find themselves at odds over the disbursement of property after
the death of a decedent. Sometimes it's over the property or
the value of the property itself. Sometimes it's just that
fact that it cannot happen immediately. Most beneficiaries
think that once the services are over, it's time to split up the
decedent's property. It doesn't happen quite that
there is no will and therefore, no executor, an administrator must
still be appointed. Though
there are significant differences between these two positions,
they will be referred to as the same for our purposes here.
The executor of the will has a
great number of duties and in all fairness, most executors haven't
been down this road before. They really need some legal help
to make sure that they have followed the letter of the law and
protected the assets of the estate.
Even if most of the duties are to
be handled by the executor, we recommend that you consult with an
attorney on a regular basis to make sure that the whole process
stays on track. This can prevent serious problems down the
road with beneficiaries and the state and federal taxing
By law, the executor actually
becomes the owner of the decedent's property and retains ownership
until the property is disbursed. There are however, other
legal duties to the beneficiaries and the executor must take all
reasonable measures to obtain the decedent's property and keep it
safe. This can include a large number of duties such as
making sure that property is adequately insured, that taxes are
paid, and that there are no encumbrances placed on the property.
To put this in more simple terms,
even though a family member has bequeathed a car to you, it
becomes the property of the executor until the property is
actually disbursed to you. The executor must make sure that
the property taxes, payments, and insurance are paid and must use
every other method reasonably available to make sure that there
isn't any significant loss to the value of the car. If you
take the car before it's actually turned over to you, you could be
charged with theft.
If there are such claims to the
car such as property taxes or payments, the executor cannot
distribute the car to you until those claims are settled.
This is one reason that certain assets take longer to disburse
than others. Property may have to be liquidated to pay off
the car loan balance or other similar encumbrances. It's
quite possible that the car itself will have to be sold in order
to pay off the debt on the car.
Fees and debts that are owed to
creditors must be paid before any other property may be
disbursed. All properties other than those that have an
obvious face value such as insurance policies, bank accounts, and
stock portfolios need to be professionally appraised.
This is to ensure that the value
isn't being misrepresented for estate tax purposes or to the
benefit of the executor or any beneficiary. By law, anyone
that has a claim against the estate has one year to file that
claim from the date of publication of the estate notice.
Such claims may include remaining medical bills, funeral expenses,
utility bills, or any other legitimate claim.
Above all else, the executor will
be required to file and pay all federal, state, and local taxes on
behalf of the estate. Again, it is recommended that this job
be done with the cooperation of your estate attorney and someone
that is trained in the filing of such returns. The IRS can
come back a couple of years later to claim unpaid taxes.
There are quite a few techniques
and strategies that may be employed to save the estate money
including deducting certain administration expenses, electing a
fiscal year over the calendar year, and many other elections.
The average person probably isn't
going to know a great deal about these issues and there are new
ones that come along regularly. It is quite likely that the
cost of obtaining professional assistance will be saved.
Using companies or individuals that back up their work with
financial guarantees can also save a tremendous amount of concern
and potential interest and penalty costs if a mistake is found.
Death taxes, both state and
federal, must be paid within nine months of the date of death
unless the estate can qualify for an extension. Often the actual
tax is paid at the nine month date but the tax returns themselves
are put on extension. Extensions are available for six months,
which would make the return filing 15 months after the date of
Unlike 1040s, every single death
tax return is looked at by the IRS. The taxes are not settled
until the taxing authority affirmatively accepts the return and
the tax and communicates this to the executor.
During the period of
administration, the executor must preserve the value of the estate
and administer it for the benefit of the beneficiaries. The
executor collects income from investments, business interests and
real estate. The collected assets must be invested prudently and,
in many cases, estate assets must be sold.
These sales are handled by the
executor. The executor accounts for all transactions, and when all
creditors have been satisfied and all taxes paid, distributes the
estate to the beneficiaries in accordance with the terms of the
An executor is entitled to a fee
for the substantial work and responsibility involved. The amount
of the fee will depend on the amount of work performed.
Sometimes an individual executor
will do a tremendous amount of work, and sometimes he or she will
hire professionals who will do almost all of the work.
Usually the executor hires a
lawyer and possibly an accountant to help with the estate
settlement. Often the lawyer who wrote the will is hired, but that
is not required.
The executor is free to hire
legal counsel of his or her own choosing. The lawyer advises the
executor of his or her duties and the due dates for various
actions, assists with the preparation of tax returns, resolves
disputes, makes tax elections and so forth.
The taxation of trusts and
estates is a very complex matter and a trained professional can
often save the estate substantial dollars in taxes with good
post-mortem tax planning.