Part I: Getting Ready

The Executor’s Legal Companion

• How This Book Can Help

 1. Overview

• What Executors Do
• What Trustees Do
• Your Legal Duty
• Payment for Serving as an Executor or Trustee
• Dealing With Emotions—Yours and Your Relatives’

2. If You’re Asked to Be an Executor or a Trustee

• Should You Accept the Job?
• Making the Job Manageable

Part II: First Steps

3. The First Week

• Organ, Tissue, and Body Donation
• Physician’s Certification and Death Certificate
• Autopsy
• Burial or Cremation
• Funerals and Memorial Services
• Other Tasks During the First Few Days

4. The First Month

• Set Up a Filing System
• Order Copies of the Death Certificate
• Find the Will
• Find Other Documents That Leave Property
• Send Notifications of the Death
• Keep Property Secure
• Sort Through Personal Belongings

5. Claiming Life Insurance, Social Security, and Other Benefits

• Life Insurance and Annuity Proceeds
• Social Security Benefits
• Pensions
• Veterans Benefits
• Wages Owed the Deceased Person
• The Family Allowance
• Other Possible Benefits and Claims

Part III: Taking Care of the Estate

6. Making Sense of the Will

• Does the Will Appear Valid?
• Reading the Will
• Gifts to Groups of People
• Events That Affect Who Inherits

7. If There’s No Will

• Who’s in Charge
• Who Gets What: The Basic Rules
• Understanding Key Terms
• If an Heir Has Died
• Taking Care of Minor Children

8. Taking Inventory

• Step 1: Look for Assets
• Step 2: Make a List of Assets
• Step 3: Estimate the Value
• Step 4: Add Up Debts
• Step 5: Determine How Title Was Held

9. Managing Assets and Paying Bills

• Your Legal Duties
• Keeping Good Records
• Setting Up an Estate or Trust Bank Account
• Managing Tangible Assets
• Managing Cash Accounts and Investments
• Digital Assets
• Paying Claims and Debts
• Giving Property to Beneficiaries
• Selling Property
• Handling a Business

 10. Caring for Children and Their Property

• Immediate Concerns
• Raising a Child
• Managing a Child’s Property
• Personal and Practical Issues

11. Taxes

• Overview
• The Deceased Person’s Income Tax Return: Form 1040
• The Estate’s Income Tax: Form 1041
• Income Tax on Trusts
• Federal Estate Tax
• State Inheritance and Estate Taxes
• Other Taxes
• Beneficiaries and Taxes
• Typical Situations

Part IV: Transferring Property

12. Property That Doesn’t Go Through Probate

• Common Assets That Don’t Go Through Probate
• Joint Tenancy Property
• Tenancy by the Entirety Property
• Community Property
• Property Held in a Living Trust
• Real Estate That Qualifies as a Homestead
• Property That Passes to Immediate Family by Law
• Salary or Wages
• Payable-on-Death Bank Accounts
• Life Insurance Proceeds
• Retirement Accounts
• Health Savings Accounts
• Securities Registered in Transfer-on-Death Form
• Savings Bonds
• Vehicles
• Pension Plan Distributions and Other Death Benefits
• Real Estate Left by a Transfer-on-Death Deed
• Personal Property in “Small Estates”

13. Transferring Joint Tenancy and Other Survivorship Property

• Real Estate
• Bank Accounts
• Securities
• Vehicles
• Savings Bonds
• If Title Wasn’t Cleared When the First Joint Tenant Died

14. Transferring Community Property

• Your Transfer Options
• Survivorship Community Property
• Community Property Agreements
• State Probate Shortcuts
• When the Second Spouse Dies

15. Claiming Money in Retirement Plans

• Retirement Plans: The Basics
• Who’s the Beneficiary?
• If the Surviving Spouse Is the Beneficiary
• Non-spouse Beneficiaries
• Special Rules for Multiple Beneficiaries
• If a Trust Is the Beneficiary
• If There Is No “Designated Beneficiary”
• If the Beneficiary Has Died
• If No Beneficiary Was Named
• If the Estate Is the Beneficiary

16. Claiming Payable-on-Death Assets

• If the Asset Was Co-Owned
• The Effect of Divorce on POD Beneficiaries
• How Beneficiaries Can Claim Assets

17. Special Procedures for Small Estates

• Are You Handling a Small Estate?
• Claiming Property With Affidavits
• Using Simplified Probate

 18. The Regular Probate Process

• Common Questions About Probate
• The Typical Probate Process
• The Process in Uniform Probate Code States
• Probate in Another State
• Disputes During Probate
• Do You Need a Lawyer?
• If You Go It Alone: Working With the Court

Part V: Handling Trusts

19. Wrapping Up a Simple Living Trust

• How Simple Living Trusts Work
• If You’re the Surviving Spouse
• Who Serves as Successor Trustee
• The Affidavit of Assumption of Duties
• What’s in the Trust
• Notifying Beneficiaries
• Getting Valuable Property Appraised
• Registering the Trust
• Debts and Expenses
• Transferring Trust Property
• Ending the Trust

