With the aging baby boomer population, more people will be asked to close estates and with this task comes great responsibility.
“The executor makes sure the will is carried out properly,” says Randy Kessler, founding partner of law firm Kessler & Solomiany. “They’re officially in charge of gathering all the information for the assets and making sure they’re divided properly.” Executors aren’t always named in the will, and it’s a paid job that you can decline. If you do decline, the court will appoint a successor executor.
If you’re asked to be an executor for a person still living, Kessler suggests talking to the person before he or she dies to best understand the wishes. Identify assets and accounts and make sure there is a list of all security information like combinations for safes and the location of keys for cars or safety deposit boxes to make your job easier.
Executors shouldn’t go it alone and Tracy Stewart, certified public accountant and personal financial specialist in College Station, Texas, suggests hiring an attorney and accountant in the state where the estate’s located. An attorney may help reduce taxes or lower costs for administering the estate while an accountant can help to file the different returns for the estate and individual.
How long this job takes depends on the complexity of the estate—the assets and debts—and the number of heirs, says Kessler. “Know who the heirs are and how to find them.”
Remember that being an executor is a privilege, says Randy Michel, family law and estate planning attorney in College Station, Texas. “This is a serious position that requires your attention and time. You need to be organized and pay attention to details. You’re in a fiduciary relationship. The judges know that and will hold you accountable.”
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If you find yourself in the executor position, here are expert steps on how to maneuver through closing an estate:
Step No.1: Present the Will
A will is presented for probate so that the correct people receive the estate. “You have to prove the person has died, typically with a death certificate,” says Michel. After a short, typically 10 to 15 minute hearing, the judge signs an order and the court clerk issues Letters Testamentary. “It’s a piece of paper that says a person has the authority to act on behalf of the estate and has been formally appointed by the judge,” says Michel.
Some assets can bypass a will and don’t go through probate, like accounts with beneficiaries or a Transfer on Death (TOD), as well as any assets in a living trust. “Any assets that go through the will have to go through probate while anything with a beneficiary goes to the person directly,” says Ted Sarenski, certified public accountant financial planner and CEO of Blue Ocean Strategic Capital.
Once probate is complete, the executor can access accounts and safety deposit boxes, communicate with the IRS regarding tax issues, transfer the estate’s real estate to a buyer, transfer vehicle titles, and buy insurance policies to protect assets. The estate can begin to receive royalties from certain investments. “Companies can communicate with the executor as if they were the deceased person,” says Michel.
Step No.2: Gather Assets
The executor needs to lead the way to deal with personal items, which may mean selling parts of the estate. Make a list of the assets that have titles, like real estate, cars and boats, along with a list of bank accounts, investments and securities, recommends Michel. “Change the locks and get insurance to cover the assets.” Homes and vehicles have to remain insured until they are sold.
As you inventory the estate, Michel suggests giving a broad sweeping value to personal effects like clothing and furniture. Include any antiques, art, stamp collections and coin collections in the inventory—an appraiser can help value these so you receive a fair market value.
“If you’re not able to personally handle the time consuming aspects of clearing out the house and selling it, maybe you want an estate sale and an auction,” says Stewart.
If the estate has a business that needs to be managed, you may have to ask a probate or superior court if you can set up a trust, says Robert Meyring, family law and estate planning attorney in Atlanta, Georgia. “It’s the best interest of the estate and recipients to receive a good operating business or an ongoing interest in that business.”
Real estate located in a different state can also add complications since a will executed in one state will not cross state lines and dictate what happens to this property, says Michel. The executor would have to open an estate in that state to administer the property and may have to probate the will again. “You may need to get an attorney in that state to help you if you plan to sell it.”
Step No.3: Pay the Estate’s Debts and Taxes
Any medical bills and other debts need to be paid by the estate. “The executor isn’t personally liable for the estate’s debts unless they make a personal promise to pay,” says Meyring. “The executor should never make a personal promise to pay.” Before paying anything, experts suggest knowing whether it’s a valid and legitimate debt of the estate.
The executor is also responsible for filing tax returns for the individual and the estate, says Stewart. Taxes are paid out of the estate and not by beneficiaries.
Step No.4: Distribute Assets
The executor will distribute specific gifts to individuals as listed, as well as the other personal items, says Meyring. Anything that’s not named in the estate is usually divided up like a pie.
If the will doesn’t specify who should certain items, before selling it, Stewart suggests considering the family relationships and individual situations and finding out if anybody’s interested in distributing certain assets to certain people. “The will may be flexible enough to give the house to the child who’s living in it and give the other assets to the other children,” says Stewart.