King & Wood, P.A.

What are the Basics of Estate Planning?

“Discussing estate planning with others can be uncomfortable and easily avoided, yet this is an important part of financial planning.”

Every adult needs to have an estate plan, regardless of how large or small their estate is. The pandemic prompted many Americans to realize this, according to a recent article from Forbes, “What Is Estate Planning? A Guide And FAQ For Investors.”

Estate planning starts with a last will and testament and key documents including a Power of Attorney, trusts and medical directives. Creating an estate plan allows a family to protect investments and other assets during disability or illness and ensure the distribution of property after death. At the same time, taxes and probate are minimized or avoided.

Estate planning provides many benefits to the individual and their families. One of these is relieving stress and uncertainty during a difficult time.

Estate planning also addresses planning for the care of minor children in the event both parents pass away.

A last will is a legal document addressing property, assets and investments and their distribution after the owner’s death. If there is no will, the state’s laws determine how the estate will be distributed. A will is also used to name a guardian for minor children, so every young family should have a will. Without a will naming a guardian, the court will make decisions about the children’s guardian, possibly appointing a person the parents might not have chosen.

Trusts are outstanding estate planning tools used to solve a wide variety of planning problems. There are Marital Trusts used to pass assets to a spouse without incurring estate taxes and Bypass Trusts used to hold assets for a surviving spouse but structured so that when the surviving spouse passes, the assets go to the named beneficiaries—typically children from a prior marriage.

Trusts are also used to make donations to charities. Some are created to make a gift and create a steady income stream for beneficiaries.

Your estate planning attorney can recommend which type of trust works best for you.

Every adult should have a Power of Attorney in place. This gives someone the legal power to act on behalf of another person if they cannot act for themselves. The POA can be drafted to be broad, allowing the agent to act on all matters, or limited so the agent can only perform specific tasks.

Medical directives are perhaps the hardest to contemplate, since no one likes to imagine themselves at death’s door. These are also critical to give family members and healthcare providers information about what a person wants in the event of extreme illness. A Heath Care Proxy allows another person to make critical decisions for you.

Beneficiary designations are often ignored and can undo an estate plan. Let’s say that you have a life insurance policy purchased several decades ago, and in the intervening years, you divorced and remarried. Who is the beneficiary named on the life insurance policy? If it’s your ex-spouse, they’ll get an unexpected windfall when you die. All accounts with beneficiary designations should be reviewed every year or two to ensure that they are still appropriate.

Estate planning may seem daunting. However, working with an experienced estate planning attorney will make the process easier and ensure that your wishes are carried out and your family will be protected.

Reference: Forbes (November 28, 2023) “What Is Estate Planning? A Guide And FAQ For Investors”

Should You Have a Revocable Trust?

“There is a lot of confusion out there about the difference between a revocable and an irrevocable trust.”

Trusts are part of many estate plans and with good reason. Trusts are an excellent way to minimize or avoid having an estate go through probate, according to a recent article, “Is your trust revocable? Should it be?” from Coeur d’Alene/Post Falls Press.

Let’s start with the basics. A trust is a contract between the creator of the trust, known as the “grantor,” “trustor,” or “settlor,” and the person who will carry out the instructions within the trust document, known as the “trustee.” Those instructions include what to do or not to do with the assets in the trust if the grantor becomes incapacitated and what to do with the assets when the grantor is deceased.

Once you’ve decided to set up a trust, you’ll become the trust's grantor and, in most cases, will serve as your own trustee. The trust must include language naming secondary and, in some cases, tertiary trustees who will serve if you are incapacitated or upon your death. The trustee who steps up to serve once you cannot serve as your own trustee is known as the “successor trustee” although the term “successor” isn’t always used.

In a revocable trust, the grantor almost always has the right to change the trust document if they are living and not incapacitated. They can change who will get what from the trust upon their death, who will serve as the secondary trustee and what powers the secondary trustee will have. This flexibility is very useful as life circumstances and relationships change over time. As the name implies, the revocable trust can also be revoked altogether.

An irrevocable trust is very different. Once an irrevocable trust is established, the trust cannot be revoked, and no changes can be made. There are exceptions. However, none of them make it easy to make changes to the trust. The grantor usually must go to court to get permission to make changes.

Why would someone choose an irrevocable trust over a revocable trust? There are instances where an irrevocable trust makes more sense. Some examples include trusts designed to protect assets that would otherwise make someone ineligible for certain programs, like Medicaid. An estate planning attorney would create an irrevocable trust to establish a Special Needs or Supplemental Needs Trust for beneficiaries with disabilities.

