Once an estate has been opened (and, in a larger estate, an executor appointed and given letters of office), the job of administering the estate begins. An executor should read the will to understand what will be expected of her. Who are the beneficiaries? What do they receive? Are there any trusts to be funded or special assets to be distributed? What are the powers that are given to the fiduciary to administer the estate? Once the executor understands the deceased person’s wishes and what is being asked of her, the tasks to administer the estate and their order varies from estate to estate. However, most executors will be responsible for:
- Opening an estate bank account, obtain a tax identification number and filing for change of address with financial institutions;
- Notifying appropriate parties of the death;
- Identifying and gathering assets;
- Valuing assets and filing inventories with the courts; and
- Providing notice to creditors, evaluating and paying valid debts (and objecting to invalid claims).
Small estates may be able to use more simplified procedures, such as an assignment of property, transfer by affidavit, personal property petition and transfer of an automobile by the department of motor vehicles.[1]
Preliminary Steps
The executor of the estate is a fiduciary, responsible for protecting the assets of the estate.[2] One of the executor’s first responsibilities will be to open an estate checking account.[3] This estate account can be opened at a local financial institution or bank by presenting the letters of office and a death certificate. The bank will issue checks in the name of the executor, on behalf of the estate. The account may be used to deposit cash, consolidate multiple accounts formerly in the deceased person’s name and pay bills (and distribute assets) when required.
Each estate must also obtain a federal tax identification number, by filing form SS-4 with the IRS.[4] The tax ID number is used for filing federal and state estate income tax returns and estate or inheritance tax returns, if needed.[5]
The personal representative should also complete a change of address form with the Postal Service to redirect all of the decedent’s mail to the address of the personal representative.
There are many parties who must be notified of a person’s death. These include, as appropriate:
– heirs, beneficiaries and next of kin;
– the deceased person’s accountant or lawyer;
– Social Security Administration;
– Medicare;
– state department of motor vehicles;
– current employer (including Office of Personnel Management if a civil servant);
– business partners or shareholders;
– credit reporting agencies; and
– clubs and membership organizations.[6]
Identifying and Gathering Estate Assets
Next, the executor should gather assets from the various people and institutions holding them, to prepare an official estate inventory for eventual sale or distribution.[7] For small estates, this process can be relatively simple, and may consist of transferring joint accounts, gathering personal property, or identifying a single piece of real estate.[8]
Finding assets for a larger estate may require work, including looking through personal files of the deceased person; gathering mail, which may contain notices, letters, or statements issued by institutions holding the assets; and contacting employers, accountants, lawyers or financial advisors for the information they may have.
Email and online accounts can also be good sources of information. People often receive statements electronically, which can be used to identify assets. To facilitate access, the Uniform Law Commission passed the revised Fiduciary Access to Digital Assets Act in 2015. Most states have enacted statutes addressing authority to manage a deceased person’s digital assets in the event of incapacity or death.[9]
For larger estates that require formal or supervised administration, potential assets may include items such as:[10]
- Bank accounts, cash, certificates of deposit, and investment accounts
Most people have bank or other investment accounts which they use to pay bills and save money. Bank statements may come through the mail or be delivered digitally. Executors should contact the local branches of any banks or other financial institutions they know, or suspect, hold assets of the deceased person. The institution will require, at a minimum, proof of death and a copy of the executor’s letters of office.[11]
Certificates of deposit may not yet be mature when someone dies. If they are mature, they can easily be converted to cash and deposited in the estate account. If they are not mature, it is possible to request a waiver of the early withdrawal penalty in order to convert them.[12]
- Tangible personal property
The deceased’s tangible personal property, other than tangible property held jointly with another person, will need to be accounted for and protected for eventual sale or distribution. This includes clothing, furniture, household items, jewelry, boats and cars.
The executor should first determine what tangible assets will become part of the estate by reading a personal property list (if any) and the will and finding any titles to boats and cars. The executor should also verify that all necessary insurance policies on those items are in place and have not lapsed. In some cases, automobiles may be transferred to a beneficiary named in the will through the state’s department of motor vehicles.[13]
- Safe deposit box
Some states allow next of kin to access a deceased person’s safe deposit box before an estate is opened – typically to find a will or other legal documents – upon presentation of a key and proof of death, such as a death certificate.[14] However, if the safe deposit box has not been accessed prior to death, an executor should seek out any safe deposit boxes and inventory their contents. Some states provide a specific document to petition for the authority to do so.[15]
- Real property
Real property may become part of the probate estate depending upon how it is titled and where it is located. Deeds should be examined to determine if the property was held in the decedent’s sole name or as tenants in common, which may subject some part or all of the property to probate.[16] Other restrictions on property should be considered, such as homestead laws,[17] which might control disposition of the property other than in accordance with the will.
