You Are Executor of an Estate - Now What?Submitted by Retirement Visions, LLC on January 23rd, 2019
Being named the executor of an estate may not be as certain as death and taxes, but it’s often nearly as unwelcome.
The executor’s role is to marshal the deceased’s assets, pay creditors, and distribute what’s left to heirs and assigns. The paperwork can be numbing, but the biggest problems often come from other surviving family members who don’t want to do the job but surely want to complain about how it’s done.
The executor’s job typically begins with a hunt for essential papers, starting with the original will. Most courts will not accept a copy, and you’ll also need 10 to 20 copies of the death certificate. Without both of those things, you’re not going to get any traction from the court.
Thus paper-armored, an executor heads to the county court to get recognized. After being judicially blessed, the executor can contact banks and brokers, open safe deposit boxes, and otherwise gain access to the deceased’s assets.
There are actually four estates that need to be settled. The probate estate consists of stocks, certificates of deposit, and the like. Getting access to these is the purpose of the probate process, which assures banks and others the executor has the proper authority.
The contract estate is controlled by contracts, such as life insurance policies. These are handled outside probate. Simply present a death certificate and insurance benefits are paid to the beneficiary. The knick-knack estate is furniture, photos, memorabilia, and the like. The fourth estate consists of any trusts that have been set up. These are also handled outside of probate.
To navigate this maze, an executor usually fields a team of professionals. The group frequently includes an attorney, accountant, financial planner, appraiser, auctioneer, real estate agent, and insurance agent. Last but not least, there is often a mover to haul away—frequently to the landfill—the miscellaneous physical belongings of the deceased.
An estate can usually be settled in around six months, although some drag on for years. One typical delay comes when a will bequeaths valuables to a minor. Because minors can’t legally own property, the estate can’t be finally settled until the minor reaches adulthood.
Fees and court costs often reach several thousand dollars. However, except to the extent that an estate is worth more than the federal estate tax limit - which adjusts to inflation - taxes are not usually a factor.
Quarrelsome family members can ramp up costs rapidly, however. When the kids start fighting about who gets paid, then the lawyer gets paid. The long drawn-out processes and huge fees are generally related to kids fighting the will, fighting over the lawn mower, fighting over who’s on the bank account, and fighting over who’s in charge.
To minimize bickering, try to avoid having more than one executor, and choose the person who has the best math chops and attention to detail. Communication also helps. If you’re executor, consider setting up an email list or text message group to give all involved a blow-by-blow account of every step. I tell my executors to use overkill on letting everybody know what’s going on.
Even if calm reigns, there is potential for costly errors. For instance, if an executor closes a deceased’s IRA and receives a check, the funds become taxable income. To avoid this gotcha, set up a beneficiary IRA and have funds transferred to that account, which should keep the transfer tax-free.
Yes, being an executor is a thankless job, but with a clear mind and the right help, anyone can do right by their deceased loved ones all while keeping peace in the family.