It is also possible to have trusts created for married couples with children from prior relationships to protect the children from being disinherited.

Revocable trusts usually become irrevocable once the trust's grantor dies. This makes sense, since the grantor doesn’t want anyone to change the trust once they have passed.

There’s much to consider when setting up a trust, which is not a one-size-fits-all strategy. Talk with your estate planning attorney to discuss your unique situation and learn what type of trust would best protect yourself, your estate and your family.

Reference: Coeur d’Alene/Post Falls Press (Dec. 3, 2023) “Is your trust revocable? Should it be?”

How Does Estate Planning Protect Young Children?

“To make sure that your children are taken care of if something happens to you, it’s important to appoint a guardian, establish a trust and ensure there’ll be financial support.”

Once you have a child, you’ve got a bundle of joy—and a lifelong commitment to caring for the child, sometimes even after they reach adulthood. What would happen if something happened to you and your partner? To be sure your child or children are taken care of, you’ll need to take these estate planning steps, as explained in a recent article from Kiplinger, “To Protect Your Kids, Consider These Estate Planning Steps.”

Appointing a guardian. Planning for the absence of parents from a physical and financial perspective needs to be done. Parents need to establish a guardian and have the person named in their will. It may be a good idea to name a secondary guardian if something happens and the primary guardian is unwilling or unable to serve in this role.

Create a trust. Parents should consider creating a trust for their children to ensure that there is money to provide for their care if both parents die. A child under the age of 18 is a minor and, as such, may not legally hold title to property. A trust is used to hold assets for the child’s benefit. The language of the trust would have instructions to provide for the children’s education, health and support.

There are two basic trusts to consider. A revocable trust is created during a person’s lifetime and can be changed anytime by the trustmaker. A testamentary trust is created as part of a will. Neither trust needs to be funded until the person passes away, at which time the property of the decedent is placed in a trust if the will contains the correct instructions. An estate planning attorney will be able to structure this plan.

Assign a trustee. This person manages the trust assets for the children's benefit. They need to be financially responsible people who can manage the funds for the children. The trustee can be a family member but should not be the same person chosen as the guardian. Keeping these roles separate ensures that the guardian will not misuse funds. Another option is to hire a professional to serve as the trustee. Professional trustees, including banks or financial advisors, usually charge a percentage of assets. In some cases, estate planning attorneys serve as trustees for minor children.

Establish terms of distribution. It’s up to the parents to decide how their children should receive trust assets. They can mandate principal distributions at certain ages, like a certain percentage at age 20, another at 30 and the balance at 40. While the parent dictates the terms of distribution while the children are minors, the trustee will be the one to decide on distributions for food, health, education, or extracurricular activities.

How do you be sure there will be money for your children? Parents should purchase life insurance, since most young parents don’t have a lot of liquidity. Term policies are the least expensive and can be for ten, twenty, or thirty years, during which the policy is guaranteed if the premium is paid. Whole life insurance is another option. However, it is more expensive.

Start a 529 college savings fund. These accounts can be funded through automatic withdrawals from a checking account, or family members can be encouraged to make gifts to these accounts. In some states, there are state income tax benefits for residents. The growth is tax-free if the funds are used for qualifying educational expenses.

When the child becomes a legal adult. Once a child celebrates their 18^th birthday, they are legal adults, and parents lose their rights. New adults should have a healthcare proxy so someone can make medical decisions for them in case of incapacity. They should also execute a HIPAA disclosure form so healthcare professionals can discuss their medical care with parents.

If a child has special needs. An estate planning attorney will create a Special Needs Trust to hold assets and name a trustee to manage the funds. This trust allows a child with special needs who may be eligible for government benefits to continue to receive benefits in addition to distributions from the trust.

Reference: Kiplinger (Nov. 19, 2023) “To Protect Your Kids, Consider These Estate Planning Steps”

Tax Deductions for Seniors Only

“There are a host of tax breaks available to retirees and older Americans. However, they’re easy to miss.”

Many seniors are missing out on tax deductions and tax savings, according to a recent article from The Wall Street Journal, “Four Lucrative Tax Deductions That Seniors Often Overlook.” The tax code is complicated, and changes are frequent.

Since 2017, there have been several major tax changes, including the Tax Cuts and Jobs Act, the pandemic-era Cares Act and the climate and healthcare package known as the Inflation Reduction Act. Those are just three—there’s been more. Unless you’re a tax expert, chances are you won’t know about the possibilities. However, these four could be very helpful for seniors, especially those living on fixed incomes.

