True or False: You have to be an attorney or well-versed in financial and tax matters in order to serve as the executor of a loved one’s estate.
True or False: The best place to keep a will or trust is in a safe deposit box at your bank.
True or False: Your responsibilities as the executor of a loved one’s estate begin after he or she dies.
If you answered False, False and False to the above questions, there’s a good chance you have a head start on experiencing your role as executor as an honor instead of a headache.
“It is the executor’s job to see that the decedent’s property is distributed to the right people according to his or her will. This includes paying all debts and taxes and gathering up and managing the assets. Not a small job,” says David Foster, CPA, CFP®, financial planner and co-founder of Foster & Motley, Inc.
The good news is, you don’t have to be an attorney or even well-versed in financials and taxes to do the job well. You do, however, need to be honest and scrupulous, and it helps to be well organized. Hence, while an executor isn’t required to do anything until the individual dies, Foster suggests doing a little prep work so you are ready for the integral job when the time comes.
For example, if your dad announces you are to be the executor, don’t hesitate to ask where he and your mom keep their estate documents, financial records and other related papers, Foster recommends. The sooner you ask, the better.
“I suggest getting a copy of their wills and trusts. If their original wills are in a safe deposit box, get them out of there – that is not a good place for them. They are often really hard to get into right away when someone dies. So, it’s a good idea to keep a will at your house in a fireproof box, for example.”
Foster also suggests requesting the names, email addresses and phone numbers of your parents’ key advisors, such as their attorney, CPA, financial advisor, insurance agent, etc. That’s also a good time to discuss their last wishes in terms of what will happen to their assets at the time of their deaths. Keep in mind that plans might change, Foster further advises.
“Hopefully, they are willing to share that information. This doesn’t mean they have to disclose their net worth with you at that time. You’re just asking for their estate planning documents.”
Sometimes, just a simple, “Everything is in a binder in the left drawer of my desk” will suffice.
Note: Because digital access to assets is a big deal today, Foster is a proponent of online password management apps like Last Pass, which give an appointed person emergency access to your digital accounts.
Responsibilities at Death
When the time comes for you to step in as executor of a parent’s estate, and there is no surviving spouse, your immediate tasks at hand are fairly forthright, Foster points out:
• Find the original copy of the will
• Cancel credit cards
• Get access to and safeguard the residence as needed
• Collect mail, forward future mail to you
• Gather prescription drugs for proper disposal
• Get several death certificates, typically from the funeral home
• Inform key financial and legal advisors
• Begin to pull together a list of all assets and liabilities
Administrative Duties
Foster suggests engaging a good attorney and his/her paralegal to assist you at this juncture. While it may be your dad’s attorney, for example, what’s imperative is that the attorney you retain is well-versed in the probate process and that they practice law in the county or state where your dad was a legal resident.
“This attorney and paralegal team can – and should – make your job as executor relatively painless,” Foster adds. “You will pay a few bucks, but the payback in time and energy should be well worth it.”
Once you are legally recognized as the executor by the probate court, it’s time to get down to business, confirming the values of all asset accounts, gathering information on debts, consolidating accounts where possible, paying off creditors and filing taxes. And that’s just the short list. Overall, it behooves the executor to “just keep good records,” Foster says.
“You will likely need to open a bank account in the name of the estate. The estate will more than likely have expenses before you can set up an estate account, however, so as executor, you should be prepared to pay for some expenses out of pocket from your own funds, all the while keeping copies of receipts, etc., so you can reimburse yourself at a later date.”
He’s not talking about funeral expenses or last medical expenses, but the random post-death expenses that just come up. Most creditors will work with executors as they are getting the estate settlement ball rolling, Foster notes.
All in Good Time
According to Foster, one of the most crucial aspects in your role as executor is keeping siblings and other estate beneficiaries informed of how the process is going, updating them regularly and providing a reasonable timeline for possible distribution of assets.
Fact: If you, as executor, distribute assets when there are valid estate liabilities that exceed the remaining assets, YOU will most likely be held personally liable, Foster emphasizes. So, unless your siblings are happy to possibly give back a portion of what they have received, establishing realistic distribution timelines is necessary.
Typically, it can take six months to a year to settle an estate. It’s not unheard of for the process to take up to 18 months. Even simple estates can’t be wrapped up in two months’ time, Foster points out.
“Nothing happens quickly. These things take time. Consolidating all the accounts, paying all the bills and taxes and distributing assets to all the right people, as well as final probate court filings as needed – it always takes longer than you think it will at the outset. Take your time and do it right.”
The “administrative wrap up” may seem tedious, but it’s the final step in granting a loved one’s last wishes, and it deserves rightful care and respect, he concludes. That care and respect, he believes, begins with that first, simple conversation after your loved one chooses you to be the executor.
“Just start by asking, ‘Can we talk about this?’ and take it from there. Do the necessary work ahead of time. Try to be ready to be an executor. Be prepared to manage the expectations of your siblings or other beneficiaries. Get on top of it early.”
Foster & Motley is located at 7755 Montgomery Road, Suite 100, Cincinnati, OH 45236. For more information, call 513.561.6640, 800.532.2962 or visit www.fosterandmotley.com