Death creates paperwork, and if the decedent left assets behind, there's even more work to do. The process of settling an estate begins when its owner dies and ends when all the estate's assets are distributed. Typically, a relative handles the preliminary work, such as finding the will and arranging for the funeral and burial.
Finding the Will
If the preliminary work falls upon you, search for the will first. It may have burial instructions. Call the decedent's lawyer, if he had one. If not, and it doesn't appear to be in the house, you can look for a will in the decedent's safe-deposit box without a court order.
Next, take the will to the probate office, which verifies that the will is valid. It must be on paper and dated and signed by the decedent. In most cases, it will also need two witnesses, though this isn't always true for holographic wills. It must be the most recent valid will. The probate court approves or appoints an executor based on preferences set out by state law, assuming that person is willing, trustworthy and legally competent.
The Executor's Job
An executor may handle preliminary paperwork, but her primary role comes later: finding the decedent's assets, claiming them for the estate and distributing them according to the will. You don't have to charge a fee as executor, but if you do, the fee is set by state law. It's usually a percentage of the estate's value. At any step in the process, you can hire a lawyer to answer your questions, help out, or take over.
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The executor needs to contact numerous people and inform them about the death. Among those who needed to be contacted includes:
- Everyone named in the will, and anyone who might have inherited property if there were no will.
- The Social Security Administration, the local post office, health insurers and physicians, and any groups or associations your relative belonged to, if only to find out if they offer any funeral and burial benefits.
- The decedent's employer, if any.
- The issuer of any life insurance policies.
- The decedent's creditors and investment manager.
Open a dedicated bank account for estate activities. These include expenses like utilities, insurance and current taxes for real estate, car loans, storage rental, and so forth. The decedent's liquid assets pay the bills. If you need more, you, as executor, can liquidate other assets.
Settle outstanding debts. Unsecured debts generally die with the debtor, but creditors may make claims against the estate -- wait 3 to 6 months to be sure. Find out which bills you are legally required to pay.
File federal and state tax returns for the decedent's final year and for prior years if the decedent did not.
Pay inheritance and estate taxes, if any. Few estates exceed the $5.43 million value that, as of this writing, triggers federal estate taxes. Only a half-dozen states levy inheritance taxes on deceased residents' estates: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. All taxes must be paid before the estate's assets are distributed.
A wise executor keeps fellow beneficiaries in the loop. In general, you don't need beneficiaries' consent to liquidate assets, but you shouldn't just go out and sell the car without telling anybody. Another beneficiary may want to buy it.
Get appraisals for major illiquid assets not earmarked for a specific beneficiary so that you can divide assets equitably. You may want to offer heirs the opportunity to buy out the others' share in major assets such as real estate.
Perform a similar tally for smaller assets that don't require an appraisal -- the kitchen table and Mom's sewing machine, for example -- if the beneficiaries can divvy up everything without rancor. Otherwise, have those appraised as well to make a fair distribution. Sell the remaining assets any way you see fit.
Finally, pay out whatever money is left, and notify the probate office that the estate is settled.