Navigating the Liquidity Crisis Upon Death: The Role of Death Certificates and the financial hardship they create.

Article by Amy Bloom

THE BENEFICIARY LIQUIDITY PLAN

Death is an inevitable part of life, and with it comes the responsibility of managing one’s estate. However, the period following a loved one’s passing can be fraught with financial challenges, particularly the liquidity crisis that families face. This crisis arises due to the immediate need for cash to cover expenses such as funeral costs, outstanding debts, and ongoing living expenses, all while the deceased’s assets remain inaccessible. Empathy.com states that beneficiaries pay for their loved one’s final expenses from their own funds 79% of the time.[1]

The crux of the issue lies in the death certificate. This legal document is essential for beneficiaries to unlock the assets of the deceased. Unfortunately, obtaining a death certificate can be a lengthy process, often taking weeks or even months. During this time, assets such as bank accounts, stocks, annuities, and real estate are effectively frozen, leaving families in a financial bind. Additionally, life insurance benefit claims may take 30, 60 or more days to process even after the death certificate has been received.

Financial obligations do not end upon death.

The liquidity crisis is also compounded by the fact that the deceased’s financial obligations do not pause with their passing. Mortgages, utility bills, and other debts continue to accrue, putting additional pressure on families who may already be struggling with the emotional toll of their loss.

How death certificates are requested and issued has changed.

One of the largest causes of delays in issuing death certificates occurred during covid. County courthouses no longer allowed walk-in or face-to-face requests and moved ordering them to electronic or online processes. This change remains in effect today. Depending on the state and county, it can take on average 30-45 days to obtain a death certificate, but often takes months to issue leaving the family to scramble for funds to pay expenses.

Additionally, staff shortages along with office closings or reduced hours has caused delays in issuing death certificates creating significantly longer processing times.

What else can delay death certificates?

·??????? Medical examiner waiting for test results.

·??????? Unknown cause of death or rare illness.

o?? Prince’s siblings were gifted $20,000 by Prince’s friend, George Lopez because they could not access his $156 million estate due to him passing from a rare illness that delayed obtaining a death certificate.[2]

·??????? Autopsy or investigation into a death.

·??????? Death occurred outside of regional area, country, or international waters.

·??????? Personnel unavailable for live signatures.

o?? Cook County - Chicago, IL population five million!??

Chicago Tribune reports April 12, 2024, Cook County Clerk passes away unexpectedly, and no death, marriage or birth certificates can be signed or issued.[3]

·??????? Data entry errors on applications.

·??????? Signer forgets to date the application.

·??????? Another global pandemic or other unforeseen crisis.

Even the best financial plans often do not provide liquidity.

Financial advisors provide guidance to protect assets and transfer generational wealth through the financial planning process. Avoiding probate, estate and other tax consequences are the main objective while maximizing growth strategies to ensure retirement income or pass on familial wealth. However, all the planning solutions including wills and trusts do not provide quick and easy access to funds upon a client passing, thus creating a liquidity crisis for beneficiaries.

Financial planners manage their clients most important asset, their money. Clients trust their advisors implicitly. Managing client’s risk and understanding their risk tolerance is essential for managing client assets, but also in identifying the need to reduce their risk of funds not being available to their family when they need it most. Removing the liquidity crisis for their clients should be a top priority.

Address potential financial gaps and provide a solution.

Liquidity gaps need to be addressed for the sake of the client and their families. There are products available today that will help close those gaps and provide liquidity within 24-48 hours upon passing without requiring a death certificate by simply working with a licensed funeral home. Advisors should research available products and begin having liquidity discussions with their clients. Filling those liquidity gaps will lead to asset retention and build a bridge to the next generation of wealth, the client’s beneficiaries. Wealthmanagment.com states that 66% of beneficiaries fire their parents’ advisor immediately upon inheriting wealth.[4]

?These liquidity plans provide a solution by ensuring that beneficiaries have quick and easy access to funds specifically allocated to cover end-of-life expenses. This rapid access to funds is crucial, as it provides beneficiaries with the financial breathing room they need during a time of grief. It allows families to focus on mourning and celebrating the life of their loved one, rather than being burdened by financial worries.

Moreover, liquidity plans are not just a stopgap measure; it is a strategic component of a comprehensive financial plan. By integrating a liquidity plan, individuals can ensure that their estate plan is complete, providing peace of mind that their loved ones will be financially secure after they are gone.

?In conclusion, the liquidity crisis upon death is a significant challenge that requires a thoughtful solution. Liquidity plans offer a way to mitigate the financial hardships that come with the loss of a loved one. Providing quick access to allocated funds helps families navigate the difficult period following a death, ensuring that financial concerns do not overshadow the process of healing and remembrance.

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[1] PR Newswire, 2022 Report, The Cost of Dying, Empathy, March 3, 2022, Empahty.com

[2] Krauser, Emily. Exclusive: George Lopez ‘Assisted’ Prince’s Family Following the Late Singer’s Death, 9 News, May 1, 2016, 9news.com.

?[3] Stevens, Olivia. Cook County Clerk’s death leads to records delay, Chicago Tribune, April 12, 2024, chicagotribune.com.

[4] Investment News Data, the great wealth transfer is coming, putting advisors at risk, July 13, 2015, wealthmanagement.com

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