WHAT DO I NEED TO DO?
By Tim Barkley. January 2016.
The voice on the lawyer’s phone was generally steady, but shook now and then. “This is Mrs. Jones. My husband just died last week. What do I need to do?”
The lawyer offered condolences – even though he had not known the Joneses, he sympathized with a grieving spouse. Mrs. Jones agreed to meet the lawyer in his office the following day.
“What do I do now?” she asked. “He didn’t have a will. I’ve heard that the State takes everything. Do I need to go to court?”
Her lawyer shook his head. “The state doesn’t take anything. And there is a sort of ‘default will’ in the law, called ‘intestacy.’ That controls what happens with his estate if he doesn’t have a will.”
He queried: “Was everything owned jointly?”
“Yes,” she replied. “The house, cars and bank accounts were all joint.”
He nodded. “Everything is yours, then. The joint owner simply owns everything when the first owner dies. How about IRAs, 401(k)s, insurance. Are you the beneficiary?”
“Then you need to file claim forms for the insurance, if you haven’t already. Call your agent or the company; they will send you the forms. They are easy to fill out. Call me if you need help.”
“Thanks,” she replied. “I’ve talked to the HR department where he used to work, and they said I’d need to fill out forms for the 401(k).”
Again, he nodded. “The law allows you to roll out the balance of the 401(k) account to an IRA in your name. That means you can continue the tax-deferred growth, and name new beneficiaries, like your children, to reduce the required distribution amount and lengthen the tax deferral period. Of course, if you need the money, you can always take out more than the required amount.”
“Oh, I’m OK. I get his pension, so I don’t need to get into the 401(k) account yet.”
“Then you can wait to draw out the money until you reach 70 ½,” he said. “But be sure to ask the 401(k) plan administrator to put your options in writing. They probably have something they send to all surviving spouses.
“Some plans don’t allow you to roll over your balance to an IRA, even though the law says it’s allowable. That’s rare – most 401(k) plans don’t want to deal with spouses of employees.
“Other plans make you take out the entire balance within five years of the date of death. If that’s the case, let me know, and I can help you work out a plan to get the money into an IRA without paying tax on it.”
Now it was her turn to nod her head.
“Is there anything just in his name?” asked the attorney.
“No, not that I can think of,” she replied.
“If you find something – a stock certificate, an old bank account, whatever – you’ll need to go to the Register of Wills’ office to get a ‘Letter of Administration’ to give you authority to liquidate the asset. The process is simple, as long as the value of the asset is less than the funeral cost plus $10,000. The $10,000 is the spousal share of the ‘family allowance,’ and is paid before any creditors or other beneficiaries receive anything.
“If the value is more than that, the process becomes more complicated. Let me know, and I’ll help you decide what to do. Or if you just don’t want to deal with it, I can take care of that – for a small fee.” They both smiled.
She rose to go. “Thanks,” she said.
He shook her hand and showed her to the door. “Call if I can help,” he said as she left the office.
Attorney Tim Barkley
The Tim Barkley Law Offices
One Park Avenue
P.O. Box 1136
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