Estate Planning Blog

What Does an Executor Need to Do?

Being named an estate executor is an honor and a big task. It is an honor because being named executor means your family member or friend trusts you implicitly enough to put you in charge of their estate when they are gone. It’s also a big task, with many moving parts to manage, which is the topic of a recent article from Kiplinger, “Eight Steps to Take When Settling an Estate as the Executor.”

You may feel like you must accomplish all of the tasks as soon as possible. However, working through an estate takes time. As a fiduciary, the executor must prioritize the decedent’s desires and the estate’s interests.

Managing expectations for the executor and heirs. It can take anywhere from two months to five years to settle an estate, depending upon its complexity and how much planning has been done. There is always the brother-in-law who knows better than anyone else how things should be handled and how long it should take. Ignore this.

Death certificates. An early task in the process is working with the funeral home to arrange memorial services, burial, cremation, or whatever the decedent wanted. Request ten original death certificates, since the probate court and financial institutions will want original certificates, which may or may not be returned.

Where are the estate documents? To file for probate, you (or an estate planning attorney) will need the last will and testament, trust documents, titles for cars or boats, deeds for the home, etc. ou should also try to locate a letter of instructions or intentions. This is not legally binding but can provide more insight into the person’s wishes.

Make a list of financial institutions, life insurance, and other assets. After you’ve been an executor and seen how complicated it becomes when you don’t have this list, chances are good you’ll start creating one for your own executor. A list of all financial institutions where accounts are held, the name of a financial advisor, estate planning attorney, or CPA, and information about all insurance (life, health, car, auto, home, etc.) spares the executor from having to conduct a scavenger hunt to identify these assets. Start a spreadsheet or a handwritten notebook to track every step you take with these assets, from who you speak with, what is said, best contact emails and phone numbers, etc.

Contact Social Security and any pension custodians. You’ll need to notify SSA and pension companies to have payments stopped and any benefits paid to the estate.

Find digital assets. Here’s where it gets tricky. Traditional assets often turn up when statements are mailed. However, if all statements are being made through email, you’ll need to log into the person’s computer and start looking for accounts, including financial accounts, credit cards, subscriptions, loans, leases and recurring charges. You’ll also need to notify the three credit bureaus. Look for a computer file or a printout of all accounts with passwords, including social media.

Contact the HR department if the person was still working. If the person has passed, let the HR department know. You may need to do some paperwork concerning retirement plans, health benefits and compensation for unused vacation time. Let the financial aid office know if a minor child is away at college. The student might now qualify for assistance.

Don’t be averse to getting professional help. Talk to the person’s estate planning attorney, financial advisor and CPA. If your loved one died without making a will, you’ll need help managing the probate process and figuring out what, if any, debts need to be paid. The estate planning attorney will also help you navigate any estate taxes, both on a federal and state level.

Reference: Kiplinger (April 3, 2024) “Eight Steps to Take When Settling an Estate as the Executor”

Inheriting a House? Navigate Your Options and Responsibilities

Inheriting a house can be a life-changing event with emotional and financial implications. Understanding your options and obligations is critical, whether you sell it, keep it, or rent it out. Insights from LendingTree show you how to make the most of your inheritance.

What’s the Legal Process of Inheriting a House?

When inheriting a house, you don’t immediately receive the title in your name. The inheritance process involves probate, where a judge reviews the will and appoints an executor to carry out the deceased’s will. The executor handles responsibilities like insurance, identifying debts or liens and paying utilities. They also distribute belongings and manage property taxes. This ensures that the estate’s assets settle any outstanding debts before you receive ownership.

What Should You Do when Inheriting a Home?

When you’re in line to inherit a home, there are five steps you should take immediately.

