What do you do about the final paycheck for an employee who has passed away? The law provides that when an employee dies leaving wages that are due and payable, the surviving spouse, reciprocal beneficiary, or if there is neither a surviving spouse or reciprocal beneficiary, then any adult child of the deceased, may obtain unpaid wages, vacation, and sick leave from the employer in an amount up to $2000.

If a family member or representative of the employee does not make immediate inquiries concerning the deceased, you should send a letter to the deceased employee’s address stating that you are holding amounts for the deceased employee’s estate. Any claim for unpaid wages up to $2000 by the surviving spouse or reciprocal beneficiary (or if there is no surviving spouse or reciprocal beneficiary, then any adult child) must be accompanied by an affidavit of the claimant. The affidavit must include the following information:

• Identification of the relationship between the claimant and the deceased (i.e., claimant is the surviving spouse, reciprocal beneficiary, or there is no surviving spouse or reciprocal beneficiary and that the claimant is an adult child of the deceased); and

• Acknowledge the receipt of payment of the amount released by the employer.

Upon presentation of the properly completed affidavit, the employer should release up to a maximum of $2000 of unpaid wages (including any unpaid vacation and sick leave). The check may be payable to the claimant or to the estate of the deceased. Because the final check will not be income to the deceased, but is payable to the deceased employee’s estate or beneficiaries, employers should not withhold state or federal income tax. If the deceased employee’s wages are paid to the employee’s beneficiaries or estate in the same calendar year the employee died, the wages are subject to deductions for FICA and FUTA. For reporting purposes, the final wages paid to the estate or to beneficiaries are not included on the deceased employee’s W-2, but are reported on a 1099-MISC if more than $600.

Have questions? Contact your HEC consultant for more information!