Surviving the death of a loved one
Surviving the death of a loved one
It's difficult for us to even consider a partner or loved one’s death and maybe that’s why many of us are so unprepared for it.
In this article, we’ll discuss what happens when someone dies, talk about the differences between an ‘expected’ death and an ‘unexpected’ death and what decisions and actions need to be taken. Then we will cover how to ensure that you get the best possible outcome from a terrible situation and finish up with a checklist you could adopt to ensure that you have covered all bases.
So… let’s get the terrible stuff over with first.
When someone dies the most important thing to remember is that it is normal to feel completely out of control. This is probably the most stressful situation you could find yourself in and the same goes for some of the people closest to you. Emotions are going to be difficult to manage but you need to focus on your job to look after both yourself and your children (if you have them), as well as the person you have just lost.
It is important to identify someone close to you who you know will be calm, tough and there for you – and ask them for help. This person might not be your best friend of even a close relative, but someone who maybe has had a little experience with this sort of thing or who you know is good in a crisis. The only immediate decision that needs to be made is which funeral director to use, and even here you have some time to decide. Next, we’ll talk about the difference between an expected death and an unexpected death.
Expected and unexpected death
If a loved one dies expectedly (perhaps in hospital or home) you will usually have had time to prepare – both emotionally and financially – but not always. An expected death is initially dealt with directly through a doctor and funeral home. The doctor will complete the formality of declaring the person is deceased and the funeral director will make arrangements to collect the body.
There is no need for police involvement and the deceased will not usually go to a public mortuary, instead they will be taken by a funeral director to the mortuary at the funeral home. If appropriate, family and friends may visit the deceased to say their goodbyes in private.
With an unexpected death out of hospital, the police may become involved on behalf of the State Coroner who will likely need to examine the body. They are not there to investigate (unless it is a suspicious death) but rather to manage important aspects for the Coroner. Once the body is released from the state mortuary (usually after a few days) the funeral director will pick up the deceased and transport them to the funeral home.
This is about the worst situation imaginable but importantly, you don’t need to make a single decision in a hurry. You don’t need to choose a funeral director as doctors, paramedics or police will be there to assist. You may need to let some important people know what has happened but look after yourself first – have a hot drink if it is offered to you and take some time to collect yourself. If someone asks if you need help to let people know, accept their assistance.
One of the first things that needs to be done after a death is to arrange the funeral. Depending on your circumstances this might be a church service or private ceremony. If it is a church service, you will talk to the church as they may have a relationship with a specific funeral director and will assist with the arrangements. Alternatively, many people now have the service at the funeral home or other venue.
In many wills, the executor has the formal powers to arrange the funeral, but practically, the will is unlikely to be even looked at before the funeral and this would only be an issue in the unfortunate circumstance of some dispute over the funeral arrangements. There is no rush to organise a funeral – it is not uncommon for the funeral to be a week or more after the death to ensure everyone who needs to be there can be there.
The funeral director is likely to ask for payment for the funeral up-front and depending on your choices this can be between $2,500 and $7,500 – more if catering is included. This often leads to the first realisation of the financial consequences of death as not everyone has this money readily available. It leads us to the next section where we will talk about the financial impact of death.
Death of a loved one often means the loss of an income used to support the ones left behind. It can also mean unexpected medical bills which still need to be paid even though the person has passed away. Just an ambulance trip to hospital can run to thousands of dollars if you are not insured for this. So, while you will be grieving terribly, it is likely that you will also be very concerned about where the money will come from to manage going forward – again, this is natural and you shouldn’t feel guilty about it.
But…where does the money come from?
Apart from savings and existing investments, the financing of death (which sounds terrible) typically comes from two sources – Superannuation and Life Insurance. For younger people (say under 40) whose super balances aren’t very high, Life Insurance becomes the primary source and vice versa for older people who have built up more significant super balances.
You should not expect that these funds will become immediately available as the application process can take some months to complete. Some insurance policies may pay a partial benefit very quickly, though, to assist with funeral costs etc, so you should contact your provider as soon as is practicable to find out. Notifying them will also start the claims process from their end and this can speed things up a little. Often a financial adviser can help you here as it is not uncommon for people to have more than one super fund with life insurance that may have been forgotten about. Financial advisers will also have expertise in dealing with super funds and life insurance companies which you might find valuable.