20. Managing a Child’s Trust

• How a Child’s Trust Works
• The Trustee’s Job
• Accepting or Declining the Trustee’s Job
• Gathering Trust Property
• Keeping Beneficiaries Informed
• Registering the Trust
• Investing Trust Property
• Keeping Good Records
• Handling Trust Taxes
• Distributing Property
• If You Want to Resign
• Ending the Trust

Part VI: Getting More Help

21. Finding More Information

• Libraries
• Online Resources
• Finding Forms
• Finding Definitions
• Researching Specific Questions

22. Lawyers and Other Experts

• When to Get Help
• Deciding What You Want From a Lawyer
• Finding a Lawyer
• Choosing a Lawyer
• Working With a Lawyer
• Paying a Lawyer
• Solving Problems With Your Lawyer

Glossary

Appendix A: State Information

Appendix B: How to Use the Downloadable Forms on the Nolo Website

• Editing RTFs
• Forms Available on the Nolo Website

Index

Chapter 1: Overview

Winding up an estate or a trust will probably take from six to 18 months, depending on the circumstances and the law in your state. Here’s how it usually goes:

•  First week: Immediate practical decisions

•  Next few months: Financial and legal matters

•  One (occasionally two) years: Taxes.

What Executors Do

As executor, you must collect and take care of the deceased person’s assets, pay debts, and distribute what’s left to the people who inherit it. Sounds pretty straightforward, and in many instances it is. Here’s a little more detail.

Gather the deceased person’s assets. This part shouldn’t be hard, especially if you are familiar with the deceased person’s financial affairs, and the assets are typical things, such as a house, a car, and bank and investment accounts. But if you’re unprepared, and the deceased person leaves behind murky finances and jumbled records, you may have a tougher time knowing what property you’re supposed to take charge of. (The best strategy is to get things straightened out before the death, as explained in Chapter 2; if that’s not possible, see Chapter 4 for help with finding and making sense of financial records and other papers.)

Take care of property. You must safeguard the deceased person’s property (both real estate and personal property) until you hand it over to beneficiaries. For example, if a house or condo is empty, and a car is parked at the curb, you’ll need to make sure both are secure. You may also have to decide whether or not to sell certain assets, either to raise cash or to avoid losing significant value. When it comes to managing investments, your duty is not to turn a big profit, but to avoid losing money.

Pay debts and taxes. Most people don’t leave behind outsized debts or tax bills, so this isn’t normally a problem. But if the estate doesn’t contain enough money to go around, it can be a headache. You aren’t personally liable for the deceased person’s debts (unless you were married, in which case you may be); you’ll pay them from the deceased person’s assets. You will have to file income tax returns on behalf of the deceased person and, if the estate goes through probate and receives income, on behalf of the estate. You probably won’t need to file a federal estate tax return; very few estates are big enough to require them. About a dozen states collect their own estate tax, however, and most of them impose the tax on estates that are too small to owe federal estate tax. Check Appendix A for your state’s rule.

Distribute what’s left. You’ll transfer assets to the people who inherit them under the will, or under state law. This may involve going to probate court, but it may not. It will depend on what kinds of assets the deceased person left and how much estate planning was done. Many kinds of assets (for example, individual retirement accounts, payable-on-death bank or brokerage accounts, and life insurance policies) can be transferred without going through probate court. In recent years, many states have simplified probate significantly, so even if probate is required, it won’t drag on like a court case in a 19th-century novel. And almost all states now offer simplified probate for “small estates.” What qualifies as a small estate may surprise you: In some states, estates worth hundreds of thousands of dollars can slip under the wire.

Help out. Finally, you may find yourself helping beneficiaries with matters that aren’t, strictly speaking, within your authority as executor. For example, life insurance proceeds aren’t part of the estate, but a beneficiary might want you to help claim policy proceeds.

What Trustees Do

Many people use living trusts as substitutes for wills, and you may find yourself tapped for the job of trustee.

The document that creates the trust names the person, usually called the successor trustee, to take over when the trust maker dies. If you’re named as trustee, you take over control of trust assets at the death of the person who made the trust. You don’t have to wait for court approval.

Your job, however, is likely to be broader than just taking care of trust assets. If the deceased person left a will, it probably names you as executor, too. And if there isn’t a will, it usually falls to the trustee to do all the other jobs that traditionally belong to an executor: pay debts, file tax returns, and transfer property that wasn’t held in trust.

Here are the two kinds of trusts you’re most likely to run into.

Simple living trust. A simple living trust is one that has only one purpose: to avoid probate. If you’re wrapping up this kind of trust, you can probably carry out your duties in a few months. That’s because you don’t have to get probate court approval. All you do is transfer trust property to the people named in the trust document.

 Child’s trust. These trusts are set up so that an adult can manage property left to a child (often a grandchild). If you’re the trustee, you may have to invest and spend trust property until the child is grown. Especially if the trust is for more than one child, you’ll have a lot of decisions to make.

