Acting as an Executor Mary Randolph, J.D.
Chapter 1 Overview... 1 Learning Objectives... 1 Introduction... 1 What Executors Do... 1 What Trustees Do... 2 Your Legal Duty... 3 Payment for Serving as an Executor or Trustee... 3 Dealing With Emotions Yours and Your Relatives... 4 Review Questions... 5 Review Answers... 6 Chapter 2 If You re Asked to Be an Executor or Trustee... 7 Learning Objectives... 7 Introduction... 7 Should You Accept the Job?... 7 Legal Restrictions on Who Can Serve as Executor... 8 Skills You ll Need... 8 Your Situation... 8 Making the Job Manageable... 10 Get a List of Assets... 11 Make Sure There s an Up-to-Date Will or Trust... 16 Encourage Steps to Avoid Probate... 16 Get Wishes for Final Arrangements in Writing... 17 Make Sure You ll Have Access to Documents... 18 Make Sure You ll Have Passwords... 18 Encourage Efforts to Avoid Estate Tax, If Necessary... 18 Get a Plan for Hard-to-Sell Assets... 18 Get a Handle on Debts... 18 Try to Head Off Family Fights... 19 Review Questions... 22 Review Answers... 23 Chapter 3 The First Week... 27 Learning Objectives... 27 Introduction... 27 Organ, Tissue, and Body Donation... 27 Kinds of Donations... 27 Presumed Consent for Organ Donation... 27 Giving Consent... 28 Physician s Certification and Death Certificate... 29 Autopsy... 29 Burial or Cremation... 30 Burial... 31 Cremation... 32 Choosing a Mortuary... 33 Who Pays the Mortuary or Crematory... 33 Veterans... 34 Funerals and Memorial Services... 35 Other Tasks During the First Few Days... 36 Review Questions... 38 Review Answers... 39
Chapter 4 The First Month... 40 Learning Objectives... 40 Introduction... 40 Set Up a Filing System... 40 Order Copies of the Death Certificate... 42 Where to Order... 42 Who May Order... 42 Ordering in Person... 43 Ordering by Mail or Fax... 43 Ordering Online... 43 Find the Will... 43 Where to Look... 44 What You re Looking For... 45 If You Can Only Find a Copy... 45 You Know It Exists But Can t Find It... 46 After You Find It... 46 Find Other Documents That Leave Property... 47 Living Trusts... 47 Beneficiary Designations... 47 Joint Ownership Deeds... 48 Other Joint Ownership Documents... 48 Marital Property Agreements... 48 Prenuptial Agreements... 48 Transfer-on-Death Deeds... 48 Send Notifications of the Death... 49 Social Security Administration... 50 State Motor Vehicles Department... 51 State Health Services Agency... 51 Credit Card Issuers... 51 Credit Bureaus... 52 Post Office... 52 Utilities and Other Services... 52 Landlord... 53 Membership Organizations... 53 The Direct Marketing Association... 53 Social Networking Sites and Email... 54 Other Social Networks... 54 Charities and Other Organizations the Deceased Person Supported... 55 Keep Property Secure... 55 Sort Through Personal Belongings... 55 Review Questions... 57 Review Answers... 58 Chapter 5 Claiming Life Insurance, Social Security, and Other Benefits... 59 Learning Objectives... 59 Introduction... 59 Life Insurance and Annuity Proceeds... 59 Life Insurance... 59 Annuities... 63 Social Security Benefits... 64 One-Time Death Benefit... 64 Monthly Survivors Benefits... 65 Pensions... 66 Veterans Benefits... 66 Dependency and Indemnity Compensation... 67 Wartime Service Pension... 67 ii
Burial Allowance... 67 Applying for Veterans Benefits... 67 Wages Owed the Deceased Person... 67 Special State Procedures... 68 Small Estate Affidavit Procedure... 69 The Family Allowance... 69 Other Possible Benefits and Claims... 69 Workers Compensation... 69 State Disability Benefits... 70 Federal Employment Benefits... 70 Railroad Retirement Act Benefits... 70 Unions... 70 Benefits From Health Insurance... 70 Lawsuits for Wrongful Death... 70 Review Questions... 71 Review Answers... 72 Chapter 6 Making Sense of the Will... 75 Learning Objectives... 75 Introduction... 75 Does the Will Appear Valid?... 75 Basic Requirements... 75 Out-of-State Wills... 