Emergency Savings Fund – Help Pay for a Parents Estate
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Over the past few weeks, my wife and I have been going through the fun of managing the estate of one of our deceased parents. This parent was widowed over two years ago, so when they recently passed away, we became the executor of their estate. When I say “we”, I really mean that one of us was listed as the executor … but the other one of us has been doing an equal share of work helping to settle the estate.
While we don’t know the exact value of the parents estate and living trust that had been setup many years ago … it is more than enough to help pay off any debts the parent(s) had.
It is also likely that a good amount of assets will be leftover … that will eventually be inherited by our family and one additional sibling … split 50/50.
Losing a parent is tough. It’s hard on my wife and I … and it is even harder on our children. Losing a grandparent is difficult for our children to deal with … especially since they were close. But losing both grandparents on this side of our family is even worse.
And all the while we are going through this grieving process … we are also now managing the finances of this couple. This process has been quite the learning experience for my wife and I.
For example, even though this set of parents have a good amount of assets … they are currently frozen. Until all the paperwork goes through (we get the death certificate), the money they had saved up cannot be touched.
This couple owned a house with a paid off mortgage, but they have utility bills, HOA due’s, credit card debt, medical debt, etc. that needs to get paid.
Some of this debt can wait … like the credit card companies told us not to worry about paying off the balances right away.
But there are other bills and debt that need to get paid.
So with no assets available yet to help “keep the lights on”, we’ve had to turn to our own emergency fund.
Today I would like to share with you yet another reason why you need to have an emergency fund. I would have never thought we’d need to tap into our emergency fund to help manage our parents finances … but we did.
Using Your Emergency Fund to Help Settle an Estate
Before I get into the details, I want to point out that my wife and I will eventually get our emergency funds credited back to us. We’ve been instructed by our estate lawyer to keep the receipts and a detailed log of the transactions we are making on our parents behalf.
Once the funds of the estate are unfrozen, we can write ourselves a check for reimbursement.
Withing the past two weeks (since our parents death) we have had to pay almost $10,000 in expenses for our parent. Some of this was due to unfortunate timing (tax deadline), while other expenses were to cover things like the funeral.
Below you will find a breakdown of the types of expenses we are currently paying from our emergency fund.
What Expenses are We Paying for the Estate?
At the time of this writing, my wife and I have paid out close to $9,600 from our emergency fund to cover costs of our parent. This number will likely grow over the next couple of weeks … or at least until an estate checking account can be setup on their behalf.
In the meantime, we are using our emergency fund to cover some expenses like the following –
- Funeral Expenses – $3,175
- Tax Preparer – $175
- Federal & State Taxes – $6,070
- Housing Expenses – $180
Total Expenses (to date) – $9,600
We had always thought (or had been told) that the funeral for our parent had been prepaid. When the spouse had passed two years ago, it was assumed the surviving parent paid for both funeral at the same time. That actually wasn’t the case and the total funeral expenses cost us about $3,175.
This wasn’t really an expense we could wait on paying … so we used our emergency funds.
Next, our parent passed away right before they filed their federal and state income taxes for the year. Combined they owed $6,070 in taxes for 2018. We considered filing an extension … but didn’t want to deal with estimated taxes, fines, etc.
Since we had the available funds, we used them to pay for their tax bill. Ironically, we just got back our tax refund (almost $5K) and used it all to help cover their tax obligation.
And our parent used a tax preparer … so that was another $175.
Finally we’ve had to cover some expenses with our parents home … that we are working to get ready to sell. As the days and weeks go on, we will likely have to cover more of these housing expenses … or at least until we can open up their finances.
Are There Any Future Estate Expenses?
As the days and weeks go on, there will be more expenses to get paid. For example, the house we are going to eventually sell will need new carpeting. If we don’t have access to the estate funds … we will use our emergency fund temporarily.
There will also be utility bills that need to get paid – water, electric, and gas. The cable has been shut off … along with any other unnecessary monthly expenses.
Depending on when the house sells, another round of HOA due’s may need to get paid.
Hopefully once we get the death certificate and an estate checking account is setup (from getting a tax id) … we can start covering the cost of our parents estate from their savings instead of ours.
In the meantime, we will keep using our emergency fund to temporarily cover those costs.
A Good Emergency Fund Will Give you Options and Power
My wife and I could have made the choice to not cover our parents taxes, housing expenses, and drastically reduced the cost of their funeral.
However … by having a well funded emergency account, we had the power to do what we think is the right thing.
Instead of letting the taxes slide, we used our emergency funds to cover those expenses for our parent. We are willing to use our emergency funds to pay for things around the house … in order to help it sell quicker.
Because we have a good emergency fund, we have options. We have the power to choose what to pay and what not to pay.
And just because we are spending that money now doesn’t mean we won’t eventually get it back.
Our parents have done a lot for my wife and I and their grandchildren. Now it was time for us to do the same for them.
It was all possible by planning for a solid emergency fund that gave us the option to take care of their estate.
Have you ever had to dip into your emergency funds to help settle an estate for a loved one? What other types of things have you had to use your emergency fund for?