Closing an estate is no small task. As an estate administrator, you are charged with navigating many financial responsibilities while also working through the grieving process. Whether you’re an executor as named in a will, or a testator (or will creator) planning your estate for when you pass away and need a trustworthy personal representative to carry out your wishes, it’s a good idea to have a general understanding of what executing an estate involves.
Estate Administrator
Sometimes referred to as a personal representative, the executor of estate is appointed by a court and often named in a will. An executor is a fiduciary, managing money and property for another person’s benefit. The important part of being named as a fiduciary is that you must act on behalf of someone else and not for your own interests. An executor, in this sense, is a highly trusted person and must take this role seriously. As an executor, you can be held responsible for any negligence while fulfilling your role.
The specific responsibilities and limitations of an executor are determined by individual states. Be sure to check your state’s regulations or consult an attorney to understand what an executor may be personally liable for.
What to Know Before a Testator Passes Away.
The executor must know where all essential documents are located, including the will. From asset and property records to marriage certificates and insurance policy documents, the executor needs access to all essential documents and relevant information when the testator passes away. It is also important to have an idea of what the testator’s funerary wishes are.
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After the Testator Passes Away
When the testator passes away, the executor’s role begins. It is imperative that the will be found and reviewed. In most cases, filing for probate is required, but even in cases where probate is not required, the executor must file the will with the state court clerk. After the court recognizes the executor’s role as estate administrator, in accordance with the last will and testament and assuming the named executor meets all state eligibility requirements, the executor is empowered to continue all duties required of them. The court will issue Letters of Testamentary (or a similar document) to authorize the executor to act on behalf of the testator.
It’s important to obtain a copy of the death certificate at this point. It will be needed for many of the executor’s responsibilities. Some executors hire legal counsel during this period to ensure all duties are carried out appropriately. Beneficiaries should be notified in accordance with state requirements, if they haven’t been notified already.
Note: You do not need to accept the role of executor. In some cases, an executor named in a will may feel they are unable to perform their duties. If a named executor decides not to fulfill their role, they must complete a Renunciation of Nominated Executor form in the filing state. The court will then appoint an alternate executor to act as estate administrator.
Notifications
As mentioned above, it’s important to notify beneficiaries of the will in accordance with state requirements. The executor is also responsible for notifying other people and entities of the testator’s death.
These may include:
- IRS
- Social Security Administration
- Banks and other financial institutions
- Creditors
- Landlords
- Utility companies
- Subscription service companies
- Department of Veterans Affairs
- Veterans Benefits Administration
- Life insurers
- DMV
- Department of State
- Employer
Be sure to close all credit cards, subscriptions, utilities, and the testator’s bank accounts. If the testator was a veteran, check with the Department of Veterans Affairs to ensure that any disability payments are properly handled to avoid overpayments that will have to be refunded. Veteran retirees may have other entities or organizations that need to be notified.
While not necessarily the executor’s responsibility unless described in a will, it is normally a good idea to close email and social media accounts in accordance with the testator’s wishes. It’s important to know how the testator wants their digital accounts handled before they pass away and to get their wishes (and log in information) in writing if possible.
Assets, Debts, and Taxes
An inventory of all assets must be collected. From vehicles and real estate, to all other valuables, assets must be located and appraised to determine the estate’s gross value. This also includes bank account amounts. Be sure to note what are considered non-probate assets, which include life insurance policies, assets in a trust, and assets that the testator owned jointly.
As mentioned, creditors and the IRS must be notified of the testator’s death. Debts are then verified and paid or settled using the estate’s cash value. If the estate is in probate, these creditors can file a claim against estate assets, so it is important to notify all creditors promptly after the testator passes away.
Keep in mind, opening an estate bank account is an option for collecting monetary assets. Financial institutions can assist with this if provided certain documentation, including a death certificate and possibly other court documents.
The executor is responsible for filing the testator’s final tax return and any income tax returns not filed prior to the testator passing away. In cases of high-value estates, the executor is required to file an estate tax return.
An accountant or tax adviser could be helpful here. Settling accounts, managing finances, and paying debts is a big responsibility, and it is very important to get the numbers correct. An executor may be liable for errors committed or negligence during this process.
Distribution
After all debts, fees, and taxes are paid, the executor can then distribute the remaining assets to beneficiaries according to the last will and testament. Adherence to the will is vital and the executor must be diligent when dispersing the estate. Remember, the executor’s role as fiduciary requires looking out for the best interests of the estate rather than their own. While many testators offer compensation to the executor in their wills, it’s important to be unbiased during this responsibility. Even the appearance of bias should be avoided.
Note: Some states require an executor to be compensated directly from the estate regardless of whether the will specifies compensation.
Executing the Estate
After all assets have been distributed, the executor must file all receipts and records and provide a statement of accounts to the court and to all beneficiaries. The estate is closed and the executor’s role is fulfilled after the court acknowledges a final report.
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The Navy Mutual blog is meant to provide basic information that generally applies to most situations and should not be construed as legal or tax advice. It is not meant to replace the services of a financial planner, insurance counselor, attorney, or tax advisor. You are encouraged to consult qualified legal and financial professionals for individual estate planning advice. Information contained in this blog post may change on occasion.