Sibling attempts to settle brother’s financial affairs with no will, designated beneficiary

He worked for the federal government for multiple years and had built up a significant amount of benefits with retirement accounts, a pension and life insurance. As I have been navigating to settle his affairs and pay bills and liabilities through the estate, I found out all of his benefits from the federal government bypass the estate. I found this to be rather odd, given I am still trying to pay off all the bills owed by the estate and none of the monies will pass through the estate.

I’m curious if you have ever heard of this. I had read that when there are no named beneficiaries everything passes through probate and is managed by the administrator of the estate. It seems as if the federal government is pulling a fast one to avoid the process. Any insight on your end is appreciated, as I enjoy your weekly articles and perspective. Thank you.

A: We’re sorry for your loss and for all the work you’ll have to do to straighten out your brother’s financial affairs. You should know that your brother could have named a single or multiple beneficiaries on most (if not all) of his financial accounts. Or, he might have been able to set up a transfer on death (TOD). If he had done either of those, the money in those accounts would have automatically transferred to those designated beneficiaries, bypassing the estate.

We’ve written before about settling an estate and TODs, so we’ll focus on naming beneficiaries and the other issues you’ve raised.

For example, let’s say you have a financial account that allows for the designation of a beneficiary. Upon the death of the owner, the beneficiary could show up at the financial institution, prove that the owner has passed (with a death certificate) and the institution will put those assets in the name of the beneficiary. The transfer may require some paperwork and the delivery of documentation, but in concept the process should be rather straightforward.

We suspect that you’re in a situation where the financial institution or the government agency only needs to know who the court has designated as the named beneficiary for them to transfer those assets to that person. In this situation, you would not see the assets deposited into a general account for you to distribute, even if you are the executor of the person’s will.

You’ll need to consult with an estate attorney in your area who has experience with wills and the probate process. One thing we should mention is that the probate process differs from state to state. While many general principles hold true, when it comes to the intricacies of probate and the mechanics, each state treats probate differently. You don’t want to get tripped up by the system.

When it comes to other assets that do not allow for the designation of a beneficiary, the process is more complicated. These assets might include a home, bank accounts, cars, boats, stock certificates or bonds in paper form held by the owner. You, as the executor under the will or appointed by the court to handle your brother’s affairs, can sell these assets and then deposit those proceeds into the account for the estate.

You mentioned that you’re working on paying off your brother’s debts. You should be able to do that using funds from the sale of his assets, including the sale of his home.

We’re sorry your brother left you with so much to do, especially since it appears that he didn’t set up his financial accounts as he should have by naming beneficiaries. It would have been helpful if he had written a will and had an estate plan in place so you would know how he wanted you to settle his affairs.

No one likes to think about their own death. We’re all so focused on today: paying our bills, raising our families, enjoying life as best we can. Your question is a good reminder to go over your financial accounts and see if you are able to designate a beneficiary on each one. For accounts that don’t allow beneficiary designations, our readers should make sure to have a properly drafted will in place. Let the executor of the will know where to find a copy and which attorney (or law firm) worked on the will.

We doubt that the federal government is trying to do something that would be improper with your brother’s accounts. But, since you have questions, and the disposition of the estate sounds complicated, you should consult with a local probate attorney to get some guidance on how to proceed. Be aware that you might have to account to the probate court for all of the assets and all of the debts in your brother’s estate and show the court how everything was distributed.

Good luck and, again, we are sorry for your loss.

(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through their website, bestmoneymoves.com.)