As the executor for a loved one, you have been charged with the arduous task of closing the estate. From identifying the recipients named in the will to paying the estate taxes, this can be a stressful time for anyone. The goal is to make sure that your loved one's wishes are carried out to the best of your ability, which means taking your job extremely seriously.
The most complicated aspect of closing an estate is the consideration of estate taxes, which are complex and can vary depending on where you live and the size of your loved one's estate. If your loved one's estate is over $2 million in 2008 and $3.5 million in 2009, then you will be paying an estate tax.
To pay estate taxes and follow tax law, a return must be filed with the IRS. With estates valued at less than $2 million or $3.5 million in 2009, Form 1041 is usually required, while Form 706 usually applies to estates valued at more than $2 million or $3.5 million in 2009. If there is a significant amount of cash involved in an estate or if the distribution is complex, it is vital that you hire a tax professional to make sure everything is done correctly.
According to the IRS Web site, estate taxes apply to all property owned by a deceased individual, including tangible items, as well as cash and other investments and assets. They are taxed based on fair market value, which means that items are appraised for what they are worth now rather than what they cost at the time of purchase. Since estate taxes apply to all property and are taxed at fair market value, you'll need to have an accurate estimate of the estate's worth to make sure you aren't required to pay estate taxes.
The total amount of items subject to estate taxes is referred to as the "gross estate"; some property may be eligible for deductions. For example, marital property passed from one spouse to another generally isn't subject to estate taxes, and the same goes for property donated to a legitimate and approved charitable organization.
You also need to be ready to file the appropriate tax forms on time, nine months after the death. You can request a six-month extension, but you'll still have to pay interest on what you owe. If the estate is complex or if you just aren't the kind of person who gets tax forms finished on time, then you'll probably save money hiring a tax attorney, as it will cost less to get the job done right the first time instead of getting it wrong and finding out the estate owes more to the IRS than you thought.
The executor is also responsible for making sure that all debts are paid before the estate is closed. If your loved one owes credit card companies, loan officers or anyone else, it is your responsibility to notify the creditors and make sure that those entities receive what they are owed. However, you do not have to pay those debts yourself. That money must come from the estate, and, if the estate runs out of money before paying all the debt, you don't have to pay the remainder. That said, you should consult a lawyer to determine who will be paid what.
Another important job of an executor is initiating and working through probate. This is the process of authenticating a will, and it can take several months depending on the complexity of the estate. Probate is usually more difficult if family members or friends of the deceased contest any part of the will. Yet, even without argument, the process takes time.
Fortunately, the costs incurred as a result of probate are generally absorbed by the estate. In other words, before any cash or assets are paid out to beneficiaries, court costs and other expenses must first be satisfied. It is up to you to make sure you and other appropriate parties are paid from the proceeds of the estate rather than from your own pocket.
If a third party challenges the will and the courts agree with that individual, you will have to manage the estate without benefit of a will. In most cases, the court will appoint someone to administer the estate with regard to the laws of that state.
Satisfying the Terms of the Will
An executor is responsible for distributing property and assets in accordance with a will. This might sound fairly easy, but it can get complicated if you have trouble locating beneficiaries or if the will is vague and you don't quite understand the decedent's wishes.
The most important aspect of handling the will is that you obtain a receipt for all items distributed through the will. For example, if Great Aunt Edna has left Cousin Amy her coin collection, Amy should sign a document that certifies that she has taken possession of the coins. This way, no one can claim later that you did not distribute the will as you were supposed to.
The executor assumes a fair amount of responsibility when closing an estate. As executor, you'll need to obtain death certificates to close accounts or process insurance claims. You'll also need to notify Social Security if the deceased received benefits. If you don't notify Social Security and the deceased continues to receive benefits, then you face problems. Additionally, you should also schedule a meeting with your loved one's employer (if he or she was employed) to make sure all unpaid wages and benefits have been remitted to the estate.
Despite the burden created by closing an estate, being named executor is an honor. This means that your loved one trusted you above all others to make sure his or her wishes were granted after death. Keep that in mind as you take care of all the tasks required, and the work might not seem as overwhelming.
Estate taxes are varied and complex, but they typically affect only 2% of Americans with high estate values. If you think your estate is valuable enough to be subject to estate taxes, you may want to learn more about the rules and consult with an estate tax attorney to help you maximize your estate.
An estate sale is more than a big garage sale because of the legal and emotional issues. Is holding an estate sale worth it? For a fast reality check, count the number of pieces of ordinary furniture and multiply by $10. Count the kitchenwares and multiply by $.50 or $1 per piece. Even at those low prices, the sale of an estate full of ordinary things can add up to hundreds or thousands of dollars.
After much tiptoeing, beating around the bush and "what if" scenarios by family members, my grandfather boldly stated, "Well, I guess I better sell the house." My spry 85-year-old grandfather had suffered a second mild stroke that had affected his mobility on one side and taken his peripheral vision and therefore his car keys.