What Tax Deadline Did My Family Almost Miss?
The year my father died, my mother had a decision to make about some savings bonds she and my father had set aside together. With everything else she was dealing with, she wanted them off her plate. But she decided to wait until after Christmas to deal with it. The holidays felt like the wrong time to add a financial task to an already difficult year, and that felt like a reasonable choice.
She cashed them in that January, just a few days into the new year.
Those few days mattered more than any of us realized. A surviving spouse generally may still file jointly in the year their spouse passes away. After that, they generally must file under a different status. Filing jointly is often more favorable than filing separately, especially with extra income to report, and cashing in savings bonds counts as income.
By waiting until January, my mother missed that window by days. It cost her more in taxes than she would have owed had she cashed those bonds in just a few days earlier in December instead. Whether a gap like that ends up being hundreds of dollars or thousands, it is money a family can avoid losing if someone knows to watch for it.
Why this is easy to miss
Nobody sends a notice telling a surviving spouse that a filing status is about to change. There is no form that arrives in the mail flagging a deadline like this. The year simply turns, quietly, while a family is dealing with everything else a loss brings with it. My mother was not careless. She made a reasonable choice to wait on a financial task during an already overwhelming time. The problem was not the decision itself. It was that nobody had told her the timing mattered.
If you are dealing with this now
If a spouse has passed away this year, it may be worth finding out sooner rather than later whether a decision like this is sitting on the calendar. Income that could be reported in the year of the loss, an account that could be settled before the year turns, a filing choice that only exists for a limited window. These are not always obvious, and they are not always urgent in the way other tasks feel urgent. But some of them, like my mother's, only exist until December 31.
If you are planning ahead
This is also worth thinking about before a loss ever happens, not just after. Part of getting organized is simply knowing what accounts and assets exist in the first place, savings bonds, retirement accounts, anything that could generate income if it were ever cashed in or transferred. A family that already knows what they have is in a much better position to ask the right question at the right time, instead of finding out a window existed only after it closed.
If you want to see how the numbers actually play out, including a worked example of how much a delay like this can cost, I wrote about it in more detail in an earlier newsletter, Tax Considerations After a Death.
Every family's tax situation is different, and this is not something I am able to advise on directly. A qualified tax professional or accountant is the right person to confirm what applies to your specific situation and to help you act on it before the year ends.
What I can help with is making sure questions like this get asked in the first place, whether you are in the middle of a loss now or simply making sure your family is organized ahead of one.
If you would like to talk through what applies to your family, I would love to help.