78 Handwritten Wills... 78 More Than One Will... 79 Reading the Will... 82 Personal Declarations... 82 Nomination of the Executor... 82 The Executor s Bond... 83 Specific Gifts... 83 Specific Gifts Listed in Another Document... 85 Gifts of Money... 85 Gift of the Residuary Estate... 86 Children s Guardians... 86 Trusts... 87 Custodianships for Minors... 87 Pour-Over Clause... 87 Payment of Debts and Taxes... 88 No-Contest Clause... 88 Simultaneous Death... 89 Other Clauses... 89 Self-Proving Affidavit... 90 Gifts to Groups of People... 90 What Children or Issue Means... 91 Group Members Born After the Will Is Made... 93 Group Members Born After the Will Maker s Death... 93 Deceased Group Members... 94 Events That Affect Who Inherits... 95 The Will Maker Got Divorced... 95 The Spouse Wants More... 95 A Child Wants More... 97 Beneficiaries Have Died... 98 The Lawyer Who Drafted the Will Inherits Property... 101 Property Has Been Given Away or Sold... 102 Beneficiaries Have Already Gotten Their Inheritance... 103 The Will Maker Gave You Different Instructions... 104 iii
Review Questions... 105 Review Answers... 107 Chapter 7 If There s No Will... 109 Learning Objectives... 109 Introduction... 109 Who s in Charge... 109 Who Gets What: The Basic Rules... 110 How State Laws Work... 110 Misconduct That Bars Heirs From Inheriting... 112 Finding Your State s Rules... 112 Understanding Key Terms... 113 Spouse... 113 Children and Issue... 114 Brothers and Sisters... 116 If an Heir Has Died... 117 Survivorship Requirements... 117 Rights of a Deceased Heir s Descendants... 117 Taking Care of Minor Children... 118 Review Questions... 119 Review Answers... 120 Chapter 8 Taking Inventory... 121 Learning Objectives... 121 Introduction... 121 Step 1: Look for Assets... 121 Hiding Places... 121 The Paper Trail... 122 Safe Deposit Boxes... 122 Unclaimed Assets... 123 Step 2: Make a List of Assets... 124 Real Estate... 125 Cash and Bank Accounts... 125 Stocks, Bonds, and Mutual Funds... 126... 126 Life Insurance... 127 Retirement Plans... 128 Wages or Benefits From Employers... 128 Small Business Interests... 128 Limited Partnerships... 128 Vehicles... 128 Debts and Court Judgments... 128 Frequent Flyer Rewards... 129 Patents and Copyrights... 129 Other Tangible Assets... 129 Step 3: Estimate the Value... 129 Real Estate... 130 Stocks and Bonds... 131 Life Insurance and Annuities... 132 Businesses... 132 Limited Partnerships... 132 Vehicles... 132 Art, Antiques, or Collectibles... 133 Step 4: Add Up Debts... 133 Step 5: Determine How Title Was Held... 134 Solely Owned... 134 iv
Joint Tenancy... 135 Tenancy by the Entirety... 135 Tenancy in Common... 136 Community Property With Right of Survivorship... 136 Community Property... 136 Property Held in a Living Trust... 140 Review Questions... 142 Review Answers... 143 Chapter 9 - Managing Assets and Paying Bills... 145 Learning Objectives... 145 Introduction... 145 Your Legal Duties... 145 Put the Estate First... 146 Keep Estate Assets Separate From Your Own... 146 Be Fair to All Beneficiaries... 146 Don t Take Risks... 146 Follow the Will s Instructions... 146 Keeping Good Records... 146 Setting Up an Estate or Trust Bank Account... 147 What Kind of Account to Open... 148 Getting a Taxpayer ID Number From the IRS... 148 Using the Account... 148 Keeping Tangible Assets Safe... 149 The Deceased Person s Residence... 149 Rental Real Estate Owned by the Deceased Person... 150 Vehicles... 150 Firearms... 150 Small Things... 151 Cash... 151 Managing Cash Accounts and Investments... 151 Bank Accounts... 151 Securities... 151 Digital Assets... 152 Paying Claims and Debts... 152 Debts You Don t Need to Pay... 152 Formal and Informal Claims... 153 How to Pay Claims... 153 If There Isn t Enough Cash... 154 If There Aren t Enough Assets... 154 Your Personal Obligation to Pay Debts... 155 Giving Property to Beneficiaries... 156 Selling Property... 156 Why to Sell Property... 157 How to Sell Property... 157 Handling a Business... 157 Sole Proprietorship... 158 Partnership... 158 Limited Liability Company (LLC)... 158 Closely Held Corporation... 158 Review Questions... 160 Review Answers... 161 Chapter 10 Caring for Children and Their Property... 162 Learning Objectives... 162 Introduction... 162 v