For lots of valuable information about serving as a trustee, see The Trustee’s Legal Companion, by Liza Hanks and Carol Elias Zolla (Nolo).

Your Legal Duty

As executor or trustee, you are in charge of property that belongs to other people (beneficiaries and creditors). You are also following instructions left in a will or trust by someone who is no longer there to supervise you. Because such a situation leaves a lot of room for mischief by a dishonest person, the law requires you to act with the highest ethical standards. You must follow a set of well-established rules and procedures.

An executor has what’s called a “fiduciary duty.” It means that you must always act in the best interest of the estate—not your own interests. For example, if you and the deceased person owned a business together, and you want to buy the deceased’s half interest, you must follow a scrupulously fair, open, and competitive process to offer the business interest for sale. The process would have to be run solely for the estate’s benefit, not yours.

Here are a few examples of acts that would violate your legal duty and could get you into trouble:

•  benefiting personally at the expense of the estate—for example, selling yourself estate property

•  selling an asset during probate if you don’t have authority

•  investing estate assets recklessly—for example, in a volatile stock, or

•  arranging things so that one beneficiary ends up with an unfairly large share of assets.

If you violate your fiduciary duty, beneficiaries can sue you for any loss you caused them, and a court can remove you from your post. In some states, a court can remove an executor or a trustee not only for misconduct, but also if all of the beneficiaries request it.

An executor who steals money from the estate can go to jail, just like any other thief. For example, a Massachusetts executor, who was in charge of $550,000 from a wrongful death lawsuit over her mother’s death, didn’t split the money with her siblings as she should have under state law. Instead, she and her husband kept most of it; they were both sentenced to 18 months’ imprisonment. (“Brockton woman sentenced after cheating her siblings out of thousands in settlement in mother’s death,” Boston Globe, Jan. 25, 2012.)

Payment for Serving as Executor or Trustee

You are probably entitled (under the terms of the will or trust, or by state law) to reasonable compensation for your work as executor or trustee.

Many family members, however, feel uncomfortable accepting money and don’t take a fee. There’s also a practical reason to decline a fee: It’s taxable income. If you’re inheriting everything anyway, you’re better off waiving the fee and instead inheriting the money, which won’t be subject to income tax. (The exception to this rule comes if estate tax will be due, and your personal rate is lower than the estate’s; in this situation, it may be wise to take the payment as compensation. If the estate is large enough to owe estate tax, you should be consulting a tax expert anyway, so ask about the executor’s fee.)

If your responsibilities are onerous or long lasting, or you’re not a close relative or friend, it’s perfectly appropriate to accept a fee for your work. You may have been chosen because of your special skills—perhaps you can manage the deceased person’s business until it can be sold, or you have the enviable ability to calm rancor among family members—and it’s only fair that you be compensated.

Just how much you’re entitled to depends on the terms of the will and your state’s law. If the will doesn’t set out a specific fee or hourly rate, under state law in most places, you can claim a “reasonable” fee. It’s up to you to decide what’s reasonable. If beneficiaries or creditors object, and there’s a probate court proceeding, they can complain to the court, which will review the fee.

Some states (New York, for example) let executors claim a percentage of the value of the probate estate. Still a few others give executors a percentage of the money that flows in and out of the estate, to try to reflect the amount of work the executor must do managing assets.

Dealing With Emotions—Yours and Your Relatives’

Unless you’re a professional, handling an estate or a trust is much more than just a legal and financial job. When you’re acting on behalf of a family member or close friend, you must deal with powerful and sometimes complicated feelings about the loss.

These emotional and spiritual issues are, of course, profoundly important. There are many sources of emotional sustenance—books, websites, organizations, counselors—in addition to your own network of family and friends. Every resource has its own tone, philosophy, and advice; you’ll have to find what speaks to you.

As executor or trustee, you will probably also have to work with the emotions of others. Beneficiaries and family members may be cooperative and patient—or grasping and unhelpful. Their demands may weigh more heavily on you than does probate court paperwork. On the other hand, you may garner much-needed support from the network of family and friends.

You’ll have to develop your own strategies for dealing with difficult family members. One good use of a lawyer can be as a buffer between you and them. A few simple actions, however, are always helpful:

•  Keep beneficiaries informed about what’s happening (or not happening) with regular letters or email.

•  Make sure you have legal authority for everything you do.

•  Keep careful records of all actions you take.

Probably the best way to head off spats, and even lawsuits, is regular communication. You may think you don’t have anything to report—but that may be the time beneficiaries most want to hear from you. Even brief email messages, sent regularly, can calm people’s anxieties.

Some executors find it helpful to hold family meetings to discuss ongoing issues. Others avoid such gatherings like the plague, because they know they will only ignite smoldering problems. Some families hire a family counselor or therapist to help people talk—and listen—to each other and work through problems. You’ll have to discover, through trial and error, what works for you and your family.

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