Acting as an Executor 7 th Edition 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... 6 Review Answers... 7 Chapter 2 If You re Asked to Be an Executor or Trustee... 9 Learning Objectives... 9 Introduction... 9 Should You Accept the Job?... 9 Legal Restrictions on Who Can Serve as Executor... 10 Skills You ll Need... 10 Your Situation... 10 Making the Job Manageable... 12 Get a List of Assets... 13 Make Sure There s an Up-to-Date Will or Trust... 18 Encourage Steps to Avoid Probate... 18 Get Wishes for Final Arrangements in Writing... 19 Make Sure You ll Have Access to Documents... 19 Make Sure You ll Have Passwords... 19 Encourage Efforts to Avoid Estate Tax, If Necessary... 20 Get a Plan for Hard-to-Sell Assets... 20 Get a Handle on Debts... 20 Try to Head Off Family Fights... 20 Review Questions... 24 Review Answers... 25 Chapter 3 The First Week... 29 Learning Objectives... 29 Introduction... 29 Organ, Tissue, and Body Donation... 29 Kinds of Donations... 29 Presumed Consent for Organ Donation... 29 Giving Consent... 30 Physician s Certification and Death Certificate... 31 Autopsy... 31 Burial or Cremation... 32 Burial... 33 Cremation... 34 Choosing a Mortuary... 35 Who Pays the Mortuary or Crematory... 35 Veterans... 36 Funerals and Memorial Services... 37 Other Tasks During the First Few Days... 37 Review Questions... 40 Review Answers... 41 Chapter 4 The First Month... 43 Learning Objectives... 43 Introduction... 43
Set Up a Filing System... 43 Order Copies of the Death Certificate... 45 Where to Order... 45 Who May Order... 45 Ordering in Person... 45 Ordering by Mail or Fax... 45 Ordering Online... 46 Find the Will... 46 Where to Look... 47 What You re Looking For... 47 If You Can Only Find a Copy... 48 You Know It Exists But Can t Find It... 49 After You Find It... 49 Find Other Documents That Leave Property... 49 Living Trusts... 49 Beneficiary Designations... 49 Joint Ownership Deeds... 50 Other Joint Ownership Documents... 50 Marital Property Agreements... 51 Prenuptial Agreements... 51 Transfer-on-Death Deeds... 51 Send Notifications of the Death... 52 Social Security Administration... 53 State Motor Vehicles Department... 54 State Health Services Agency... 54 Credit Card Issuers... 54 Credit Reporting Agencies... 54 Post Office... 55 Utilities and Other Services... 55 Landlord... 55 The U.S. State Department... 56 Membership Organizations... 56 The Direct Marketing Association... 56 Social Networking Sites and Email... 56 Other Social Networks... 57 Charities and Other Organizations the Deceased Person Supported... 57 Keep Property Secure... 58 Sort Through Personal Belongings... 58 Review Questions... 60 Review Answers... 61 Chapter 5 Claiming Life Insurance, Social Security, and Other Benefits... 63 Learning Objectives... 63 Introduction... 63 Life Insurance and Annuity Proceeds... 63 Life Insurance... 63 Annuities... 67 Social Security Benefits... 68 One-Time Death Benefit... 68 Monthly Survivors Benefits... 68 Pensions... 69 Veterans Benefits... 70 Dependency and Indemnity Compensation... 70 Wartime Service Pension... 70 Burial Allowance... 70 Applying for Veterans Benefits... 70 Wages Owed the Deceased Person... 71 ii
Special State Procedures... 71 Small Estate Affidavit Procedure... 71 The Family Allowance... 72 Other Possible Benefits and Claims... 72 Workers Compensation... 72 State Disability Benefits... 73 Federal Employment Benefits... 73 Railroad Retirement Act Benefits... 73 Unions... 73 Benefits From Health Insurance... 73 Lawsuits for Wrongful Death... 73 Review Questions... 74 Review Answers... 75 Chapter 6 Making Sense of the Will... 79 Learning Objectives... 79 Introduction... 79 Does the Will Appear Valid?... 79 Basic Requirements... 79 Out-of-State Wills... 82 Handwritten Wills... 82 More Than One Will... 83 Reading the Will... 86 Personal Declarations... 