Immediate Concerns... 162 Raising a Child... 163 Is a Personal Guardian Necessary?... 163 How to Get a Guardian Appointed... 164 Who Serves as Guardian... 164 Court Supervision of the Guardian... 165 When the Guardianship Ends... 165 Managing a Child s Property... 165 Is an Adult Property Manager Necessary?... 165 Kinds of Property Managers... 166 General Legal Duties of the Property Manager... 166 Custodians Under the UTMA... 167 Trustees of Children s Trusts... 168 Property Guardians and Other Court-Ordered Solutions... 168 Personal and Practical Issues... 168 Review Questions... 170 Review Answers... 171 Chapter 11 Taxes... 172 Learning Objectives... 172 Introduction... 172 Overview... 172 Who Is Responsible for Filing Tax Returns... 172 Returns You May Need to File... 172 Where Does the Money Come From?... 173 Your Personal Liability... 173 Paying Taxes on Your Compensation... 174 The Deceased Person s Income Tax Return: Form 1040... 174 Is a Return Required?... 174 Special Rules for Surviving Spouses... 175 When the Income Tax Return Is Due... 175 What Forms to Use... 176 Claiming a Refund... 176 Special Rules for Final Tax Returns... 177 The Estate s Income Tax: Form 1041... 177 Is a Fiduciary Return Required?... 177 Getting an ID Number for the Estate... 179 Notifying the IRS That You re in Charge... 179 Completing the Return... 179 When the Return Is Due... 179 Who Pays the Tax... 180 Estimated Tax Payments... 180 State Income Taxes... 180 Income Tax on Trusts... 181 Simple Living Trusts... 181 Ongoing Trusts... 181 Federal Estate Tax... 181 Value of the Estate for Estate Tax Purposes... 181 The Portability Provision for Spouses... 183 The Filing Deadline... 183 Estimating the Tax Owed... 184 Paying the Federal Tax... 185 Gift Tax Returns... 185 Other Estate Tax Concerns for the Executor... 186 Working With a Tax Expert... 186 State Inheritance and Estate Taxes... 187 Pick-Up Taxes... 187 vi
State Estate Taxes... 187 State Inheritance Taxes... 188 Other Taxes... 188 Real Estate... 189 Business... 189 Beneficiaries and Taxes... 189 Income Owed to the Deceased Person... 189 Income Tax on Inherited Property... 189 Property Subject to Estate or Inheritance Tax... 190 Tax Basis of Inherited Property... 190 Capital Gains Tax for a Surviving Spouse... 192 Typical Situations... 192 Everything Left to the Surviving Spouse... 192 Everything to Adult Children... 193 A Large Estate... 193 Large Estate With Trust... 194 Review Questions... 196 Review Answers... 197 Chapter 12 Property That Doesn t Go Through Probate... 201 Learning Objectives... 201 Introduction... 201 Common Assets That Don t Go Through Probate... 201 Joint Tenancy Property... 202 Tenancy by the Entirety Property... 203 Community Property... 203 Community Property With Right of Survivorship... 203 Property Covered by a Community Property Agreement... 203 Other Community Property... 203 Property Held in a Living Trust... 203 Real Estate That Qualifies as a Homestead... 203 Property That Passes to Immediate Family by Law... 204 Salary or Wages... 204 Payable-on-Death Bank Accounts... 204 Life Insurance Proceeds... 204 Retirement Accounts... 205 Health Savings Accounts... 205 Securities Registered in Transfer-on-Death Form... 205 Savings Bonds... 205 Co-Owned Bonds... 205 Bonds Registered in Beneficiary Form... 205 Vehicles... 205 Vehicles Registered in Transfer-on-Death Form... 205 Vehicles That Qualify for Nonprobate Transfer Under State Law... 206 Pension Plan Distributions and Other Death Benefits... 206 Real Estate Left by a Transfer-on-Death Deed... 206 Personal Property in Small Estates... 206 Review Questions... 208 Review Answers... 209 Chapter 13 Transferring Joint Tenancy and Other Survivorship Property... 210 Learning Objectives... 210 Introduction... 210 Real Estate... 210 Documents You Need... 210 Where to File Your Documents... 212 vii
