Financial Items to Consider When a Parent Passes Away

When a parent dies, besides the significant loss of your loved one, there are many practical steps to consider. These include planning a funeral or memorial service, notifying family, friends and organizations such as social security, as well as managing property or household services. There may also be many financial items to address that aren’t immediately obvious, beyond life insurance policies and bank accounts. Many of these items can wait until after receipt of death certificates, allowing you to focus on more pressing matters like your family, but these items should not be overlooked or forgotten. 

If time permits, preparing ahead by working with your parents while they’re alive, in order to understand where financial documents and personal information is kept, can help ease the process of settling their affairs after they pass away. However, even without the ability to prepare ahead, you can attend to key financial issues upon their death by understanding what they are and what actions might need to be taken. 

With certain financial items, the actions needed may depend on whether your parent was married or not at the time of their death, and if you are a named executor or beneficiary.  

Here are some financial items to consider when your parent passes away: 

If your parent was unmarried and you are the beneficiary 

• Social Security benefits: You or your siblings may be able to collect a $255 lump sum death benefit from the Social Security Administration if your parent did not have a spouse. The benefit can be eligible to minors, children ages 18-19 in secondary education, and children who developed a disability at age 21 or younger.  

• Required minimum distributions from retirement account: If your parent was aged 73 or over and taking RMDs from a traditional individual retirement account (IRA) and you are a beneficiary, the IRA sponsor can set up an inherited IRA account for you as well as advise on possible required minimum distributions (RMDs). For deaths after 2020, the entire inherited IRA needs to be liquidated by December 31 of the tenth year following death. A tax professional or retirement advisor can help you understand the options and laws that apply to your situation. Other types of accounts such as a 401(k) or a 403(b) may have different rules that are determined by the plan and should be available from the plan administrator. 

• Estate: Your parent’s estate may have federal and state estate tax liabilities. Proceeds from a life insurance policy owned by the deceased and values of retirement accounts are included in the gross estate. If your parent filed taxes as an individual and had an estate amount that exceeds their remaining combined estate and gift exclusion amount of $13.61 million in 2024 and $13,990 million in 2025, if not previously used during their life. In addition, to carry over the unused exemption, the estate must file IRS Form 706 within. When there is an estate tax liability and the total value of the estate on the date of death was greater than the value at six months after the date of death, Form 706 allows for using the alternate valuation date to reduce estate taxes, valuing all assets as of six months after the date of death (unless sold within that period). Form 706 due date is nine months from the date of death, which can also be extended an additional six months. Do you expect to inherit any assets from your parent or was your parent included in your own estate plan? If so, consider updating your estate plan. An estate attorney or tax professional can offer advice. 

• Insurance: You may be eligible for life insurance, worker’s compensation, or veteran’s benefits from your parent’s employer, union, or the government, if you were the named beneficiary. Be sure to check for any unidentified or unclaimed insurance and benefits with all potential providers. 

• Taxes: Was your parent a joint owner with you in property or an investment account? As the joint owner, you may be entitled to a step-up in basis for all assets except for retirement accounts and qualifying opportunity zone funds (QOZs). A tax professional is a good resource for understanding the tax laws. You may want to confirm that all your parent’s prior income taxes have been paid by contacting the IRS and state taxing authorities and, if not, making any necessary payments. Final personal income tax returns, as well as need for income tax returns for a parent’s trust or estate, should be considered when income continues after death before assets are transferred to beneficiaries.  

• Investments: Are you the beneficiary of stock options, grants, or restricted stock units from your parent’s employer? Check employer plan documents to understand how these assets are treated after your parent’s death. There may be tax implications from accelerated stock vesting. For annuities, as the beneficiary you will have to take required distributions from a non-qualified annuity which does not receive a step-up in basis and could have tax implications from distributions. Research whether any digital assets need to be preserved. 

If your parent was married 

You may need to assist your surviving parent with these items, particularly if they’re elderly or overwhelmed by the loss and its many ramifications. In some cases, you may need to be named as the financial power of attorney for your parent’s affairs, to get information about accounts, benefits, and assets. 

• Social Security benefits: It may be necessary to tell the bank to release the final payment since they may have already been notified of the death. A payment that is received the month the person died can be kept but any payments received the month after a person dies must be returned to the Social Security Administration (SSA). The spouse may be eligible for survivor benefits, but if they were receiving a government pension based on earnings that were never subjected to Social Security taxes, the government pension offset (GPO) may reduce or eliminate the survivor benefits. Determining whether the GPO applies to the spouse can help reduce confusion or adjust expectations around Social Security benefits. The SSA can provide more information. 

