One of the necessary tasks after the passing of a family member is settling the decedent’s financial affairs. Some of these tasks are mundane, such as closing accounts, or stopping cable service. Some are mandatory, like reporting the death to the Social Security administration or preparing a final tax return. And besides these clean-up items, there is also the proper transfer of assets to beneficiaries.

Filing a beneficiary claim on a life insurance policy, annuity contract, or retirement account is an important financial transaction that requires exact documentation. While it’s not something most people want to handle in the days and weeks after a loved one passes away, the legal and tax implications require beneficiaries to take the time to properly execute these transactions. The specifics regarding a beneficiary claim may vary according to the type of asset, and the institution responsible for distributing benefits, but the following is a broad outline for beneficiaries to acquaint themselves with the process.

Step 1: Identify and communicate with the appropriate contacts. An insurance agent or broker listed on annual statements for life insurance or annuity contracts, and retirement accounts, is typically a good resource for direction and assistance in completing the claim process. For benefits provided through an employer, the most likely starting point is contacting the company’s Human Resources department.

In situations where there is not a specific contact, beneficiaries may have to communicate directly with the customer service departments of financial institutions. As soon as possible, even on the first call, beneficiaries will be well served to secure direct contact with a specific individual–you should not have to navigate a voice-mail menu and speak to a different representative every time you contact the institution.

Step 2: Have essential documents and personal information in order and on hand. Before authorizing a distribution to beneficiaries, financial institutions want verification of the events and parties involved. Beneficiaries are expected to provide account or policy numbers, basic information about the decedent (such dates of birth and death, and usually his/her Social Security number). In addition, many institutions will require a certified death certificate (and usually will not accept copies). Additionally, some beneficiaries may have to produce additional documentation, such as a marriage certificate for a spouse inheriting a qualified retirement account. Executors and personal representatives for estates should provide documentation of their position and authority.

In the case of insurance contracts with multiple beneficiaries, each beneficiary has the right to select the manner in which they will receive funds. Thus, each listed beneficiary is required to file a separate claim, documenting his/her status as well as providing documentation of the passing of the insured. Because most institutions require a certified death certificate as part of the claim process, beneficiaries should expect to procure multiple certificates from the funeral home or local authority.

Step 3: Methodically process and resolve all details before submitting a beneficiary request. Depending on the asset involved, and the relationship of the beneficiary to the deceased, there may be several ways to receive benefits, such as a lump sum, periodic payments, or transfer without disbursement. Some assets when distributed incur no tax; others may be taxable to the recipients, with the amount varying depending on type of account and financial status of the beneficiary. Because many claims decisions are irrevocable, beneficiaries should carefully weigh their options, and not rush to decisions. Consultation with financial professionals, especially regarding tax and legal consequences, is recommended.

Unknown benefits and privacy issues

The above action steps assume that beneficiaries are aware of their designation, and know the assets for which they are the intended recipients. But too often individuals leave assets that lack clear instructions as to their current status or beneficiary designation. Assets are forgotten (such as military or pension benefits), or neglected (paid-up life insurance policies). The death, divorce, or remarriage of a spouse changes family dynamics, children grow up and relocate, financial professionals change, time passes, and somewhere along the way the disposition of an insurance policy, savings account, or dormant 401(k) account becomes a mystery.

For example, survivors come across an old life insurance policy, and find the only beneficiary listed is a spouse who is also deceased. Is the policy still in force? Are there contingent beneficiaries? How does one find answers?

This can be a real challenge. Tighter privacy regulations make it difficult for potential beneficiaries to receive information from financial institutions without authorization from an agent or broker. But suppose the writing agent is unknown to survivors or has terminated his relationship with the insurance company. Obtaining any information about a policy, active or lapsed, will most likely require the following steps:

· Proof of death of the insured (another certified death certificate).

· Proof that the individual requesting information has authority to inquire on behalf of the insured’s estate. This could be the deceased’s surviving spouse, or the personal representative of the estate.

This is a lot of work just to determine the status of a policy, and it can be time consuming, causing beneficiaries to either wait for benefits or wait to discover the policy has lapsed, and no benefits are available.

If it is important that your loved ones and favored causes receive some of your accumulated wealth, take steps to keep the parties informed as to what they might expect at your passing. When the process of transferring assets to beneficiaries is convoluted and confusing, it takes a bit of the luster off what should be a positive legacy event.

Elozor Preil, RICP®, CLTC is Managing Director at Wealth Advisory Group and Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). He can be reached at [email protected]. See www.wagroupllc.com/epreil for full disclosures and disclaimers. Guardian, its subsidiaries, agents, or employees do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation.

By Elozor Preil