The executor should continue to pay utilities, mortgages, and insurance on any real property which has become part of the estate, until the property is sold or transferred.
Any real property located outside the decedent’s state of domicile, and any livestock, oil, gas or mineral rights that are attached to real property located outside of the state of domicile, may be subject to ancillary administration.[18] The executor of the domiciliary estate must prepare a petition for ancillary administration to be filed in the state where the real property is located. The law of the state where the property is located will determine whether the executor is qualified to serve as ancillary executor or whether an ancillary administrator must be appointed.[19] The ancillary administration runs concurrently with the domiciliary administration.
An order closing the ancillary estate, after the real property has been probated and sold or transferred, will be required before the domiciliary estate can be closed.[20]
- Indebtedness, rents, and royalties
Executors should review notes issued by or to the deceased person, support payment agreements, rental agreements on real properties and all contracts for publication, dissemination or sale to determine if the estate is owed money from any source, including royalties, or owes payments to any source.[21] If payments are owed to the estate, the executor has the authority to collect or demand those payments and to sue, if necessary, for payments that are owed but unpaid.[22]
- Life insurance and retirement plans
Both life insurance and retirement plans are paid to the designated beneficiary on the account. Insurance policies should be reviewed, and the executor should contact financial or insurance institutions to notify them that the holder is deceased. The executor can apply for payment to the estate if no beneficiary has been designated or if the estate has been named as the beneficiary.[23] If a minor or disabled beneficiary has been named, the executor may be required to coordinate with a legal guardian, apply for appointment of a guardian ad litem and establish a special account before the funds will be distributed.[24]
- Business interests
If the deceased owned and operated a business, that business interest may become part of the estate, requiring the executor to either ensure the business continues to operate or wrap up the business concern in an appropriate way.[25] For example, where the deceased person owns a sole proprietorship or other single-person entity, sales may need to be fulfilled, accounts receivable collected and inventory paid for (or sold). An interest in a partnership or corporation owned with other persons will need to be managed according to governing documents that may determine what happens to a deceased person’s interest. This may involve working with partners or shareholders to continue to run the business or to transfer or sell the deceased person’s interest to a successor.[26]
Regardless of the type of entity, the executor is ultimately responsible for ensuring that the value of the business interest is protected for the benefit of the beneficiaries of the estate, to the greatest extent possible.
- Miscellaneous
Other assets or benefits that should be investigated and collected include Social Security benefits, veteran’s burial and survivor benefits, fraternal, union and association benefits and employer or retirement benefits. Where the deceased person has been paid a benefit in advance, it may also be necessary to reimburse the paying organization for funds paid in excess of the amount due through the date of death.
Valuing Assets and Filing an Inventory
Once the executor is reasonably certain all assets have been accounted for and are within his control, he should begin officially valuing those assets. Asset valuations are necessary to prepare inventory with the probate court and establishing cost bases for income tax purposes.[27] The inventory is due within a short time of opening the probate, often within two to four months of issuance of the letters of office.[28]
The inventory is important for several reasons. First, the inventory officially establishes the assets under the executor’s control and is a starting place for the accounting an executor must prepare before closing an estate. Second, having asset valuations can help protect assets in the event of an unplanned loss, such as fire or theft. Third, the asset valuations as reported on the inventory are used to divide the estate into shares for each beneficiary. Fourth, where a spouse chooses to exercise an elective right to property under state law – such as the right to take a percentage of the estate in lieu of a gift made in the will – asset valuations are necessary to determine the value of that share. Fifth, accurate asset valuations can assist the executor and court in planning for the payment of creditors’ claims, taxes and expenses of administration, including whether (and which) assets must be sold to ensure all payments are made.[29]
Assets are generally valued at their market value on the date of the decedent’s death,[30] unless state or federal statutes specify otherwise. Valuations should be obtained from an appraiser or other professional familiar with the asset or industry. For example, cash accounts can be valued as of the date of death by the institution holding the account on that date. Stocks and bonds fluctuate and should be valued by the institution where the investment account is located or by a company specializing in the valuation of commodities. Motor vehicles can be valued using the Kelly Blue Book; personal property may be valued using eBay or the Valuation Guide for Goodwill Donors, for example.[31] Estate appraisal firms can provide valuations of antiques and jewelry, while a real estate broker or appraiser may be needed for real property.
