Common Mistakes and How to Avoid Them
In the fog of grief, it is easy to make missteps. Being aware of these common pitfalls can help you avoid costly and stressful errors during the estate settlement process.
Mistake 1: Making Major Financial Decisions Too Quickly.
The urge to “do something” can be strong, but making hasty decisions about selling a home, liquidating investments, or paying off a mortgage can have unintended financial consequences. You may not have a clear picture of your new financial reality yet.
How to avoid it: Give yourself time. Avoid any large, irreversible financial moves for at least six months to a year. Work with a financial advisor to create a new budget and long-term plan before making significant changes.
Mistake 2: Paying the Deceased’s Debts from Your Personal Funds.
A surviving spouse is generally not personally responsible for their deceased spouse’s individual debts (such as a credit card in their name only). These debts are owed by the estate.
How to avoid it: Understand the distinction between individual debt, joint debt, and estate debt. Joint debts (like a shared credit card or mortgage) are an exception and will become your responsibility. For individual debts, they should only be paid using funds from the estate account under the guidance of your attorney. Do not use your own money.
Mistake 3: Not Ordering Enough Death Certificates.
Nearly every institution, from banks to the DMV, will require an official, certified copy of the death certificate, not a photocopy. Running out and having to order more later can cause delays and is often more expensive.
How to avoid it: When you first order death certificates through the funeral home or local health department, order more than you think you need. A good rule of thumb is 10 to 15 copies.
Mistake 4: Overlooking or Forgetting to Update Beneficiary Designations.
After your spouse passes, you must update your own estate plan. If you were to pass away unexpectedly, your assets might go to unintended heirs or get tied up in court if your deceased spouse is still listed as your primary beneficiary on life insurance, IRAs, or 401(k)s.
How to avoid it: As soon as you are able, make it a priority to review and update the beneficiaries on all of your financial accounts, retirement plans, and insurance policies. At the same time, update your will and powers of attorney.
Mistake 5: Falling Victim to Scams.
Unfortunately, scammers read obituaries and target grieving spouses. They may call pretending to be debt collectors for a fake debt, or try to gather personal information for identity theft.
How to avoid it: Be extremely cautious. Do not provide your spouse’s Social Security number or other personal information over the phone unless you initiated the call to a legitimate institution. If a “debt collector” calls, ask for the debt to be validated in writing and discuss it with your attorney before paying anything. For official information, consult government resources like USA.gov, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC).
