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A death in the family brings financial issues

You think the Toronto Maple Leafs have had a tough year so far?

That's nothing. I've had it tougher in some ways. I've been to no fewer than seven funerals since last November.

I might have expected this if I were much older. And when a friend or family member dies, I almost always expect a phone call a few days after the funeral.

You know, to help out with the financial issues. And that's okay, I'm glad to help. I think it's high time that I write about some of the financial issues that a widow or widower should think about.

Here's a list of my top issues to consider when your spouse or common-law partner (CLP) dies.

1. Funeral costs: Costs of a funeral can vary widely. There will be many decisions to make -- all at a time when you're fragile emotionally. You'd be wise to ask for the help of a trusted friend or relative to make the arrangements. Even better: You and your better half should plan your funerals today to simplify things when you're gone.

2. Deceased's will: Look after the funeral or memorial first. Then you should focus some attention on finding a copy of the deceased's will -- it'll be needed to distribute his assets properly. Visit a trusted lawyer to arrange for probating of the will (which is required in most provinces).

3. Deceased's assets: You'll need to gather information on the whereabouts of your spouse's assets, including investments, after his death. Speak to your spouse's financial and insurance advisers, and accountant soon after the funeral, to help locate everything. Create your own list of assets today to make this task easier for your family.

4. Bank accounts: If you held a bank account jointly with your spouse, you'll be able to access the cash immediately after he dies. Joint bank accounts make sense for this reason. No joint account? You may not be able to access that money (often with the exception of paying for funeral expenses) until the will has been probated.

5. Insurance policies: Be sure to contact your insurance adviser as soon as possible after the death of your spouse so that he or she can look after making the insurance claim on any policies. In most cases, insurance proceeds are paid out quickly after the insured's death.

6. Government benefits: Three types of benefits may be available if your deceased spouse or CLP contributed to the Canada Pension Plan: A death benefit (a onetime payment, to a maximum $2,500), a survivor's pension (a monthly pension paid to you, averaging $265, but can be as high as about $465), and a children's benefit paid to a surviving child (a monthly benefit of about $180 per month per child under age 18 or up to age 25 while still a student). You've got to apply for these benefits -- so do this very soon after your spouse or CLP's death.

7. Registered plans: Any RRSPs or RRIFs owned by your spouse or CLP can generally be transferred on a tax-free basis to a registered plan in your name. This may be true even if your spouse or CLP failed to name you as beneficiary in the plan documentation.

8. Employment issues: Call the employer of your deceased spouse to determine if there are any amounts owing such as salary, vacation pay or bonuses. Enquire as to whether the employer can pay any amounts as a tax-free death benefit (up to $10,000 can be received tax-free where it is considered a death benefit in recognition of the employee's service).

9. Cash management: When your spouse dies, keep your spending in check until you've had a chance to review your affairs with a trusted financial adviser to ensure you'll be able to manage. Cancel any medical or disability coverage that is no longer needed.

10. Debt management: Check with your financial institution to see if mortgage or other insurance had been purchased to pay off any debts owing upon your spouse's death. Do each other a favour and put this important insurance in place today.

11. Visit advisers: Soon after the funeral, visit a lawyer to revise your own will and powers of attorney; a financial adviser to review your situation and change any beneficiary designations on insurance policies and your RRSPs or RRIFs; and an accountant to look after the tax filings for your deceased spouse.

12. Don't rush yourself: Don't make any big financial decisions immediately after your spouse dies. You may want to wait close to a year before changing investments, selling your home, or making other big decisions.
Tim Cestnick, CA, CFP, TEP is author of The Tax Freedom Zone and Winning the Tax Game 2003. He is managing director, Tax Smart Services, at AIC Ltd.

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