Smaller estates may not be required to file an inventory, and often, a smaller or limited estate may obtain more casual, less expensive valuations, depending upon the complexity of the estate, state law and common practice.
Dealing with Creditors
Most people die owing at least some sort of debt. Debts consist of any amounts owed by the deceased person prior to death, including credit card balances, loans, final medical bills and some post-death expenses such as funeral or burial expenses, attorney’s fees and accountant’s fees for final tax returns. Executors must identify all actual and potential creditors of the estate and provide them with notice in keeping with state law, prior to paying or objecting to all filed claims.
Notice requirements differ from state to state. Generally, notice must be provided to actual and potential creditors within a short time of opening the estate and receiving the letters of office. That time frame may vary from ninety days to six months.[32] Notice is often published in a local newspaper and mailed to known creditors.[33] The notice informs creditors that an estate has been opened and gives the creditor a specific time frame for filing a claim with the court for payment of the amount owed.[34] Claim forms are often available through the court, and proof of the claim must be included.[35]
Giving notice shortens the time frame in which the creditor can file a claim against estate assets and prevents the creditor from attempting to collect the outstanding debt from a beneficiary of the estate.[36] The executor will file proof of notice with the court as required.[37]
Once notice is given and the time for filing claims has passed, the executor should evaluate all claims. Claims that are untimely or appear to be invalid for any reason – such as having been paid previously – may be objected to within the time allowed by law, usually thirty to ninety days.[38] Claims that are not objected to in a timely manner are considered valid and enforceable.
If the estate has the funds to pay all claims, the executor should pay the claims from the estate account. The executor may sell assets to raise sufficient cash, if necessary, by abating (that is, reducing) gifts made in the will in accordance with state law.[39]
If the estate is not sufficient to pay all claims, the claims will abate in accordance with state law.[40] Typically, funeral and burial expenses, fees of the attorney for the estate, and executor’s fees take first priority. Other debts are paid in order of priority. For example, first paid are any debts with preference under the law, such as federal or state income tax obligations, then taxes on the decedent’s property assessed prior to death and judgments docketed and decrees entered against the decedent, and, finally, any other debts that may be owed by the decedent at the time of death.[41] Debts within a particular priority category will abate proportionately if the estate’s assets are insufficient to pay all creditors within the category.
Distributions to beneficiaries, other than those for family or spousal support given priority by state law, are not be paid until all creditors’ claims are paid or accounted for.
[1] Overview of Informal Probate, Michigan Legal Help. https://michiganlegalhelp.org/self-help-tools/end-of-life-planning/overview-of-informal-probate
[2] See, e.g., Vose v. Lee (In re Estate of Vose), 390 P.3d 238, 250, (Okla. 2017).
[3] Lauren A. Jenkins, Probate Administration in Virginia: An Overview For The Personal Representative, State Bar of Virginia, Trusts and Estates Division, http://www.vsb.org/site/sections/trustsandestates/winter2008a
[4] See, About Form SS-4, Application for Employer Identification Number, Internal Revenue Service. https://www.irs.gov/forms-pubs/about-form-ss-4
[5] Deceased Taxpayers: Understanding the General Duties as an Estate Administrator, Internal Revenue Service. https://www.irs.gov/businesses/small-businesses-self-employed/deceased-taxpayers-understanding-the-general-duties-as-an-estate-administrator
[6] Death Notification Checklist, State of Virginia. https://www.oprm.va.gov/docs/DeathNotificationChecklist.pdf
[7] See e.g., Ohio Rev. Code Ann. § 2113.25.
[8] See, Transferring Small Amounts of Property, Indiana Legal Services, Inc. https://www.indianalegalservices.org/node/109/transferring-small-amounts-property
[9] Access to Digital Assets of Decedents, National Conference of State Legislatures, February 25, 2019, http://www.ncsl.org/research/telecommunications-and-information-technology/access-to-digital-assets-of-decedents.aspx.
