Death is a natural part of life, but that doesn’t mean it’s easy to cope with a loss. So many things change when a family member passes away that it can be hard to keep track of all of them, especially matters like finance that can seem inconsequential when it comes to coping with grief. However, having an accountant’s help during difficult life changes like the loss of a loved one is important. In your future accounting career, you may need to advise families on matters related to income taxes, the estate or “death tax” and moving forward with their finances after a death in the family.
Death and Taxes
Among the biggest criticisms of the United States income tax system is that it is overly complex. A death in the family further complicates matters. Can a widow or widower still file a joint tax return if his or her spouse passed away during the tax year? What about how the loss of a child affects a taxpayer’s deductions? Can you still write off medical bills if the patient is now deceased?
Obviously, questions like these aren’t the first thing on the mind of a bereaved client. When tax time rolls around, though, these questions need answers – which means your clients will need your help, guidance and expertise.
The “Death Tax”
What happens if your client received an inheritance as a result of a family member’s passing? Depending on the circumstances, including the size of the inheritance, it may be subject to taxation.
The federal estate tax, known colloquially as the “death tax,” has been a matter of political contention for years, Accounting Web reported. It has been the subject of frequent tax code changes or pushes for tax code changes. Naturally, this constant back-and-forth makes it difficult for recipients to understand what their tax obligation, if any, is. Of course, to properly advise clients who come to you with questions about the federal estate tax, you will have to keep on top of these and other tax code changes yourself.
Moving Forward Financially
For many families, one matter that can’t be put on hold is moving forward financially after a loss. Bills still need to be paid. If the surviving family members have little experience handling the family’s finances, suddenly becoming responsible for the financial decisions can be overwhelming, Kiplinger reported – especially on top of their grief. Clients in this situation may call you for help with matters like identifying their bills and financial accounts, handling life insurance payments benefits and creating and following a budget.
Clients come to their accountants for financial help involving all sorts of life changes, and the death of a loved one is no exception. While it can be sad or even uncomfortable to talk about the financial changes that result from a death, handling the situation with compassion and professionalism make your client’s life easier and grow the accountant-client relationship.