A CPA just asked for my help in advising the CPA’s client on how to distribute the last paycheck(s) of a deceased employee. When an employee dies, the employer needs to treat the situation similar to any other termination of an employee. The estate would be entitled to the deceased’s last pay, unused vacation time, etc. as if the employee was alive but no longer employed.
The biggest distinction in dealing with monies owed to a deceased employee is how to protect the employer from giving the money to someone not authorized to act on behalf of the decedent. The best way for the employer to be protected is to insist that a representative of the deceased’s estate provide an original death certificate and one of the following two documents:
(1) Letters of Authority issued by a court. To be valid, the letters must have a court case number and be signed and certified by a judge or court clerk. The form that the letters will usually take can be found here.
(2) An Affidavit for Collection of Personal Property. This affidavit replaces Letters of authority where the deceased’s assets did not include real estate and were not worth enough in total to justify a court case. The form that the affidavit usually takes can be found here.
Note that this advice is based on Colorado probate law and is not applicable to estates outside the state of Colorado.
Under Colorado law, only one of these documents is appropriate, depending on the assets in the estate. It is not up to the employer to determine which of these documents is appropriate for the decedent’s estate. That is up to the representative. If the employer is presented with either of these documents signed by the appropriate party (and notarized in the case of the affidavit), the employer can feel comfortable providing the monies owed to the deceased to the party named in the document.
If you are the representative of a decedent’s estate in the Arvada, Colorado area and you don’t know which of these documents to choose, consult with our firm or a competent attorney specializing in probate or estate administration.