86 Nomination of the Executor... 86 The Executor s Bond... 87 Specific Gifts... 87 Specific Gifts Listed in Another Document... 89 Gifts of Money... 89 Gift of the Residuary Estate... 89 Children s Guardians... 90 Trusts... 90 Custodianships for Minors... 91 Pour-Over Clause... 91 Payment of Debts and Taxes... 92 No-Contest Clause... 92 Simultaneous Death... 92 Other Clauses... 93 Self-Proving Affidavit... 93 Gifts to Groups of People... 94 What Children or Issue Means... 94 Group Members Born After the Will Is Made... 96 Group Members Born After the Will Maker s Death... 97 Deceased Group Members... 97 Events That Affect Who Inherits... 98 The Will Maker Got Divorced... 98 The Spouse Wants More... 98 A Child Wants More... 100 Beneficiaries Have Died... 101 The Lawyer Who Drafted the Will Inherits Property... 104 Property Has Been Given Away or Sold... 104 Beneficiaries Have Already Gotten Their Inheritance... 106 The Will Maker Gave You Different Instructions... 106 Review Questions... 107 Review Answers... 109 iii
Chapter 7 If There s No Will... 111 Learning Objectives... 111 Introduction... 111 Who s in Charge... 111 Who Gets What: The Basic Rules... 112 How State Laws Work... 112 Misconduct That Bars Heirs From Inheriting... 114 Finding Your State s Rules... 114 Understanding Key Terms... 115 Spouse... 115 Children and Issue... 116 Brothers and Sisters... 118 If an Heir Has Died... 118 Survivorship Requirements... 118 Rights of a Deceased Heir s Descendants... 119 Taking Care of Minor Children... 120 Review Questions... 121 Review Answers... 122 Chapter 8 Taking Inventory... 123 Learning Objectives... 123 Introduction... 123 Step 1: Look for Assets... 123 Hiding Places... 123 The Paper Trail... 124 Safe Deposit Boxes... 124 Unclaimed Assets... 125 Step 2: Make a List of Assets... 125 Real Estate... 127 Cash and Bank Accounts... 127 Stocks, Bonds, and Mutual Funds... 128 Life Insurance... 129 Retirement Plans... 129 Wages or Benefits From Employers... 129 Small Business Interests... 130 Limited Partnerships... 130 Vehicles... 130 Debts and Court Judgments... 130 Frequent Flyer Rewards... 130 Patents and Copyrights... 130 Other Tangible Assets... 131 Step 3: Estimate the Value... 131 Real Estate... 132 Stocks and Bonds... 132 Life Insurance and Annuities... 133 Businesses... 134 Limited Partnerships... 134 Vehicles... 134 Art, Antiques, or Collectibles... 134 Step 4: Add Up Debts... 134 Step 5: Determine How Title Was Held... 135 Solely Owned... 135 Joint Tenancy... 136 Tenancy by the Entirety... 137 Tenancy in Common... 137 Community Property With Right of Survivorship... 138 Community Property... 138 iv
Property Held in a Living Trust... 141 Review Questions... 143 Review Answers... 144 Chapter 9 - Managing Assets and Paying Bills... 147 Learning Objectives... 147 Introduction... 147 Your Legal Duties... 147 Put the Estate First... 148 Keep Estate Assets Separate From Your Own... 148 Be Fair to All Beneficiaries... 148 Don t Take Risks... 148 Follow the Will s Instructions... 148 Keeping Good Records... 148 Setting Up an Estate or Trust Bank Account... 149 What Kind of Account to Open... 149 Getting a Taxpayer ID Number From the IRS... 150 Using the Account... 150 Managing Tangible Assets... 151 The Deceased Person s Residence... 151 Rental Real Estate Owned by the Deceased Person... 151 Vehicles... 152 Firearms... 152 Small Things... 153 Cash... 153 Managing Cash Accounts and Investments... 153 Bank Accounts... 153 Securities... 153 Digital Assets... 154 Paying Claims and Debts... 154 Debts You Don t Need to Pay... 154 Claims for Reimbursement for Medicaid Benefits... 155 Formal and Informal Claims... 155 How to Pay Claims... 156 If There Isn t Enough Cash... 156 If There Aren t Enough Assets... 156 Your Personal Obligation to Pay Debts... 157 Giving Property to Beneficiaries... 158 Selling Assets... 159 Why to Sell Property... 159 How to Sell Property... 159 Handling a Business... 159 Sole Proprietorship... 160 Partnership... 160 Limited Liability Company (LLC)... 160 Closely Held Corporation... 161 Review Questions... 162 Review Answers... 163 Chapter 10 Caring for Children and Their Property... 165 Learning Objectives... 165 Introduction... 165 Immediate Concerns... 165 Raising a Child... 166 Is a Personal Guardian Necessary?... 166 How to Get a Guardian Appointed... 166 Who Serves as Guardian... 167 v
