What happens to credit card debt after death, Financial management tips for after a loved one dies

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Updated: 02-21-2019