• Pensions: Depending on the options chosen for the spouse at the time the pension began, payments to the surviving spouse may stop after your parent’s death or be adjusted for survivor benefits. The pension provider should be able to offer insight. 

• Required minimum distributions from retirement account:  Spouses who inherit retirement accounts from their deceased spouse can have the amounts rolled over to their own account. This allows the survivor to name a new beneficiary as well liquidate the account over their life expectancy.  

• Estate: If your parent and spouse have a combined estate amount that exceeds their remaining combined estate and gift exclusion amount ($27.22 million, if not lifetime used), there may be federal estate tax due. The information in the above section regarding Form 706 may also apply. An estate attorney or tax professional can likely offer advice on these matters. 

• Insurance: The surviving spouse may be eligible for life insurance, worker’s compensation, or veteran’s benefits from your parent’s employer, union, or the government. If there is a minor or permanently disabled child, Social Security benefits may be available to the spouse or child. Check for any unidentified or unclaimed insurance and benefits with all potential providers. 

• Taxes: If your parent was married and filing taxes jointly, they can continue to file married filing joint (MFJ) for the year of death; as well as up to two additional years if they claim a dependent. If no dependent, then single status would be claimed starting the following year. A $500,000 capital gains exclusion may still be available to the surviving spouse if the home is sold within two years of your parent’s death. If the surviving spouse was a joint owner in property or an investment account, they may be able to receive a step-up in basis for all assets except for retirement accounts and QOZs, which adjusts the property value to the fair market value at the time of death. This can reduce capital gains tax that may be owed. A tax professional can help with understanding the tax laws and situations. Contact the IRS and state taxing authorities to find out if your parent’s prior income taxes have been paid and, if not, there may be necessary filings due. 

• Investments: Is your surviving parent the beneficiary of stock options, grants, or restricted stock units from your parent’s employer? As noted in the above section, check employer plan documents to understand how these assets are treated after your parent’s death. Did your parent have carryforward investment losses? The survivor might consider realizing investment gains in the year of death. Your deceased parent’s tax carryforwards can be used on their final tax return but may not be applicable afterwards. For annuities, your parent’s spouse may be able to inherit a non-qualified annuity as their own if they’re the beneficiary. A tax professional is a good resource for learning options and implications. 

Additional items 

• Online accounts: To help reduce the threat of identity theft or cybersecurity threats, cancel your parent’s email accounts, social media accounts, and driver’s license; report to credit bureaus, the election board and other agencies that may require notice.  

• State laws: Consider any state-specific issues that could apply including out-of-state property or estate tax liability. 

• Mortgages or other loans: There may be requirements for the time period in which you notify the lender of your parent’s passing as well for paying off the loan. Check with the lender or read the loan documents. Check with an attorney if debts in the decedent’s name alone should be paid or not.  

• Disclaimers: Will a beneficiary be inheriting any of your parent’s assets and have more assets than they need to maintain their lifestyle? If so, and if acceptable contingent beneficiaries have been named, they may wish to disclaim these assets to shift them to other beneficiaries. An executed disclaimer must be done within nine months of the date of death. 

• Property and assets: Look at the points feature on credit cards and miles programs with airlines to see if they are transferable. Check if there is a safe deposit box but follow any probate rules before opening. Search state agencies and unclaimed property sites, typically run by state treasurers, to recover possible additional assets. 

• Beneficiary designations: Review life insurance and retirement beneficiaries with your surviving parent to see if any changes need to be made.  

Don’t be afraid to ask for help 

It’s important to seek help and support from friends, family, or professional grief counselors during this difficult time. Don’t hesitate to ask for help with any emotional, practical, or financial issues you may be facing.  

While the above information may be helpful, it likely doesn’t cover every financial issue or situation that results from your parent’s death and might not apply to your personal situation or remaining parent.  

At Mercer Advisors, we offer comprehensive wealth management solutions that integrates financial planning, investment management, tax, trusts and estates, as well as insurance, all managed by a single team.  We can help manage all the financial and investment needs for an individual and their family. If you’re interested in learning more about handling an estate or setting up your own estate, let’s talk.