Your Social Security check stops when you die. Your financial institution legally must return any payments that are received after you die. Is your family going to be able to weather this major disruption to the household income? Hopefully you are not counting on VA benefits or your federal annuity to close the gap in cash flow; they will stop at the same time. Any other pensions or annuities may also stop depending on the benefactors’ individual policies.
You may still want to hold on to some type of a reserve fund, even in retirement. The well-worn benchmark is to have six months expenses available for emergencies. This may not be realistic for everyone, but it is a good starting point.
Your survivors should contact the appropriate agencies and companies as soon as reasonably possible after you die. This accomplishes several things. First, it will limit potential over payments they may get which will have to be returned.
Secondly, a surviving spouse may have been receiving a substantially smaller amount from Social Security than the deceased spouse. This spouse may be entitled to receive more, however, there will be a new eligibility processing which can take time. By contacting Social Security sooner, unnecessary cashflow delays will be avoided.
As many are aware, the government is not alone in stopping a payment quickly and restarting any benefits, if available, in a more deliberate manner. Life insurance companies are among the more rapid responders, however they may only process payments on a few days each month. The probate process can also delay final transfer of your estate. Make sure your cookie jar isn’t empty.
Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.