THE PROCESS OF SETTLING AN ESTATE | The basics of what you’ll need to do as an executor.
This is an overview of the estate settlement process. Every estate is unique in its details, so this list will include items that may not apply to your estate, and your estate may involve steps that are not noted here. The steps may also occur in a different order, depending on the circumstances.
Most importantly, this list excludes all legal conflicts that can arise in an estate. Conflicts can arise at any of the stages set forth below, involving lengthy and costly court procedures. Skillful management of the process can often prevent such conflicts.
Just as each estate has its own set of issues, each estate will have its own profile in terms of what is simple and what is complicated. Any step in this process may be quick and easy, or may be lengthy and challenging, depending on the particular circumstances of the individual estate.
I.PROBATE / ADMINISTRATION PROCESS – Getting an Executor / Administrator Appointed.
1.Gathering information about the decedent and their assets.
2.Gathering information about the family.
3.Obtaining one or more affidavits to explain the family relations.
4.Obtaining the original will.
5.Checking court for any will on file.
6.Discovering whether there were any other versions of the will, or any codicils or trusts.
7.Reviewing the will for validity and content:
a.Was it signed, witnessed and notarized correctly?
b.Who are the beneficiaries, executors, trustees?
c.Who is disadvantaged by it?
d.Are there ambiguities?
e.Are there other parties who must receive notice (e.g., charitable beneficiaries, personal representatives of deceased or incapacitated beneficiaries)?
8.Obtaining the original death certificate.
9.Preparing, sending and receiving Waivers and Consents from all family members.
10.Preparing, sending and receiving Renunciations from any executors nominated in the will
11.Preparing the Petition and all supporting materials.
12.Filing the Petition.
13.Responding to questions or further requirements from the court clerks.
14.Receipt of Letters Testamentary or Letters of Administration.
15.Receipt of Letters of Trusteeship for any testamentary trusts.
II.ADMINISTRATION OF THE ESTATE – Closing out all the estate’s business and marshalling all the assets.
1.Reviewing Letters Testamentary / Administration / Trusteeship for any limitations on the fiduciary’s authority. Developing a plan of action with respect to any limited authority.
2.Securing the home (e.g., changing the locks).
3.Releasing the legal seal on the home if death occurred at home.
4.Submitting claims for the beneficiaries of all retirement accounts, pensions,
annuities and life insurance policies.
a.Determining and arranging for the optimal method of distribution for tax-deferred assets.
5.Preparing a ledger to maintain a comprehensive and accurate accounting of all estate assets, payments and transactions.
6.Maintaining detailed records of all out-of-pocket expenditures for reimbursement.
7.Obtaining tax ID for the estate.
8.Opening an estate bank account.
9.Obtaining tax ID for any trusts.
10.Opening trust bank accounts.
11.Coordination with trustee as to funding trusts and ongoing procedures of trust
12.Discovery of all estate assets, debts and other open items of business.
a.Contacting, or authorizing attorney to contact, all financial institutions and other third parties for inquiries.
13.Preparation and delivery of an estate Inventory to the court.
14.Liquidating all financial accounts and depositing proceeds in the estate account.
15.For any personal property of value (e.g., antiques, art): obtaining appraisals, arranging for sale or other disposition.
16.Determining whether the estate is solvent – i.e., whether there are sufficient assets to cover all obligations.
a.If not, or uncertain, determining how assets will be applied to the estate’s obligations, in accordance with legal priority of claims.
17.Payment of all legitimate debts and obligations of the decedent.
a.Negotiation to reduce any amounts subject to collection.
18.Filing appropriate documents to transfer ownership of any asset passing in-kind to a beneficiary.
