If you have been named the executor of someone's estate or the trustee under a trust, there are a number of tips and rules to be aware of. Don't fall into the traps of the unwary outlined by Robert A. Cohen, estate planning attorney in California.
Most parents name a child as an executor or trustee, but more often than not, the parents haven't had a conversation with their children about their desires, nor do children do the necessary research to see what estate administration is all about. And when it comes time to take over these responsibilities, an executor or trustee may panic and miss important deadlines and details.
Immediately following the death of the estate owner or trust grantor, executors/trustees should:
1. Secure tangible property. It is amazing how many things "walk away" from a decedent's home right after they pass away. Someone may feel that Aunt Dotty would have "wanted" them to have the silver collection, so they just take it. It's important that executors secure all tangible property—especially if that property may require an appraisal—so they can plan for the distribution of the property as outlined in the decedent's will.
2. Take your time. After you have secured the tangible property, take a little time to grieve before worrying about most financial matters. You will probably want to pay bills but these can wait a month or two without repercussion. Keep in mind, however, that you do need to notify Social Security within 30 days of the decedent's death. You don't have to do this alone—an estate attorney can help with this so that you have the time you need to grieve without worrying about bills or paperwork.
3. Notify probate court (but only if needed). If the decedent left any property that passed under the will (in other words, any property not left in a trust or through a beneficiary designation), then you must file the Last Will and a petition with the probate court to be officially recognized as executor. If a decedent died without an estate plan, the heirs must petition the court to be appointed as administrator of the estate. "Executor" means the person appointed in a Will, while "administrator" means the person chosen by the probate court in the absence of a Will.
4. Inventory the assets. Compile a list of everything the decedent owned. This is a must whether the decedent had the most sophisticated estate plan or left no estate plan at all—you need to know what was left behind so that you know how to properly administer it from there.
5. Open an estate or trust checking account. Unless the decedent made provisions ahead of time (which an attorney would be able to advise you on), you will need to open a checking account on behalf of the estate or trust to pay bills and taxes.
6. File tax returns. You must file a final income tax return for the decedent. If the estate has any assets that earn interest, you must also file an income tax return for the estate. If the estate exceeds $5.25 million in 2013 (or the applicable amount for future years taking into account inflation), you will need to file a federal estate tax return within nine months of the date of death.
7. Talk with your attorney. Meet with your personal family lawyer to receive the guidance you need to properly administer the estate. Any fees incurred should be paid out of the estate, not your pocket, and the advice you get will be invaluable—it will allow you the time you need to grieve and it will give you the peace of mind knowing that all T's are crossed and I's are dotted.
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