[10] Instructions For The Personal Representative Of A Washington Estate, Washington Law Office. https://www.lancasterlawoffice.com/instructions-prs/
[11] See, e.g., Mary Randolph, Handling Bank Account Funds in an Estate, https://www.alllaw.com/articles/nolo/wills-trusts/bank-account-funds-estate.html
[12] William Pirraglia, Conditions for Early Withdrawal of a Certificate of Deposit Without a Penalty, https://finance.zacks.com/conditions-early-withdrawal-certificate-deposit-penalty-7564.html
[13] See, e.g., Transfer Vehicle from Name of Deceased Member of Immediate Family, State of CT Dept. of Motor Vehicles, https://ct.gov/dmv/cwp/view.asp?a=810&q=245070
[14] See, Cal. Prob. Code § 331.
[15] State of Michigan Probate Court, Petition and Order to Open a Safe—Deposit Box to Locate a Will or Burial Deed. https://courts.michigan.gov/Administration/SCAO/Forms/courtforms/pc551.pdf
[16] See, Real Property as Part of Probate Cases in New Mexico, Santa Fe County, New Mexico Probate Judge. https://www.santafecountynm.gov/probate/real_property_as_part_of_probate_cases_in_new_mexico_
[17] Fla. Stat. Ann. § 732.4015.
[18] Ancillary Probate, Mercer County, New Jersey. http://www.mercercounty.org/government/county-surrogate/ancillary-proceedings
[19] See, Instructions for Completing Petition for Estate Administration, New Hampshire Judicial Branch, https://www.courts.state.nh.us/forms/nhjb-2145-p-instructions.pdf
[20] See, Joseph A. Stusek et al, Ancillary Probate in Florida, Cummings and Lockwood, pg. 9, https://www.cl-law.com/uploads/Ancillary-Probate-in-Florida-W-010-8321.pdf
[21] Probate Procedures Manual, Probate Division Of The Circuit Court Of Jackson County, Missouri. https://www.16thcircuit.org/Data/Sites/1/media/probate/probatemanual.pdf
[22] Nev. Rev. Stat. Ann. §§143.060, 143.070.
[23] Betsy Simmons Hannibal, Do Life Insurance Proceeds Go Through Probate?, Lawyers.com. https://www.lawyers.com/legal-info/trusts-estates/wills-probate/does-insurance-money-need-to-go-through-probate.html
[24] Surviving Minor Children, Alaska Self-Help Court System: Probate. http://www.courts.alaska.gov/shc/probate/probate-minors.htm
[25] An Executor’s Guide to Probate Administration, New York State. https://bhlawpllc.com/wp-content/uploads/2015/08/NYS-Executors-Guide.pdf
[26] Ohio Rev. Code Ann. § 2113.30.
[27] 20 Pa. Cons. Stat. Ann. §§3301, 3302
[28] Julie Garber, How to Probate an Estate Step-by-step, The Balance, March 15, 2019 https://www.thebalance.com/step-by-step-guide-how-to-probate-an-estate-3505261.
[29] See, Estate Inventory: Why It Matters and Tips on Its Preparation, Alberts Law, Nov 6, 2017, https://alberts-law.com/2017/11/06/estate-inventory-preparation-use/.
[30] 20 Pa. Cons. Stat. Ann. §3302.
[31] See, Estate Inventory: Why It Matters and Tips on Its Preparation, Alberts Law, Nov 6, 2017, https://alberts-law.com/2017/11/06/estate-inventory-preparation-use/.
[32] Ind. Code Ann. § 29-1-14-1.
[33] Mich. Comp. Laws Serv. § 700.3801.
[34] Mich. Court Rules section 5.208.
[35] Superior Court of California, Creditors Claim. https://www.courts.ca.gov/documents/de172.pdf
[36] Fla. Stat. Ann. § 733.2121 and Fla. Stat. Ann. § 733.702.
[37] Tex. Est. Code § 308.053.
[38] Ohio Rev. Code Ann. § 2117.06.
[39] Wash. Rev. Code Ann. § 11.10.010.
[40] Va. Code Ann. § 64.2-528.
[41] N.Y. Surr. Ct. Proc. Act Law § 1811.