Court Supervision of the Guardian... 168 When the Guardianship Ends... 168 Managing a Child s Property... 168 Is an Adult Property Manager Necessary?... 168 Kinds of Property Managers... 168 General Legal Duties of the Property Manager... 169 Custodians Under the UTMA... 169 Trustees of Children s Trusts... 170 Property Guardians and Other Court-Ordered Solutions... 170 Personal and Practical Issues... 171 Review Questions... 173 Review Answers... 174 Chapter 11 Taxes... 175 Learning Objectives... 175 Introduction... 175 Overview... 175 Who Is Responsible for Filing Tax Returns... 175 Returns You May Need to File... 175 Where Does the Money Come From?... 176 Your Personal Liability... 176 Paying Taxes on Your Compensation... 177 The Deceased Person s Income Tax Return: Form 1040... 177 Is a Return Required?... 177 Special Rules for Surviving Spouses... 177 When the Income Tax Return Is Due... 178 What Forms to Use... 178 Claiming a Refund... 179 Special Rules for Final Tax Returns... 179 The Estate s Income Tax: Form 1041... 179 Is a Fiduciary Return Required?... 179 Getting an ID Number for the Estate... 181 Notifying the IRS That You re in Charge... 181 Completing the Return... 181 When the Return Is Due... 181 Who Pays the Tax... 182 Estimated Tax Payments... 182 State Income Taxes... 182 Income Tax on Trusts... 182 Simple Living Trusts... 182 Ongoing Trusts... 183 Federal Estate Tax... 183 Value of the Estate for Estate Tax Purposes... 183 The Portability Provision for Spouses... 185 The Filing Deadline... 185 Estimating the Tax Owed... 185 Paying the Federal Tax... 186 Gift Tax Returns... 187 Other Estate Tax Concerns for the Executor... 187 Working With a Tax Expert... 187 State Inheritance and Estate Taxes... 188 Pick-Up Taxes... 188 State Estate Taxes... 188 State Inheritance Taxes... 188 Other Taxes... 189 Real Estate... 189 Business... 189 vi
Beneficiaries and Taxes... 190 Income Owed to the Deceased Person... 190 Income Tax on Inherited Property... 190 Property Subject to Estate or Inheritance Tax... 191 Tax Basis of Inherited Property... 191 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... 194 Large Estate With Trust... 195 Review Questions... 197 Review Answers... 198 Chapter 12 Property That Doesn t Go Through Probate... 203 Learning Objectives... 203 Introduction... 203 Common Assets That Don t Go Through Probate... 203 Joint Tenancy Property... 204 Tenancy by the Entirety Property... 204 Community Property... 205 Community Property With Right of Survivorship... 205 Property Covered by a Community Property Agreement... 205 Other Community Property... 205 Property Held in a Living Trust... 205 Real Estate That Qualifies as a Homestead... 205 Property That Passes to Immediate Family by Law... 206 Salary or Wages... 206 Payable-on-Death Bank Accounts... 206 Life Insurance Proceeds... 206 Retirement Accounts... 206 Health Savings Accounts... 206 Securities Registered in Transfer-on-Death Form... 207 Savings Bonds... 207 Co-Owned Bonds... 207 Bonds Registered in Beneficiary Form... 207 Vehicles... 207 Vehicles Registered in Transfer-on-Death Form... 207 Vehicles That Qualify for Non-Probate Transfer Under State Law... 207 Pension Plan Distributions and Other Death Benefits... 208 Real Estate Left by a Transfer-on-Death Deed... 208 Personal Property in Small Estates... 208 Review Questions... 210 Review Answers... 211 Chapter 13 Transferring Joint Tenancy and Other Survivorship Property... 213 Learning Objectives... 213 Introduction... 213 Real Estate... 213 Documents You Need... 213 Where to File Your Documents... 215 Bank Accounts... 215 Securities... 215 Brokerage Accounts, Mutual Funds, or Money Market Funds... 215 Certificates... 216 Vehicles... 219 Savings Bonds... 220 vii