Bank Accounts... 212 Securities... 212 Brokerage Accounts, Mutual Funds, or Money Market Funds... 212 Certificates... 213 Vehicles... 216 Savings Bonds... 217 If Title Wasn t Cleared When the First Joint Tenant Died... 217 Review Questions... 218 Review Answers... 219 Chapter 14 - Transferring Community Property... 220 Learning Objectives... 220 Introduction... 220 Your Transfer Options... 220 Survivorship Community Property... 221 Community Property Agreements... 221 Validity of These Agreements... 221 Transferring Community Property to the Surviving Spouse... 221 State Probate Shortcuts... 222 California... 222 Idaho... 223 New Mexico... 223 Texas... 224 When the Second Spouse Dies... 224 Review Questions... 225 Review Answers... 226 Chapter 15 Claiming Money in Retirement Plans... 227 Learning Objectives... 227 Introduction... 227 Retirement Plans: The Basics... 227 How Retirement Plans Save on Taxes... 227 Early Distribution Penalties... 228 Required Minimum Distributions... 228 How Inherited Funds Are Taxed... 228 Who s the Beneficiary?... 229 The Beneficiary Declines the Money... 229 The Surviving Spouse s Rights... 229 A Former Spouse s Rights... 230 If the Surviving Spouse Is the Beneficiary... 230 Rolling Over the Account... 230 Leaving the Account in the Deceased Spouse s Name... 231 Nonspouse Beneficiaries... 231 The First Year... 232 The Second and Later Years... 232 Special Rules for Multiple Beneficiaries... 233 Special Situations... 233 Cobeneficiaries Options... 233 If a Trust Is the Beneficiary... 234 If There Is No Designated Beneficiary... 234 If the Beneficiary Has Died... 235 If No Beneficiary Was Named... 235 If the Estate Is the Beneficiary... 235 Review Questions... 236 Review Answers... 237 viii
Chapter 16 Claiming Payable-on-Death Assets... 238 Learning Objectives... 238 Introduction... 238 If the Asset Was Co-Owned... 238 The Effect of Divorce on POD Beneficiaries... 238 How Beneficiaries Can Claim Assets... 239 Bank Accounts... 239 Health Savings Accounts... 239 U.S. Savings Bonds... 239 Vehicles... 240 Real Estate... 240 Review Questions... 241 Review Answers... 242 Chapter 17 Special Procedures for Small Estates... 243 Learning Objectives... 243 Introduction... 243 Are You Handling a Small Estate?... 243 How States Define Small Estates... 243 What Kinds of Property to Count... 244 Subtracting What s Owed on Assets... 245 Claiming Property With Affidavits... 245 Who Can Use an Affidavit... 245 What Kind of Property Can Be Claimed... 246 The Waiting Period... 246 Preparing the Affidavit... 246 How to Claim the Property... 248 Using Simplified Probate... 250 State Eligibility Rules... 250 How It Works: An Overview... 251 Can You Do It Yourself?... 251 Getting Started... 252 Review Questions... 253 Review Answers... 254 Chapter 18 The Regular Probate Process... 255 Learning Objectives... 255 Introduction... 255 Common Questions About Probate... 255 How Much Does Probate Cost?... 255 Is There a Deadline for Starting Probate?... 256 How Long Will It Take?... 256 Who Will the Court Name as Executor?... 256 The Typical Probate Process... 257 Getting Started... 257 The First Hearing... 258 Posting a Bond... 258 Proving the Will s Validity... 259 Managing Estate Property... 259 Paying Creditors... 259 Giving Property to Beneficiaries Early... 260 Distributing Property and Closing the Estate... 261 The Process in Uniform Probate Code States... 262 Informal Probate... 262 Unsupervised Formal Probate... 264 ix