19.For an owned home:
a.Obtaining tax clearance for the sale or transfer of the house.
b.Clearing the house of its contents.
c.Arranging for storage if necessary, and developing a plan to minimize estate costs for storage.
d.Delivering items of personal property to appropriate beneficiaries.
e.If house is to be transferred to a beneficiary: filing appropriate deed; documentation and execution of any arrangements among the beneficiaries in regard to the property.
i.If house is to be owned by multiple family members, the negotiation, drafting and execution of an appropriate agreement about the use and upkeep of the property.
f.If house is to be sold, listing the house for sale with an appropriate broker.
g.Arrangement for payoff of any mortgage or home equity line
h.Making any necessary repairs, rectifying any building violations.
i.Conducting a closing with proper payment and documentation of taxes, settlement of mortgage or equity line, broker commissions, etc.
j.Deposit of net proceeds in the estate account.
k.Documentation and reporting of capital gains, including allocation of gains to the beneficiaries.
20.Maintaining complete records of all actions noted above.
1.Payment of decedent’s final full-year income taxes by April 15 of the year of the death, if not already paid.
2.Payment of decedent’s partial-year income taxes by April 15 of the year after the death.
3.Payment of estate taxes within 9 months after the date of death, if applicable.
4.Reporting and payment of income taxes by the estate and any trusts, year by year, for any income within the estate or trusts.
IV.DISTRIBUTION OF THE ESTATE – Delivering the assets to the beneficiaries.
16. Assembling a comprehensive accounting of all assets, payments and transactions in the estate.
17.Ensuring that all estate obligations have been paid, or that appropriate funds have been set aside for any unsettled obligations, and that the statutory period for the filing of claims has passed.
18.Calculating the executor’s commissions and providing for its payment.
19.Calculation of distributions in exact accordance with the will or applicable law.
20.Preparation and execution of Receipt and Release agreements from each beneficiary.
21.Documentation of all agreements by which the precise terms of the will or intestacy laws have been altered (e.g., one party’s buy-out of property from another; or payment of money from one account rather than another; or payment of an asset’s present value rather than waiting to make a payment in the future).
22.Delivery of distribution to each beneficiary.
23.Assembly of all estate documents into an orderly file for future reference.
24.Please note that the assembly of the materials under this “Distribution of the Estate” heading can be very complicated, as it requires the integration of all information, numbers, and correspondence regarding the estate. The documents must be extremely precise, and the numbers must add up exactly. The preparation of these materials may take quite a bit of time, requiring multiple drafts and collaboration between attorney and client to gather and express all information in the required legal format. The benefit of this work is that all parties are assured of a complete and precise distribution of the estate, with all parties’ interests fully satisfied.
25.Note that estates can be settled with different levels of legal formality. Some of the steps noted above are required and the estate cannot be administered without them. Others are part of the legal procedure for a formal accounting, when the estate is fully reviewed by the court. When an estate is settled amicably, however, it is often not necessary to have judicial review. In such cases, it is still the standard practice to complete the full documentation, and it’s strongly recommended, to protect all parties’ interests. If you strongly wish to reduce process and expense, we can discuss which parts of the process might reasonably be omitted.
REVIEW OF EXISTING DOCUMENTS.
It’s not uncommon for estate documents to accumulate over time. You might start with a will, and then make some revisions, add a trust, change a trustee, re-title a property. And the result could be a complicated set of material that may or may not have the intended effect, and may or may not suit your current needs. If you have anything more than one will in effect, it might be a good idea to bring your documents in for a comprehensive review.
Changes in an estate plan have to take your whole picture into account. It’s not unusual for us to find that a plan that made sense when it was written is out of touch with the client’s current needs. Or that a smart strategy in one part of the plan was not coordinated with a corresponding change in another part of the plan. There are also lots of issues that can arise as plans play out over time – such as the ongoing ownership or management of a property that passed to a trust after someone has died.
And technical details can have serious impact. For example, amendments to trusts are not always permitted, and they require the signatures of the right parties with the right formalities in order to take effect.
Bring it all in and we’ll let you know what your documents are doing for you and what you might want to change.