If Title Wasn t Cleared When the First Joint Tenant Died... 220 Review Questions... 221 Review Answers... 222 Chapter 14 - Transferring Community Property... 223 Learning Objectives... 223 Introduction... 223 Your Transfer Options... 223 Survivorship Community Property... 224 Community Property Agreements... 224 Validity of These Agreements... 224 Transferring Community Property to the Surviving Spouse... 224 State Probate Shortcuts... 225 California... 225 Idaho... 226 New Mexico... 226 Texas... 227 When the Second Spouse Dies... 227 Review Questions... 228 Review Answers... 229 Chapter 15 Claiming Money in Retirement Plans... 231 Learning Objectives... 231 Introduction... 231 Retirement Plans: The Basics... 231 How Retirement Plans Save on Taxes... 231 Early Distribution Penalties... 232 Required Minimum Distributions... 232 How Inherited Funds Are Taxed... 232 Who s the Beneficiary?... 233 The Beneficiary Declines the Money... 233 The Surviving Spouse s Rights... 233 A Former Spouse s Rights... 234 If the Surviving Spouse Is the Beneficiary... 234 Rolling Over the Account... 234 Leaving the Account in the Deceased Spouse s Name... 235 Nonspouse Beneficiaries... 235 The First Year... 236 The Second and Later Years... 236 Special Rules for Multiple Beneficiaries... 237 Special Situations... 237 Co-Beneficiaries Options... 237 If a Trust Is the Beneficiary... 238 If There Is No Designated Beneficiary... 238 If the Beneficiary Has Died... 238 If No Beneficiary Was Named... 239 If the Estate Is the Beneficiary... 239 Review Questions... 240 Review Answers... 241 Chapter 16 Claiming Payable-on-Death Assets... 243 Learning Objectives... 243 Introduction... 243 If the Asset Was Co-Owned... 243 The Effect of Divorce on POD Beneficiaries... 243 How Beneficiaries Can Claim Assets... 244 Bank Accounts... 244 viii
Health Savings Accounts... 244 U.S. Savings Bonds... 244 Vehicles... 245 Real Estate... 245 Review Questions... 246 Review Answers... 247 Chapter 17 Special Procedures for Small Estates... 249 Learning Objectives... 249 Introduction... 249 Are You Handling a Small Estate?... 249 How States Define Small Estates... 249 What Kinds of Property to Count... 250 Subtracting What s Owed on Assets... 250 Claiming Property With Affidavits... 251 Who Can Use an Affidavit... 251 What Kind of Property Can Be Claimed... 251 The Waiting Period... 251 Preparing the Affidavit... 252 How to Claim the Property... 253 Using Simplified Probate... 256 State Eligibility Rules... 256 How It Works: An Overview... 256 Can You Do It Yourself?... 257 Getting Started... 257 Review Questions... 259 Review Answers... 260 Chapter 18 The Regular Probate Process... 261 Learning Objectives... 261 Introduction... 261 Common Questions About Probate... 261 How Much Does Probate Cost?... 261 Is There a Deadline for Starting Probate?... 262 How Long Will It Take?... 262 Who Will the Court Name as Executor?... 262 The Typical Probate Process... 263 Getting Started... 263 The First Hearing... 264 Posting a Bond... 264 Proving the Will s Validity... 265 Managing Estate Property... 265 Paying Creditors... 265 Giving Property to Beneficiaries Early... 266 Distributing Property and Closing the Estate... 266 The Process in Uniform Probate Code States... 267 Informal Probate... 268 Unsupervised Formal Probate... 269 Supervised Formal Probate... 270 Probate in Another State... 270 Disputes During Probate... 270 Challenges to the Will... 271 Fights About Who s Entitled to Inherit... 273 Challenges to the Executor... 273 Settling Disputes... 274 Do You Need a Lawyer?... 274 How Lawyers Can Help... 274 ix
