Your parents have informed you that they’ve updated their will named YOU as the executor of their estate. While you’re honored that they trust you to take care of things after they’ve passed, you have NO IDEA where to start! Don’t worry, we’re here to help.
The emotional trauma brought on by the death of a close family member often is accompanied by bewilderment about the financial and legal steps the survivors must take. Often times this task is added to the existing commitments to family and work that can’t be set aside. All too often, the estate itself is in disarray with no real records of where anything is.
Let’s start with by clarifying exactly what you’ve been appointed to do… Estate administration is the process of managing and distributing a person’s property (the “estate”) after death. If the person had a will, the will goes through probate, which is the process by which the deceased person’s property is passed to his or her heirs and legatees (people named in the will). The entire process, supervised by the probate court, usually takes about a year. However, distributions from the estate can be made in the interim.
Take some time to grieve, and when you’re ready, meet with an attorney to review the steps necessary to administer the deceased’s estate. Bring as much information as possible about finances, taxes and debts.
Rules of Estate Administration
The exact rules of estate administration differ from state to state, however, they generally include the following steps:
- File the will and petition at the probate court in order to be appointed executor or personal representative. In the absence of a will, heirs must petition the court to be appointed “administrator” of the estate.
- Collect the assets. You need to find out everything the deceased owned. You need to file a list, known as an “inventory,” with the probate court. Bills and bequests should be paid from a single checking account, either one you establish or one set up by your attorney, so that you can keep track of all expenditures.
- Pay the bills and taxes. If a state or federal estate tax return is needed, it must be filed within nine months of the date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply. If you do not have all the information available in time, you can file for an extension and pay your best estimate of the tax due.
- File a final tax return. You must also file a final income tax return for the decedent and, if the estate holds any assets and earns interest or dividends, an income tax return for the estate. If the estate does earn income during the administration process, it will have to obtain its own tax identification number in order to keep track of such earnings.
- Distribute property to the heirs. Generally, executors do not pay out all of the estate assets until the period runs out for creditors to make claims, which can be as long as a year after the date of death. Once the executor understands the estate and the likely claims, he or she can distribute most of the assets, but be sure to retain a reserve for unanticipated claims and the costs of closing out the estate.
- File a final account. The executor must file an account with the probate court listing any income to the estate since the date of death and all expenses and estate distributions. Once the court approves this final account, the executor can distribute whatever is left in the closing reserve, and finish his or her work.
Some of these steps can be eliminated by avoiding probate through trusts and joint ownership, however, whoever is left in charge still has to pay all debts, file tax returns, and distribute the property to the rightful heirs. Organized and thorough record keeping of all assets and liabilities by the decedent throughout their lifetime makes an executor and trustees job much easier.
About Oakstone Law, PL
Oakstone Law PL was founded by Bob Kleinknecht. A member of the Florida Family Trust Company Subcommittee, the Estate Tax & Trust Planning (ETTP) Committee and the Real Property, Probate & Trust Law (RPPTL) Section of the Florida Bar, Kleinknecht has 15 years’ experience.
Prior to founding Oakstone law, he spent more than eight years serving as a personal, in-house estate, tax and charitable planning attorney for a Forbes 400 family in New York and Florida. Before that he was an estate planning and estate settlement attorney with prominent firms in Boston and Washington, D.C. after beginning his career with a boutique firm in Naples, Florida.
Licensed in Florida and Massachusetts, Kleinknecht has developed a practice model that eliminates billing by the hour and offers a streamlined, customized client process supported by technology, security and a personal approach.
For more information on Oakstone Law, click here. To get in touch with us, click here to send us an email, or call 239-206-3454. Our office is located at 5137 Castello Drive, Suite 2 in Naples, Florida 34103.