1. Communicate with the Executor: Establish a clear line of communication with the executor. This will help you learn the necessary information and simplify the transfer process.
2. Coordinate with Co-Heirs: Work with the others if you are one of several heirs. Avoid costly disputes by deciding whether to sell, keep, or rent the property.
3. Get an Appraisal: An appraisal calculates the property’s value. This informs your decision to keep, sell, or rent the home while informing you of tax liabilities.
4. Evaluate Debts: Identify any liens or debts tied to the property and compare them against the house’s value. Understand the financial implications and incorporate that into your decision.
5. Seek Professional Advice: Consult estate planning attorneys, accountants and financial advisors. These professionals can clarify ownership-related problems, such as debt obligations and inheritance taxes.

What Should You Do with the House?

Moving Into an Inherited House

Moving into the inherited house can provide a new residence or vacation home. However, this option can be costly due to mortgages, taxes, repairs and insurance.

Renting Out an Inherited Home

Renting out the property can provide passive income, while keeping it in the family. Buy out other heirs or work with them to share costs and rental income.

Selling Your Newly Inherited Home

Selling the house is a straightforward way to obtain immediate cash. The proceeds can help pay off debts tied to the house, and the remaining proceeds will go to the heirs.

How Can You Finance an Inherited House?

If debts and taxes are associated with the house, that doesn’t mean you need to sell. There are many ways to finance the home and keep your inheritance.

• Mortgage Assumption: Take over the existing mortgage if its terms are better than what you’d get with a new loan. The lender must approve the assumption.
• New Purchase or Refinance Mortgage: You can obtain a new mortgage or refinance to put the house in your name. This option is particularly useful when the property has a reverse mortgage.
• Cash-Out Refinance: Refinance the mortgage with a cash-out option to tap into the home’s equity to cover expenses, like buying out heirs or making repairs.
• Investment Property Loan: Mortgage an investment property if you plan to rent the house.

Inheriting a House? Schedule a Consultation Today

Navigating the process of inheriting a house requires legal, financial and practical knowledge. You can get this knowledge by scheduling a consultation with our estate planning attorneys. We’ll listen to you and provide tailored advice about handling your inheritance.

Key Takeaways

• Inheriting a House: The probate court oversees the inheritance process, and the executor handles legal and financial responsibilities.
• Options: Move in, rent out, or sell the property based on financial goals and agreements with co-heirs.
• Financing: Explore mortgage assumptions, new or refinanced mortgages and other financing options.

Reference: LendingTree (Nov. 16, 2021) “Inheriting a House? Here’s What to Expect”

What Happens When Executors Keep Beneficiaries in the Dark?

A couple who never had children created a will, leaving their six nieces and nephews equal shares of their estate upon their deaths. When the uncle died, the aunt remarried years later but never changed the will, except for giving her second husband a life tenancy in the family home. A recent article from Market Watch asks if what happened next is right: “My late aunt gave her husband a life tenancy in her home—but her attorney won’t even let us see the will. Is this a bad sign?”

The problems began when the aunt’s attorney told the nieces and nephews that they were responsible for the taxes and property insurance while the life tenant lived in the home. The nieces and nephews had never seen a copy of the will, so they are unsure of their responsibilities as remaindermen. Nothing in the estate needed to go through probate, so the aunt’s will was not available to beneficiaries through the county court.

This case illustrates several important estate planning points. First, an executor of a will (or an administrator of an estate) is required to keep beneficiaries “reasonably informed” of the will’s contents after probate. It seems reasonable for the nieces and nephews to be able to see the will.

In most cases, the person given the life tenancy is responsible for paying taxes and property insurance and for the general upkeep of the residence. Any other arrangement is unusual, so the nieces and nephews are right to want to see the will.

The life tenant has rights, including the ability to rent out the property. However, they can’t do anything to decrease the house’s value. It’s important to know that elderly people may be unable to apply for Medicaid because they live in the house this way.

If it has been months since the person died and there hasn’t been any communication from the executor, a few different scenarios are possible. It may be that the executor doesn’t know they are required to keep beneficiaries informed. However, it’s also possible that the executor is engaging in illegal behavior.

In most states, the executor is responsible for providing beneficiaries with a complete inventory and appraisal of all the estate’s assets. Depending on the state, probating an estate may take more than six months, and creditors have a certain number of months to file a claim.

