A friend or loved one has passed away. A few months have gone by, and you remember that you agreed to be their trustee/executor. When they asked, you were flattered and honored. Now you are overwhelmed by the magnitude of the job. You were never a “numbers person”. Organization is not your strong suit, and the legalese of the will and trust document might as well be gibberish. What once seemed like a good idea is now keeping you up nights. It does not have to be that way. In fact by following a few steps and choosing the right professionals that mountain of paperwork can easily be scaled back to a mole hill.
As an executor, one is required to corral all the decedent’s assets and liabilities, determine their value at the date of death, pay final debts, file the final tax returns, determine if estate taxes are due, and distribute the decedent’s assets as directed by either the last will and testament. Or, in the absence of a will, by the laws of intestacy that vary by state.
A first step in the process is reading the will. Unlike Hollywood, this is usually not a formal dramatic event in a mahogany walled office. Instead it can be rather low key and relaxed. Take notes and if complicated, draw flow charts that illustrate what happens to the assets. If trust documents exist, it would make sense to read them now too. These instruments often work in conjunction with one another, and a clear understanding of them at the beginning of the process can make the entire route smoother.
Obtain copies of death certificates. In some instances you could easily use a dozen. Notify the Social Security Administration, retirement plans, credit card companies and any organizations of the death. Now would be a good time to prepare an inventory of the decedent’s assets. It the decedent did not leave a spread sheet listing all their assets, do not despair. You may have to do some searching, but it has been done before. A good way to start the hunt is by familiarizing oneself with the schedules for the IRS tax form 706. Looking for assets based on the schedules will automatically organize your search and ease the preparation of an estate tax return if required. Going through the last tax return filed often reveals income producing assets. Reading mail, going through safe deposit boxes and looking under the mattress may also ferret out assets.
Once all the assets have been found, they must be valued as of the date of death (or six months later- the alternative valuation date). For some assets such as real estate, family businesses or extensive collections of art, formal appraisals may be required. Be certain to hire professionals with good credentials.
The next step would include filing the appropriate documents with the court. Although most court documents can be found on-line these days, it would be prudent to seek the services of a competent attorney. This is not the time to be penny wise and pound foolish. An estate attorney would take all the guess work out of these proceedings, and their fees are deductible on the estate return.
If an estate return is required, it is due nine months (to the day) after the date of death. A six month extension of time to file is available, but any taxes due must be paid with the extension. As an executor, you could be personally liable for the taxes due on the estate; it is therefore prudent to delay distribution of the assets to the heirs until receiving a closing letter.
With these tips in mind, even a novice can navigate the intricacies of estate administration.