When You Can Handle Things Yourself... 275 When to Hire a Lawyer... 275 If You Go It Alone: Working With the Court... 275 What You Need to Know... 276 Where to Find Forms and Information... 276 Finding the Right Probate Court... 276 Review Questions... 277 Review Answers... 278 Chapter 19 Wrapping Up a Simple Living Trust... 281 Learning Objectives... 281 Introduction... 281 How Simple Living Trusts Work... 281 If You re the Surviving Spouse... 282 Notifying Beneficiaries... 283 Transferring Assets to Yourself... 283 Managing Your Revocable Trust... 283 Your Other Duties... 284 Who Serves as Successor Trustee... 284 The Affidavit of Assumption of Duties... 284 What s in the Trust... 285 Property Owned in the Trustee s Name... 285 Assets From a Pour-Over Will... 286 Notifying Beneficiaries... 286 General Practices... 286 Special State Requirements... 287 Getting Valuable Property Appraised... 288 Registering the Trust... 289 Debts and Expenses... 289 Transferring Trust Property... 290 In-Kind or Cash Transfers... 290 Selling Assets and Distributing the Proceeds... 290 Transferring Property to Children Younger Than 18... 291 Making In-Kind Transfers... 291 Ending the Trust... 296 The Final Accounting... 296 The Trust Tax Return... 296 Review Questions... 298 Review Answers... 299 Chapter 20 Managing a Child s Trust... 301 Learning Objectives... 301 Introduction... 301 How a Child s Trust Works... 301 The Trustee s Job... 302 An Overview of the Trustee s Tasks... 302 Your Legal Duties... 302 Accepting or Declining the Trustee s Job... 303 Your Asset Management Duties... 303 Personal Considerations... 304 Liability Worries... 304 Can You Resign Later?... 304 Making the Job Easier... 304 Putting Your Decision in Writing... 305 Gathering Trust Property... 306 Keeping Beneficiaries Informed... 307 General Principles... 307 x
Special State Requirements... 309 Registering the Trust... 310 Investing Trust Property... 310 Working With Experts... 310 The Legal Rules... 310 Coming Up With Your Investment Strategy... 311 Picking Investments... 311 Conflicts With Beneficiaries... 313 Keeping Good Records... 313 Handling Trust Taxes... 314 Notifying the IRS That You re Trustee... 314 Getting a Tax ID Number for the Trust... 314 The Trust Tax Return... 314 Minimizing Income Taxes... 315 Sending Beneficiaries Schedule K-1... 315 Distributing Property... 315 Your Authority... 315 Dealing With Beneficiaries... 316 If You Want to Resign... 316 How to Resign... 316 Your Responsibilities If You Resign... 317 Ending the Trust... 317 Review Questions... 318 Review Answers... 319 Chapter 21 Finding More Information... 323 Learning Objectives... 323 Introduction... 323 Libraries... 323 Online Resources... 323 Government Websites... 323 Law Firm Websites... 324 State Bar Association Websites... 324 Commercial Legal Databases... 324 Finding Forms... 325 Finding Definitions... 325 Researching Specific Questions... 326 Look for a Statute... 326 See How Courts Interpret the Statute... 326 If There s No Statute... 327 Review Questions... 328 Review Answers... 329 Chapter 22 Lawyers and Other Experts... 331 Learning Objectives... 331 Introduction... 331 When to Get Help... 331 Deciding What You Want From a Lawyer... 331 Finding a Lawyer... 332 Personal Recommendations... 332 Group Legal Plans... 333 Referral Services and Directories... 333 Choosing a Lawyer... 333 Working With a Lawyer... 334 Paying a Lawyer... 334 How Lawyers Charge for Probate Work... 334 Getting a Written Fee Agreement... 336 xi
Solving Problems With Your Lawyer... 336 Communication Problems... 336 Concerns About Quality... 336 Fee Disputes... 337 Review Questions... 338 Review Answers... 339 Glossary... 341 Appendix State Information... 351 Index... 403 xii