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A common misperception is that nothing need be done on the first death between spouses. This can cost the estate millions and the children their inheritance when the survivor dies.

However, it is understandable why people have this misconception. Married couples own most of the assets so that both have access and control, such as joint tenancy. The survivor can still write checks, pay bills—live goes on without administration. But opportunities can be lost and obligations left unattended to if nothing is done.

When a spouse dies the survivor’s grief can be compounded by numerous questions cluttering the mind and causing needless anxiety. It is often said in our profession that there is an unwritten rule that the spouse who handled the family finances dies first. This leaves the survivor groping for answers and not knowing who to trust.

The general process of administration is the same for surviving spouses as it is for all estates: 1) Marshal the assets, 2) Pay the expenses and taxes, 3) Distribute the assets to the spouse or trusts for the spouse’s benefit.

Here is a sample of some of the questions the surviving spouse may have to deal with. It is highly advisable that he or she do so.

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1. Administration means that someone other than the deceased now has the benefit of the decedent’s interests in the assets. Changing title to the decedent’s assets must be done. Contrary to popular belief, it isn’t automatic—not even with joint tenancy—not even with a trust.
2. Should you rollover the IRA or other retirement plan, take the money out, or leave it where it is? The answer to this question involves both estate planning and tax planning issues. Income tax benefits will be lost if the wrong decision is made. Make sure your attorney, CPA, and financial advisor all agree on this one. Early mistakes may not be reversible and they can cost you and your children a lot of money.
3. Will there be a probate? Many people don’t realize it only takes $100,000 of assets in the decedent’s name to be subject to the expense and delay of probate. There are many ways to avoid probate—joint tenancy, transfer on death, beneficiary designations, living trusts (funded!), etc. But the title of each asset needs to be reviewed in order to make a determination of whether a probate will be required.
4. Which assets are the most efficient to spend on estate expenses? For example, it usually is not advisable to spend IRA assets since an income tax has to be paid on the withdrawal. For similar reasons it may not be advisable to sell stocks that will incur a capital gains tax in order to raise money to pay the expenses.
5. What steps need to be taken to prevent identity thieves from transacting business in your deceased spouse’s name? Deaths are public record. People who know what they are doing can take advantage of the situation.
6. Who will you keep the doors of the family business open while you find a buyer? The value can be seriously eroded as customers go elsewhere during the administration process.
7. Who do you turn to: Your attorney? Your CPA? Your financial advisor? All are essential but many spouses often find themselves without such existing relationships and have to find them in a time of crisis. Putting together a team of advisors who speak with one voice is essential for your peace of mind.
8. Would it be better to let some of the money go the kids? If you are financially comfortable there are ways to let the children begin enjoying some of their inheritance while you are still alive. There may even be tax advantages to doing so instead of waiting for the survivor to die before the children inherit.
9. What are the deadlines for making these decisions? The number one reason for attorney discipline is blowing a deadline. Go to www.ilardc.com and click on "Lawyer Search." By filling in the name of the attorney you can find out two important facts: One, the disciplinary history and two, whether the lawyer carries malpractice insurance. (Unlike some States, Illinois does not require lawyers to carry malpractice insurance.)
10. One of the most overlooked opportunities is the failure pay attention to estate taxes. There is a false sense of security about estate taxes because the exemption is so high by historical standards and because the IRS rules favor spouses. But millions of dollars are needlessly wasted by failing to attend to this issue in administration. Handling the estate properly on the first death even though there is no tax at this point is critical to making sure the children pay as little in estate taxes as possible when the survivor dies.
11. How safe is the children’s inheritance if you decide to remarry? Children are often inadvertently disinherited because of the remarriage of the surviving spouse. The risk of this happening can be greatly reduced or even avoided if the administration issues are death with properly at the outset.