How to navigate finances after the death of a loved one

Losing a loved one is hard enough, particularly during a pandemic, but what comes next can sometimes be complex and costly. There is organising the funeral, tracking down a will and winding up the estate.

You have to tie up loose ends such as bank accounts, superannuation, health insurance, social media accounts, donations to charities, credit cards, car registration, the electoral roll and Services Australia, if there were any government benefits.

It can be overwhelming and often people are in the midst of an emotional storm and dealing with family tensions. If you have never done it before, you are vulnerable to being ripped off and paying too much as well as making decisions that you may regret later.

What steps do you take - and how much do you pay - when a loved one dies?

Work out what you can do yourself and when you need to engage experts. The tasks may be shared among willing family members if they get on and are agreeable about dividing up the estate. This can keep the fees down.

But if some family members insist on lawyers, trust companies, valuers and accountants, be aware of the fees they charge. The Law Society of NSW recommends shopping around for a solicitor, but warns that the cheapest may not be the best. It suggests checking the solicitor's experience in estate work.

The first place to find out what you need to do can be found in the helpful information from government and professional groups. This will help guide you through the labyrinth.

When my mother died, moneysmart.gov.au, as well as state government and court websites, helped me navigate through a funeral and winding up the estate. My mother's assets were straightforward: a nursing home bond, a couple of bank accounts and some shares as well as some personal belongings.

But the costs still added up. The funeral home charged $6900, and there were cemetery costs of around $8000. Then there were some costs involved with getting the estate sorted. The lawyer cost $9272 and the accountant $1250, valuing assets cost around $500 and then probate was $1946.

Here are the steps you need to take:

1. Find the will

One in two Australians dies without a valid will. If you don't have one, the assets are distributed according to a formula set out in a statutory order known as the intestacy rules.

Each state and territory has a different way of deciding who is next of kin and what proportion of the estate they will inherit.

2. Identify the executors named in the will

Often they are relatives, but sometimes they are friends or people outside the family. Executors manage the estate and must act impartially in the best interests of all beneficiaries. They don't have to be experts because often they work with lawyers.

It is more important for them to be fair-minded and responsible.
If there is an outside executor or a trustee company, be aware of the cost.

Sometimes it is an hourly rate, or a fixed fee based on a percentage of the assets of the estate that goes to probate.

An outside executor is generally entitled to claim all costs and expenses incurred in administering the estate, and if the estate is complex and time-consuming they can apply to the Supreme Court for an executor's commission, which is a percentage of the value of the estate and all income received by the estate.

3. Advertise to let people know that the estate is being settled

This notice is to give anyone who knows of another will, creditors or others with an interest in the estate an opportunity to put in a claim.

The notice must be placed for a set period before applying for probate.

4. Obtain a death certificate

The funeral home usually fills out the forms, registers the death and provides the death certificate.

Make many copies of the original, then have them certified by a justice of the peace or lawyer, as you need to produce a copy for claiming life insurance and other drawdowns.

5. Work out the assets and any debts

Assets include money, houses, land, cars, shares, clothes, jewellery and any other goods. They do not include super.

One area that people often aren't clear about is jointly owned assets. These automatically go to the surviving joint owner, regardless of what a will says. This includes jointly owned property and joint bank accounts.

If there is a family home, the estate could be valuable, given the high price of real estate. Often personal effects, particularly furniture, aren't very valuable. You can send photos to auction houses or drop off jewellery and antiques to valuers.

Get together assets such as bank accounts, shares, property, jewellery, art, cars, nursing home bond.

Superannuation and assets held in trust are dealt with separately from the person's estate. The super fund could make a decision about who is entitled to receive the benefits if there isn't a binding death nomination.

6. Apply for probate

Family members must first agree on the value of the assets. This can be trickier than it sounds. Often death can be a catalyst for exposing unresolved family conflicts.

Disputed wills are common. If there are any favoured children who received more from their parents, either as a gift or loan, can be a cause for litigation.
Probate can only be granted if there is a will. There is a registry of probates in different states.

It grants probate, confirming a will is valid. Probate is essential for collecting the assets for the beneficiaries from groups such as banks and nursing homes. Probate will be held up if anyone challenges the validity of the will.

Once the family members have agreed, they must sign the application for probate. There is a filing fee that is based on the value of the assets in the estate. How long the probate takes to come through can vary.

7. Sell or keep the assets

If there are any shares, decide if you want to sell them or divide them among the family members. There are capital gains tax  implications if you keep them.

One of the most onerous tasks I found was completing my mother's tax. After a person dies, their estate is treated separately from their usual tax return for tax purposes. This means there are two tax forms to fill out: one for the time up until she died, and then you must apply for an estate tax file number from the tax office.

Because my mother had owned some shares, capital gains tax was applied to the sale. But don't hang onto shares because you have to pay CGT. Often holding a half dozen shares isn't the best investing strategy as the companies can fall in value.

It can be better to sell them and reinvest the proceeds in a diversified exchange traded fund that offers exposure to a broad-based index.

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