Suppose the beneficiaries wish to replace the executor. In that case, they can do so by speaking with an estate planning attorney and being prepared to go to court and prove the executor is either self-dealing, incompetent or has a conflict of interest.

However, once the will is probated, it will become part of the public record and must be filed in probate court. Depending on the jurisdiction, the court will give the beneficiaries the right to access the will.

The best option for the nieces and nephews is to consult an estate planning attorney to explore their options. If they live in a different state, a local estate planning attorney can recommend someone in their aunt’s jurisdiction to help.

Reference: Market Watch (April 28, 2024) “My late aunt gave her husband a life tenancy in her home—but her attorney won’t even let us see the will. Is this a bad sign?”

An Estate Plan Question: How Do My Heirs Receive Their Money?

You are proactive and designed an estate plan with your beneficiaries in mind. You evaluated the options and chose a trust to distribute your wealth as you intended. Have you considered how your heirs will receive the money?

Trusts are powerful estate-planning tools that bypass probate and provide a structured method for transferring assets to beneficiaries while minimizing tax implications. But how do beneficiaries receive money from a trust? The Smart Asset article “How Does a Beneficiary Get Money From a Trust?” addresses this question. Let’s explore trusts, distribution methods, and how a trust can make it easier or harder for heirs to get the money.

Why Trusts are a Reliable Go-To Estate Planning Strategy

Trusts are a tried-and-true strategy for providing for loved ones after you’re gone and leaving a multigenerational legacy. A well-structured trust can preserve wealth, avoid probate, and control asset distribution while minimizing taxes.

A grantor establishes a trust through a legal document and funds it with assets, including investments, retirement or bank accounts, real estate, and other property. The trust document appoints a trustee or co-trustees and outlines trust administration. Terms and conditions instruct how and when the trustee distributes the estate to named beneficiaries.

How Do Beneficiaries Receive Money from a Trust? What are the Methods of Distribution?

• Outright Distribution: The trustee distributes trust assets directly to beneficiaries, typically without restrictions. Money is deposited into a bank account or as a check. Real estate is given as a new deed or sold for the money.
• Over-Time Distribution: The grantor may opt for a phased approach, where assets are distributed to beneficiaries gradually based on predetermined criteria. This might involve reaching a certain age or meeting specific life milestones.
• Trustee’s Discretion: The trustees are granted discretion over asset distribution, which is particularly beneficial for beneficiaries who struggle with financial management. Trustees ensure assets are distributed responsibly based on the grantor’s intentions.

How can Trust Distribution Methods Make It Easier or Harder for Beneficiaries to Receive the Money?

Grantors can structure a trust, making it easier for heirs to receive the money through direct and unrestricted distribution. Adult and financially sound beneficiaries are good candidates for this method. Minor or irresponsible heirs would likely benefit from restrictions and distributions over time.

Knowing your beneficiaries, you can establish a trust to preserve and protect assets in their best interests. One caveat is that trustees must distribute assets within a reasonable timeframe, typically after fulfilling administrative tasks such as reviewing trust terms and obtaining asset appraisals. While there’s no strict deadline, prolonged delays can incur additional costs for maintaining the trust.

Trust Beneficiary Distribution Key Takeaways:

• Structuring a Trust: A grantor establishes a trust through a legal document, funds it, and appoints a trustee or co-trustees to administer the trust and distribute the estate to named beneficiaries.
• Distributing Assets: A distribution can occur outright, gradually, or at the trustee’s discretion.
• Considering Your Beneficiaries: A responsible or irresponsible heir can help determine the terms and conditions of distribution.

Conclusion

Whether assets are distributed outright, gradually, or at the trustee’s discretion, being well-informed empowers you to make sound financial decisions. Seeking advice from an experienced estate planning attorney can provide valuable insights and guidance tailored to your needs.

Reference: Smartasset (Aug. 25, 2023) “How Does a Beneficiary Get Money From a Trust?”

What Does the Executor of an Estate Do?

