When someone passes—whether a loved one or close friend—settling the estate can be an involved and often-confusing process. But, unfortunately, it’s a task that needs to be done. Assets need to be distributed. Debts need to be settled. Taxes need to be paid.
Being assigned the Executor of an individual’s estate can be a daunting task, but it’s far from impossible. There is a reasonably straightforward procedure you need to follow that, once done, can leave everyone in a better place.
Here is a list of the nine steps to take to close the deceased’s estate to make things easier.
Things have to get organized. First, you should look for a will and obtain several certified copies of the death certificate. You will also need to know the deceased’s social security number to inform banks, credit card companies, investment firms, life insurance companies, and the Social Security Administration of the deceased’s passing. Some will need a certified copy of the death certificate sent to them.
Similarly, write up a list of people who should be notified of the deceased’s passing, including anyone named in the will, relatives, friends, neighbors, business associates, and others.
Also, don’t forget to keep track of your time and expenses during this whole process. You deserve to be fairly compensated for your work, so document as much as possible.
Unfortunately, it’s not unheard of for potential thieves to target the homes of the recently deceased. Take an inventory of the deceased’s belongings at home and change the locks if you can.
If the deceased has active utility accounts (electricity, gas, cable, etc.) or other subscriptions, you should get those canceled.
If the estate is small and doesn’t include a will or significant property, you may not need much legal assistance. That said, you may want to consider it regardless of the size of the estate. A probate lawyer or estate attorney understands all the finer details that need to be covered and could provide some significant peace of mind.
They can also guide you through the rest of the steps in this process.
If there is a will, it must be filed in the probate court, and beneficiaries must be notified. Similarly, the trustees should also be kept informed if there is a trust.
If there is no will, the estate is divided between the deceased’s heirs, including any surviving spouse, children, siblings, parents, and other relatives.
If there is a property involved when there is no will, and the property title states “joint with rights of survivorship,” you can use the title and certified original death certificate to file a notarized Affidavit of Death form and Preliminary Change of Ownership Report form with the assessor’s office.
If no relatives come forward to claim their share in the property, the estate’s assets go to the state.
Make an inventory list of all assets that need to be distributed. High-value assets such as houses and vehicles should be appraised so you can determine if the Estate will owe any taxes.
If you’re the assigned Executor of the estate, it’s your responsibility to take care of the assets until they are appropriately distributed.
If you have been assigned the Executor, you should open a checking account in the estate’s name. This will be used to collect money owed to the deceased (final wages, insurance benefits, etc.) and to pay debts, final bills, court costs, lawyer’s fees, funeral costs, and any other expenses associated with settling the estate.
Next, you’ll need to file the necessary tax returns and make sure taxes are paid. In addition to the deceased’s final income tax form (Form 1040), you’ll need to include federal estate tax (Form 706), state estate tax (varies by state), estate and income tax (Form 1041), and the gift and generation-skipping transfer tax (Form 709) if applicable.
Despite being deceased, debts still need to be paid. Fortunately, you’re not personally responsible for paying off debts—that money comes from the estate. You need to figure out what is owed to whom. If there is a lot of debt involved, you may want the assistance of an estate attorney to help you handle debt claims.
Once debts and taxes are paid, and probate (if applicable) has closed, you can now distribute assets according to the deceased’s final wishes. You can formally petition the court to discharge you of your executor responsibilities and close the estate when that is completed.
A simple estate with few assets and debts may be settled in as little as six months. However, more complicated estates could take several years.
If an estate tax return is required, the estate might not be closed until the IRS says it has accepted the estate tax return without issue. Note that this may take a while because of staffing shortages at the IRS.
The expert teams at Heban, Murphree & Lewandowski, LLC are standing by, ready to answer your questions about settling estates and managing assets following an individual’s passing. We can also guide you through the probate process and handling of debts and taxes. Our experienced estate law team will assist you with whatever comes along.