Before the claim can be paid, the insurer or the super fund will need to verify a few things. First, they need proof that the person is really deceased and will ask for a death certificate. Second, they will want to know the circumstances of the death to ensure that it is covered under the policy (some situations are not covered by all policies). Third, they will want to confirm who the beneficiary is and if this is you, proof of identity will be required. If the funds are coming from a super fund, you may be eligible to receive the funds as a pension rather than a lump sum and you should get some quality financial advice to assist with this decision. Payments directly from a life insurance company will generally be paid as a lump-sum only.
We should discuss here issues regarding who might be the beneficiary of superannuation and life insurance because a surprising number of people have not nominated beneficiaries at all and this can really slow the claims process down.
A stand-alone life insurance policy - not part of a super fund - can nominate anyone as beneficiary or even your estate (which means as per the instructions in your will). Superannuation death benefits, including life cover through super, can only be paid to spouses (including de facto and same sex), children, financial dependents or your estate (often referred to as your legal personal representative).
If you get a chance before it is too late you should check the beneficiaries on all super fund and life insurance policies. You can nominate superannuation fund beneficiaries as either binding or non-binding. A binding nomination (which requires two independent witnesses) means that the superannuation trustees MUST pay the benefit to the person or estate as nominated by the policy owner.
A non-binding nomination is simply a recommendation by the policy owner but the final decision rests with the superannuation fund trustees to ensure that the most suitable person receives the benefit. In most cases this works fine, but where there has been a previous long-term relationship or marriage or children from a previous relationship this can be problematic. A binding nomination is safer, but you should remember that binding nominations only last 3 years in most super funds before they need renewing.
Making a nomination becomes even more important if you don’t have a valid will because you can’t really leave it to your estate if it doesn’t have a legal form and in this case the court will decide who gets the funds.
Now let’s talk about what and when to tell the bank that your loved one has passed away.
Notifying the bank
There is no rush to get to the bank to let them know what has happened – it is not your highest priority at this time. You should know that they have an obligation to protect the estate of the deceased and therefore they may freeze bank accounts owned directly by the deceased as soon as they are made aware. Even joint accounts can be temporarily frozen although the rule of survivorship (where jointly owned assets pass directly to the surviving owner and are not part of the estate or death benefit) will mean that the funds will become available again.
The executor, with a certified copy of the original will, can request funds be released to pay estate expenses but this is time consuming and often uncomfortable. My advice is to ensure that you have an individual bank account linked to a joint account and transfer enough money (if you have it) to your individual account to keep you going for a month or so and to cover final expenses such as funeral costs.
Loans may need to be re-negotiated in time but not in the short term and if the bank is aware that there are superannuation and/or life insurance proceeds coming they will be more understanding. Hopefully you have enough insurance cover to clear or significantly reduce all loans.
Maybe a check-list might help?
1. Breathe…and have a little time on your own
2. Ask for help from a strong, trusted friend or relative – you need a buddy who can maintain an emotional steady state
3. If expected death
a. Contact funeral director
b. Arrange for some money to be put into your account
4. If unexpected death
a. Let professionals around you help (Doctor, Paramedics, Police etc)
b. Wait a couple of days and then contact funeral director
c. Arrange for some money to be put into your account
5. If you have a Financial Adviser or Planner make contact ASAP - they will be a great help at this time
6. Arrange the funeral/ceremony/celebration of life
One - two weeks
7. Look through financial paperwork to identify superannuation funds and life insurance policies
8. Obtain certified copies of the deceased’s will if they have one
9. Obtain Death Certificate (GP or Funeral Director may be able to help here)
10. Contact Life Insurance company and/or Superannuation fund
11. Contact Bank to let them know what has happened
One – two months
12. Contact Solicitor to assist with administration of estate
13. Get some trusted financial advice
14. Take some time just for yourself, and maybe consider counselling if you feel you need it.
General Advice warning
Information contained in this document is of a general nature only. It does not constitute financial or taxation advice. The information does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document. Provided by Paul Moran of Moran partners financial planning ABN 40159812530, AFSL 428848.
Change is a constant in our lives and money matters are no different. Understanding your finances and the steps you need to take can help you gain more control through a period of change.
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