Being named the executor of an estate usually means you’ve lost someone close to you, and it’s a challenging time. The article “What to do when you’re the executor of an estate” from Bankrate explains what you’ll need to do and outlines the steps to stay on track.

The executor is the personal representative of a deceased person’s estate until the probate process is completed and all assets have been distributed. One of the key tasks is distributing assets according to the terms of the decedent’s will.

You can say no if you are not able or willing to serve as the executor. A secondary executor may be named in the will, or the probate judge can name a replacement. However, this task is doable if you set up a detailed checklist and work with an estate planning attorney.

Obtain the death certificate. The funeral home issues these; you’ll need them to notify banks, investment firms, life insurance companies, the Social Security Administration, the Department of Veterans Affairs and others. You’ll also need them for filing final tax returns. You’ll also need to notify Social Security to turn off payments going directly into the person’s bank account.

Locate the will and any trust documents. Hopefully, the person who notified you of the death will know where these documents are. Depending on the state where the decedent was domiciled, the last will needs to be filed within a few days to a month to a year after the death. If there are trusts, the trust documents name the trustees in charge of distributing assets owned by the trusts. Trust assets can be distributed immediately by the trustees without court approval.

Seek professional advice. After reviewing the will and trust documents, you’ll better understand how complex the estate is. You may want to consult with an estate planning attorney, CPA, appraiser, or other professionals whose expertise can help you avoid any mistakes. Trying to do it yourself could leave you personally responsible for mistakes, and the process may take far longer.

File “letters testamentary.” If the estate goes through probate, the court will legally confirm your appointment as executor with letters testamentary, sometimes referred to as surrogate certificates. These are legal documents proving your authority to act on behalf of the estate, pay bills, file tax returns, manage and distribute assets, deal with beneficiaries and open or close bank accounts.

Locate and protect assets. In the best scenario, the executor is given a complete list of assets and related information. This would include wills, trusts and paperwork related to insurance, investment accounts, prearranged funeral plans, bank accounts, real property, artwork, business interests and partnerships. A complete list of digital accounts is also needed.

Pay bills and taxes. The estate is responsible for paying debts, including income and estate taxes. If the debts exceed assets, beneficiaries are not responsible for paying them. The executor opens an estate bank account, which pays bills for the estate. Before paying debts, the executor must confirm the estate’s ability to pay. If a list of monthly bills, income and debts were not left for the executor, they’ll need to figure this out.

Don’t rush. It’s common for the executor to want to get the tasks done, distribute any inheritance to beneficiaries and have done with the process. However, if you rush and miss some important tasks, you could be found personally liable. It can take six months to a year to work through an estate. Keep careful records of all transactions and a copy of everything sent and received from creditors, beneficiaries, financial institutions, the IRS, the Social Security Administration and others.

Having an estate planning attorney can help. An attorney can also mediate between the executor and beneficiaries if things take a turn for the worse.

Reference: Bankrate (Nov. 17, 2023) “What to do when you’re the executor of an estate”

How Does a Living Trust Protect Your Legacy

Want to leave assets of any kind to loved ones? You’ll need to plan ahead. There are a number of options used to pass wealth to the next generation, including a last will and testament. This is a legal document designating someone to be in charge of your estate after you die and telling them how you want your assets to be divided.

Another means of passing assets along is explained in the recent article from The Motley Fool, “3 Reasons to Seriously Consider Using a Living Trust to Pass Inheritance to Your Family.” A living trust is a legal entity created while you are living to hold assets and designates someone to manage and disburse them based on specific directions in the trust document. You don’t have to be wealthy to have a trust.

While these two instruments sound similar, they have unique elements, making one better than another in certain situations. For many people, a living trust can benefit the individual making the trust (the grantor) and their families. Here are a few to consider.

Maintaining privacy. Wills must go through probate, a court-supervised process to review the decedent’s assets, approve their executor and rule on the will’s validity. Because the will is under the court’s review, it becomes public information. In most jurisdictions, anyone who wants to see your will can. They can also see who received what assets.