Supervised Formal Probate... 264 Probate in Another State... 264 Disputes During Probate... 265 Challenges to the Will... 265 Fights About Who s Entitled to Inherit... 267 Challenges to the Executor... 268 Settling Disputes... 268 Do You Need a Lawyer?... 269 How Lawyers Can Help... 269 When You Can Handle Things Yourself... 269 When to Hire a Lawyer... 270 If You Go It Alone: Working With the Court... 270 What You Need to Know... 270 Where to Find Forms and Information... 270 Finding the Right Probate Court... 271 Review Questions... 272 Review Answers... 273 Chapter 19 Wrapping Up a Simple Living Trust... 277 Learning Objectives... 277 Introduction... 277 How Simple Living Trusts Work... 277 If You re the Surviving Spouse... 279 Notifying Beneficiaries... 279 Transferring Assets to Yourself... 279 Managing Your Revocable Trust... 280 Your Other Duties... 280 Who Serves as Successor Trustee... 280 The Affidavit of Assumption of Duties... 280 What s in the Trust... 281 Property Owned in the Trustee s Name... 281 Assets From a Pour-Over Will... 282 Notifying Beneficiaries... 282 General Practices... 283 Special State Requirements... 283 Getting Valuable Property Appraised... 285 Registering the Trust... 285 Debts and Expenses... 286 Transferring Trust Property... 286 Transferring in Kind or in Cash... 286 Selling Assets and Distributing the Proceeds... 287 Transferring Property to Children Younger Than 18... 287 Making In-Kind Transfers... 288 Ending the Trust... 293 The Final Accounting... 293 The Trust Tax Return... 293 Review Questions... 295 Review Answers... 296 Chapter 20 Managing a Child s Trust... 297 Learning Objectives... 297 Introduction... 297 How a Child s Trust Works... 297 The Trustee s Job... 298 An Overview of the Trustee s Tasks... 298 Your Legal Duties... 299 x
Accepting or Declining the Trustee s Job... 300 Your Asset Management Duties... 300 Personal Considerations... 300 Liability Worries... 301 Can You Resign Later?... 301 Making the Job Easier... 301 Putting Your Decision in Writing... 302 Gathering Trust Property... 303 Keeping Beneficiaries Informed... 303 General Principles... 303 Special State Requirements... 306 Registering the Trust... 307 Investing Trust Property... 307 Working With Experts... 307 The Legal Rules... 307 Coming Up With Your Investment Strategy... 308 Picking Investments... 308 Conflicts With Beneficiaries... 310 Keeping Good Records... 310 Handling Trust Taxes... 311 Notifying the IRS That You re Trustee... 311 Getting a Tax ID Number for the Trust... 312 The Trust Tax Return... 312 Minimizing Income Taxes... 312 Sending Beneficiaries Schedule K-1... 312 Distributing Property... 312 Your Authority... 313 Dealing With Beneficiaries... 313 If You Want to Resign... 313 How to Resign... 314 Your Responsibilities If You Resign... 314 Ending the Trust... 314 Review Questions... 316 Review Answers... 317 Chapter 21 Finding More Information... 321 Learning Objectives... 321 Introduction... 321 Libraries... 321 Online Resources... 321 Government Websites... 321 Law Firm Websites... 322 State Bar Association Websites... 322 Commercial Online Legal Databases... 322 Finding Forms... 323 Finding Definitions... 324 Researching Specific Questions... 324 Look for a Statute... 324 See How Courts Interpret the Statute... 325 If There s No Statute... 325 Review Questions... 326 Review Answers... 327 Chapter 22 Lawyers and Other Experts... 328 Learning Objectives... 328 Introduction... 328 xi
When to Get Help... 328 Deciding What You Want From a Lawyer... 328 Finding a Lawyer... 329 Personal Recommendations... 329 Group Legal Plans... 330 Referral Services and Directories... 330 Choosing a Lawyer... 330 Working With a Lawyer... 331 Paying a Lawyer... 331 How Lawyers Charge for Probate Work... 332 Getting a Written Fee Agreement... 333 Solving Problems With Your Lawyer... 333 Communication Problems... 333 Concerns About Quality... 334 Fee Disputes... 334 Review Questions... 335 Review Answers... 336 Glossary... 337 Appendix State Information... 347 Index... 399 xii