When a loved one dies, you might be facing the responsibility of settling their affairs. Matters needing attention range from personal matters like notifying family and making funeral arrangements, to legal matters including gathering records and reporting the information to beneficiaries, to handling financial affairs of paying taxes and distributing assets.
Knowing what to do and when to do it can keep you from feeling overwhelmed in a difficult time.
Professional guidance can definitely smooth the way. Vincent F. Heuser, Jr., Attorney is an expert in probate and estate matters and
The executor of an estate may be an individual such as the decedent’s spouse, child, advisor or other person, or it may be a financial institution such as a trust company or bank. If you are the executor, it is important to have a clear understanding of the process and handle things diligently and openly.
Key Steps and Time Line for Settling an Estate
Estate settlement involves both technical and personal skills and responsibilities, ranging from getting tax returns prepared and filed to resolving conflicts among beneficiaries. It also carries significant potential legal liabilities and requires a certain commitment of time and energy.
Tasks Done in Months One through Three
Review Will, Trust and other documents. Carefully review the will and any trust documents or related document to make sure you have a full understanding of the situation and plan. Collect documents such as the death certificate, life insurance policies, birth certificates, military discharge papers, marriage certificates and real estate titles. Gather financial records such as bank, brokerage and retirement account statements for the past three years and handle claims submitted by creditors.
File the Will and Probate Petition if necessary. Heuser Law Office generally handles these matters very efficiently.
Secure Personal Property
All property such as homes, boats, furniture, antiques, artwork, clothing, photographs and jewelry as well as personal documents such as journals, diaries and correspondence must be secured and protected. It is important to preserve and secure all items, including items that were promised to a child or relative, until the estate is properly settled.
Appraise and Insure Valuable Assets
After all estate property has been identified and located, consult with you attorney to make sure assets are properly valued and insured (vacant homes require special attention because traditional policies terminate when a home is not occupied).
Cancel Personal Accounts. After appointment or as advised by your attorney, close all personal accounts and cancel automatic payments and withdrawals, and subscriptions and memberships.
Determine Location of Assets and Secure “Date of Death Values”
One of the most tedious tasks is taking an inventory of the entire estate and determining the value of all assets, including investment accounts, business interests, insurance policies, bank deposit boxes and intellectual property (patents, licenses and copyrights). Taking possession of property located outside the United States can be particularly challenging.
Submit Probate Inventory.
In most circumstances a detailed inventory of all property, real or personal, is required to be filed. Determining how much detail is required is more of an art than a science. Consult with Exceutor’s counsel before filing an inventory with probate court.
Months Three through Six
Begin resolving financial assets, assets in IRA/401(k) accounts, brokerage and savings accounts, and financial interests in corps. LLC’s, partnerships or other businesses, in consultation with your estate attorney, liquidate and transfer them into the estate account.
Once the claims period has passed, and before if your attorney suggests, you can distribute tangible items to beneficiaries and distribute personal property as directed by the will or trust document. This is an area that requires the diplomacy of an experienced executor, since surviving family members often have strong emotional attachments to items of sentimental value. Generally, Wills prepared by our attorneys have a specific plan for tangible personal property. A good probate attorney can guide you in a reasonable distribution plan.
File taxes and other IRS forms and make partial distributions.
File any estate tax return and make a partial distribution of financial assets to beneficiaries according to the directives of the will. This may mean “in-kind” distribution (transfer of title), or property may be distributed to a trust and distributed over time. Maintain reserves, usually at least 20% of the total value of the estate, to pay the estate’s expenses until it is closed.
Within nine months, prepare and file a federal estate tax return, if required. It usually takes the IRS another six to nine months to process the return. Kentucky Inheritance tax return should also be filed by this time. You may need to file Information about Beneficiaries (Form 8971). You may need to file a Gift and Generation-Skipping Transfer Tax (Form 709) Verify this with your attorney.
Estate and Income Tax (Form 1041)
Estates and some trusts are separate taxpayers. That requires obtaining separate tax ID numbers and filing fiduciary income tax returns. These are specialized returns that require a an attorney or CPA familiar with such filings.
Final Individual Income Taxes (Form 1040)
The estate or trust have tax returns to file. The executor or successor trustee is also responsible for ensuring the decedent’s final individual returns are filed, and addressing any issues with past filings.
Months 18 through 36
Preparing to close and closing:
Secure closing letters from the IRS
Pay any remaining expenses
Distribute any reserves that were held pending resolution of contingencies
Prepare and file the final accounting or waivers if appropriate.
Make final distributions
File petition for discharge of executor responsibilities
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IRS Circular 230 Notice: Pursuant to relevant U.S. Treasury regulations, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. You should seek advice based on your particular circumstances from your tax advisor.