If you have concerns about maintaining your privacy or the privacy of your heirs, it may be worthwhile to create a trust. This will keep your assets and your heir’s receipt of assets private. The only people who know what’s in a trust are the grantor, the trustee who manages the trust and the beneficiaries.

Avoiding long delays. Since a trust doesn’t go through probate, it may be possible for the trustee to make distributions of assets much faster. The executor typically needs to file the will for probate and wait for the process to be concluded. Only then can they carry out the directions of a will.

When assets are in a trust, the trustee can implement the terms of the trust more quickly. This can significantly help loved ones, especially if they have paid for long-term care, hospital bills, funeral expenses, etc. If they were relying on an inheritance to cover these costs, the faster the trust can reimburse them, the better.

Managing assets if you become incapacitated. One of the biggest advantages of having a trust over a will is its value during your lifetime. A will doesn’t take effect until you die. On the other hand, a living trust with a successor trustee allows the successor to manage the trust if you become incapacitated and cannot serve as the primary trustee.

Whether you have a trust or not, you will want to name a Power of Attorney who will manage your financial and legal affairs if you cannot do so. However, financial institutions can be challenging when dealing with a POA.

Changing the trustee does not impact the trust’s status as a separate legal entity. The successor trustee steps in, and financial institutions will generally be on notice as long as the initial trust documents specify who the successor trustee will be.

Talk with your estate planning attorney about using a living trust as part of your estate plan. It may be wise to use a combination of a will and a trust to achieve your desired outcome. Do remember estate planning is not just for what happens after you die but for preparing to care for yourself and your family while you are living. A living trust could serve you and your family well, during life and after death.

Reference: The Motley Fool (Oct. 31, 2023) “3 Reasons to Seriously Consider Using a Living Trust to Pass Inheritance to Your Family”

What Is the Purpose of an Executor?

It is flattering to be named the executor for a loved one. It demonstrates an extremely high level of trust and respect, as the person considers you capable enough to fulfill their wishes when they have passed. However, just because you have been named executor does not mean you are obliged to serve, says the recent article, “What are the responsibilities of an executor?” from Daily Local News.

Suppose you decide the responsibilities of being an executor are more than you’re willing or able to handle. In that case, you can renounce your position as executor, and a successor executor named in the will becomes the executor. If the person who named you executor did not name a successor, the court will select a person for the role.

If you have any doubts about this role, please tell the person who asks you to serve, so they can make other arrangements.

If you choose to serve, you’ll want to understand what the job entails. Each estate is unique, and its administration depends upon the assets owned by the deceased, what debts they had and their wishes for distribution.

Some duties are the same regardless of the complexity or simplicity of the estate. For example, the executor often makes arrangements with the funeral home and provides information for the death certificate. Once the death certificate is issued, the executor probates the will with the local court in the county where the decedent last lived. Most people retain an estate planning attorney to guide them through probate and estate administration.

Once the petition for probate has been filed and the court issues Letters Testamentary empowering you to serve as the executor, the administration begins. Some, but not all, of the tasks, include:

• Gathering assets
• Notifying beneficiaries named in the will
• Obtaining an EIN federal tax number for the estate
• Opening an estate checking account
• Verifying and paying the debts of the decedent
• Liquidating and transferring estate assets into the estate checking account
• Filing a final personal income tax return
• Providing an accounting to beneficiaries and distributing the estate in accordance with the decedent’s will
• Filing an estate tax return.

The executor also handles other tasks, such as selling the contents of the person’s residence and home.

The executor is entitled to reasonable compensation for their services. The amount is treated as taxable income. Determining the fee depends on the value and complexity of the estate and the amount of time it took to settle the estate. Some family members waive a fee, while others feel their time deserves compensation.

An estate planning attorney can provide invaluable assistance and prevent expensive mistakes from occurring. If the estate involves businesses, complex ownership structures, trusts, or other sophisticated assets, it is worthwhile to have the help of an experienced professional.

Reference: Daily Local News (March 22, 2023) “What are an executor’s responsibilities?”