It happened during the first round of direct payments that went out under the CARES Act, and now, we could be in for a repeat. Deceased individuals may be in line for stimulus checks under the latest relief bill.
Earlier in the week, lawmakers approved a $900 billion coronavirus-relief package after months of negotiations that includes direct stimulus payments in the amount of $600 per eligible adult and dependent child. And the good news is that those payments have already started going out.
For eligible recipients with bank account details on file with the IRS, those payments should hit pretty quickly. In fact, some people may have their stimulus cash in hand already. Those who don't have bank account details on file with the IRS will need to wait longer, as was the case with the last stimulus round, but Treasury Secretary Steven Mnuchin has stated that paper checks would start going out as early as Dec. 30. But some of those direct deposits or checks may be issued to individuals who can't use them -- because they're no longer among the living.
What happens when stimulus checks go out to the deceased?
Earlier in the year, when stimulus payments went out under the CARES Act to deceased individuals, the IRS was quick to ask for that money back. And now, there's a measure in place in the new bill that will prevent people who passed away before Jan. 1, 2020 from receiving a direct payment under this second round.
But it's still unclear as to what will happen when payments are sent out to those who died after Jan. 1. So the question is, if people who died in 2020 get that money, will their heirs be allowed to keep it?
What to do if you get a stimulus check for a deceased loved one
If you're on the receiving end of a stimulus check that was issued to a loved one who's no longer with us, your best bet is to hang onto it but not spend it. Though the IRS may not have a legal leg to stand on with regard to asking for that money back, it may also attempt to recoup funds issued to people who passed away in 2020.
Once there's better clarity on the matter, there's no reason not to use that money for whatever purpose you deem suitable, whether it's paying down debt, investing in stocks, or buying household essentials. But for now, you may want to let that money sit in the bank and earn whatever minimal interest it can. The last thing you want is a lawsuit on your hands for hanging onto money you aren't entitled to.
Another thing -- lawmakers still need to vote to increase this latest round of $600 payments to $2,000 apiece. If that measure goes through, those who receive the initial $600 will be in line for an additional $1,400. If that happens, the same rules apply -- don't touch that money until you're certain it's yours to keep.