July 05, 2006

Money Matters

Some may view being named as the executor of a will, a successor trustee, or an estate administrator an honor. Others may see this for what it can be: plenty of work, and more than a little personal liability, with little reward.

The basic task of estate administration is to validly dispose of the property of the decedent according to their wishes, or in the absence of expressed directions, according to State laws.

If the decedent left property in a trust, the successor trustee must carry out the provisions of the trust. If a decedent leaves property that requires a change of title, then the administrator will be required to go through the courts to change the title according to the will or in accordance with state laws.

When the person passes, the estate administrator's duties include: 1. Identifying, inventorying, and securing property. 2. Locating important papers such as wills, trust deeds, and business agreements. 3. Locating safety deposit boxes, brokerage accounts, bank accounts, and any negotiable securities not held in a brokerage account. 4. Gathering information on the debts of decedent and monitoring mail for bills. 5. Notifying Social Security and any pension plans of the date of the death. 6. Securing plenty of certified copies of the death certificate — necessary to transact business for decedent. 7. Working with the estate lawyer and accountant for estate administration and tax preparation.

If the decedent did not identify an administrator or personal representative in a will, the probate court will appoint an administrator to carry out these functions. If there is a will, the probate court will likely ratify the decedent's nomination for a personal representative to serve.

If all property is held within a trust, the successor trustee will need copies of the trust along with certified copies of the death certificate to present to brokerages, title companies, Department of Motor Vehicles, banks, etc.

Property that passes by operation of law or contract, such as property held in joint tenancy, life insurance, pension or retirement accounts, and annuities, will require the party making the claim to provide copies of the death certificate as well as complete required paperwork to verify the claim.

One of the more difficult tasks can be distributing personal property, such as jewelry, furniture, and family keepsakes among heirs. It is not uncommon for a will or trust to simply state that all property will be divided equally among heirs. This can be a problem when values vary, or the property cannot easily be turned into cash.

Two simple solutions can be used to solve the problem. The personal representative may elect to let each heir submit a bid to buy specific items from the estate. Highest bidder gets the property, estate gets cash, and cash is then divided according to the will. In the event bidding is not practical, the personal representative may let heirs draw lots, then each chooses property by order of drawn lots.

The personal representative is responsible for paying the expenses of the estate and final debts of the decedent . . . before distributing property to the heirs. If bills are left unpaid but property is distributed, the personal representative could find him or herself personally liable.

For all this trouble, the personal representative is entitled to compensation. Compensation paid by the estate for services is taxable income to the representative. A better solution is to adjust estate distribution such that compensation comes in the form of additional inheritance, which is tax-free.

Different states have different schedules for services, for example New York allows an executor 5% of the first $100,000 of estate value, 4% of the next $200,000, 3% of the next $700,000, then 2% up to $4 million, and 2% of anything in excess of $5 million, plus reimbursement for "extraordinary services."

Site Search

2107 Capeletti Front Tile
Gurney's Inn