Estate Planner Nov-Dec 2000
Few of us are prepared to oversee the financial affairs of a recently deceased relative or close friend’s estate. Nevertheless, it would not be unusual for such a person to name you as executor (or personal representative) of his or her will.
Of course you could decline the offer. Circumstances may have changed since your relative or friend asked you to be executor — or he or she may never have consulted you. And, perhaps, a successor such as a bank or trust company could better serve the family. But if you decide to accept the responsibility of executor, you could have a long and complicated task ahead. Let’s review some of the duties you’ll perform as executor and then examine the steps necessary to administer the estate.
Duties of the Executor
Running an estate is similar to running a business. You’ll have to make decisions regarding each asset and claim. The first month or so of the estate’s administration will be busy. Your duties as executor may include:
- Collecting and managing estate assets,
Investing estate assets to preserve value,
- Directing the payment of taxes, debts and administration expenses from estate assets, and
- Distributing the remaining estate assets to the named beneficiaries or heirs in accordance with the terms of the will.
You’ll need professional advice and assistance throughout the administration of the estate. Assemble a team consisting of an accountant (particularly one who is familiar with the decedent’s financial and tax records), an attorney qualified in estate and trust administration, a life insurance broker with expertise in filing insurance claims, and, in large estates, a financial manager or advisor. You may be able to combine various functions in one firm or individual or choose to spread the duties among several. You may also need to establish banking and brokerage relationships for the estate.
Administering the Estate
Once you assemble your team of professional estate advisors, begin preparing to administer the estate or trust. Your team members may assume many of the specific tasks, but you need to understand the steps involved in the administration. Here’s a brief explanation of those steps:
1. Confirm that appropriate funeral arrangements have been made.
2. Safeguard the decedent’s household and assets until you’ve taken control of them. This may involve changing locks or notifying asset holders and power of attorney users of the decedent’s death.
3. Locate the original will and file it with the appropriate supervisory court — usually a probate court.
4. Determine whether a formal reading of the will is required and whether to send a copy, summary or outline to interested parties.
5. Have the will formally accepted in a probate court and have yourself appointed as the personal representative of the estate.
6. Direct the post office to forward the decedent’s mail to you.
7. File Form 56 with the IRS, advising that you are the estate’s personal representative and entitled to receive all IRS notices.
8. Determine the nature and extent of the decedent’s assets and family benefit plans. These may include the contents of safe deposit boxes; Veteran’s Administration and fraternal organization benefits; existing qualified benefit plans; and individual retirement accounts, securities, and brokerage and banking accounts.
9. Determine whether the estate should pay the surviving spouse and minor children awards or allowances and whether Social Security benefits are available.
10. File medical insurance claims for payment or reimbursement of expenses for the decedent’s last medical care.
11. Identify life insurance policies, file claims for proceeds and obtain Form 712 from the insurance companies for use with the federal estate tax return.
12. Determine what formal notices you need to give to interested parties and the type of notice court rules require be published in a local newspaper.
13. Ascertain the estate’s liabilities, such as the decedent’s debts, bank loans, mortgages and auto loans, and arrange for payments or settlement.
14. Formally object to all questionable claims against the estate.
15. Arrange for valuation of all assets except cash items and marketable securities. This includes real estate (residence, investment and business), closely held business interests, investment interests in partnerships and limited liability companies, and tangible personal property — including personal effects, jewelry, antiques and art collections.
16. Prepare an estate asset inventory and determine whether you need to file a copy with the court and whether beneficiaries should receive copies now or later.
17. File the decedent’s income tax return for the prior year (if unfiled) and for the year of death.
18. File income tax returns for the estate.
19. File federal estate tax returns and state estate or inheritance tax returns for the estate and related trusts.
20. Determine whether you need to file gift tax and generation-skipping tax returns for the year of death and for prior years.
Look Out for Trouble
If you assemble a competent team and delegate many of the executor duties to professionals, you may ultimately have a rewarding experience. But if there is a disgruntled heir, a confusing or ambiguous will, or a conflict among family members, your experience may be frustrating and difficult. If you decide to serve as executor, make certain you understand what may lie ahead.