Settling an Estate – Learn How to Make Your Job Easier
Have your parents designated you as their estate executor – or perhaps their successor trustee – or both? If so, you have my condolences. Settling an estate is a lot of work. But, you can work now – while your parents are alive, towards making your job as executor less difficult when the time comes.
Find a way to talk to your parents about being an executor.
In spite of the fact that they made you their executor, they do love you. They will want to make your future job easier for you. So let them know what you think you need in order to prepare for this honorable role.
Express the concerns you may have. Maybe you haven’t seen the estate planning documents. Maybe your parents haven’t shared any information about what is in their estate. Maybe you live in another state or some distance away. Maybe you don’t think you will have time. Maybe you are afraid the family will squabble. Whatever it is that you want to talk about, bring it up.
Help your parents help you prepare for your role.
Work together on these steps towards making their estate distribution easier.
If they don’t already, help them create, and update each year, a list of assets in their estate.
For each asset, list its location, value and any documents related to it, how it is titled, who is the beneficiary and any contacts for it.
If the asset is personal property – talk to them about who they want to have it and why. Consider asking them to write down the information, or go over it in a family meeting with everyone there. Perhaps they might even consider letting heirs indicate which personal property items they might want.
If they have a lot of stuff, encourage them to downsize some of it. If they have valuable collections, talk with them about what the collection is, why they collected, who they want to have it, how to get it appraised, who some other collectors are that might be able to help if the heirs want to sell it.
If they have businesses or complex investments, work with them to develop a plan you (as executor or trustee) can follow to disperse it according to their wishes.
A net worth statement – also updated annually, will help you with an estimate for the taxable value of the estate. Estate tax laws keep changing. An estate that is taxable on death today may not be tomorrow and vice versa. It takes longer to settle an estate that must pay estate taxes.
Ask for a copy of their will, trusts, powers of attorney, living will – all estate plan documents. If they are lacking any of these, help them get started creating them. Read the documents to understand their wishes. Talk with them about what they intended when they drew up the documents. Ask them to discuss the plan with all their heirs so everyone knows their wishes.
Encourage them to write down their funeral wishes – including charities they want donations to in lieu of flowers, the type of service, burial vs. cremation and etc. Have them include a list of people to call, special readings desired, clothes in which they want to be buried and etc.
Property goes through probate court to be distributed if it isn’t passed otherwise. Ways to avoid probate include such things as titling it in the name of a trust, holding it in joint ownership, holding it in partnership or business title or designating a beneficiary or beneficiaries directly for that asset (such as a transfer on death title on your house).
Review the list of assets your parents created with your help and look for things that might have to go through probate. Look especially for real estate held in a different state. You don’t want to go through probate at all, let alone in two different states! When you find assets that might have to go through probate, encourage your folks to re-title, designate a beneficiary or take other action to avoid the expense and time needed for probate.
Reduce or avoid estate taxes.
If the estate is large, encourage your folks to consult their accountant or financial advisor to see if there are smart steps they can take now, to avoid a big tax bite when they die. One simple step is to give yearly gifts now to future heirs. Other steps might involve finding ways to free up cash from the estate to pay the taxes (some people use term life insurance).
Meet their advisors.
Offer to pay for a meeting with their lawyer, accountant and other professionals so you can meet them and perhaps discuss any questions you have about your duties as described in documents they created.
Mitigate potential family dysfunction.
Talk to them about the family’s probable reaction. Will there likely be discord between your siblings, should your parents consider designating one of them as co-executor. Will you want them to get someone else lined up to help you in your executor or trustee role?
See if they will write a letter of instruction on the disposal of personal property – in case there is dispute about it. Some folks will let the executor decide, some set up a method to let heirs pick, some dictate that disputed objects go to charity instead of family. In this same letter, ask them to explain why they set up their estate plan the way they did – especially if assets are not to be divided equally between heirs.
Have them consider pulling all heirs together and explaining the estate plan – making sure not to contradict the legal documents.
Don’t wait until your parents die to find out what being their executor or successor trustee involves. Take an active role in figuring it out with them now. Take what steps you can in you family situation to make your future job easier on you and remaining heirs.
Have you settled an estate as executor or successor trustee? What tips do you have?