The IRS does offer a community-based program, Tax Counseling for the Elderly. This community-based program includes free tax return preparation for seniors aged 60 and over in low to moderate-income brackets. However, not everyone knows about this program or feels comfortable with an IRS-run tax program.

Here are four overlooked tax deductions for seniors:

Extra standard deduction. Millions of Americans take the standard deduction—a flat dollar amount determined by the IRS, which reduces taxable income—instead of itemizing deductions like mortgage interest and charitable deductions on the 1040 tax form.

In the 2023 tax year, seniors who are 65 or over or blind and meet certain qualifications are eligible for an extra standard deduction in addition to the regular deduction.

The extra standard deduction for seniors for 2023 is $1,850 for single filers or those who file as head of household and $3,000 for married couples, if each spouse is 65 or over filing jointly. This boosts the total standard deduction for single filers and married filing jointly to $15,700 and $30,700, respectively.

IRA contributions by a spouse. Did you know you can contribute earned income to a nonworking or low-earning spouse’s IRA if you file a joint tax return as a married couple? These are known as spousal IRAs and are treated just like traditional IRAs, reducing pretax income. They are not joint accounts—the individual spouse owns each IRA, and you can’t do this with a Roth IRA. There are specific guidelines, such as the working spouse must earn at least as much money as they contributed to both of the couple’s IRAs.

Qualified charitable distributions. Seniors who make charitable donations by taking money from their bank account or traditional IRA and then writing a check from their bank account is a common tax mistake. It is better to use a qualified charitable deduction, or QCD, which lets seniors age 70 ½ and older transfer up to $100,000 directly from a traditional IRA to a charity tax-free. Married couples filing jointly can donate $200,000 annually, and neither can contribute more than $100,000.

The contributions must be made to a qualified 501(c)(3) charity. The donation can’t be from Donor-Advised Funds. This is a great option when you need to take the annual withdrawal, known as a Required Minimum Distribution or RMD, and don’t need the money.

Medicare premium deduction. A self-employed retiree can deduct Medicare premiums even if they don’t itemize. This includes Medicare Part B and D, plus the cost of supplemental Medigap policies or a Medicare Advantage plan. The IRS considers self-employed people who own a business as a sole proprietor (Schedule C), partner (Schedule E), limited liability company member, or S corporation shareholder with at least 2% of the company stock.

Remember, you must have business income to qualify, since you can deduct premiums by only as much as you earn from your business. You also can’t claim the deduction if your health insurance is covered by a retiree medical plan hosted by a former employer or your spouse’s employer’s medical plan.

Reference: The Wall Street Journal (Nov. 29, 2023) “Four Lucrative Tax Deductions That Seniors Often Overlook”

How Do Qualified Charitable Distributions Work?

“For taxpayers who stress over annual Required Minimum Distributions and are also inclined to charitable giving, Qualified Charitable Distributions or QCDs have been a useful tool to accommodate both relief over federal income tax angst and the desire to donate.”

Qualified Charitable Distributions use the federal tax code to benefit older taxpayers and must take Required Minimum Distributions (RMDs). Recent changes in federal law under the SECURE Act 2.0 present even more opportunities to use QCDs, according to a recent article, “Planning Ahead: Expanding on year-end tax strategies for Qualified Charitable Distributions,” from The Mercury. How does it work?

Required Minimum Distributions for seniors can become a problem since taxpayers above a given age must withdraw specific amounts based on their age from traditional retirement accounts and pay taxes on the withdrawals, regardless of whether they need the money. The reason is obvious: if people weren’t required to take funds out of their accounts, the government would never have the opportunity to generate tax revenue. The QCD lessens the blow of the additional year-end taxes by providing some relief through donations to qualified charities.

Used correctly, the QCD serves two purposes: saving on taxes and benefiting a favorite charity. Charities include any 501(c)(3) entities under the federal tax code. Before using a QCD, ensure the charity you choose is a qualified 501(c)(3). Otherwise, you’ll lose any tax benefits.

Your estate planning attorney can help you understand the process of making a QCD. You’ll need to coordinate with the custodian of the IRA. While some may provide step-by-step information, others require you to coordinate with your estate planning attorney and financial advisor. A reminder—the point of the QCD is that the distribution does not appear in your adjusted gross income and goes directly to the charity.

Usually, taking RMDs adds funds to your taxable income, which can, unfortunately, push you into a higher income tax bracket. It could also limit or eliminate some tax deductions, such as personal exemptions and itemized deductions. There may be increases in taxes on Social Security benefits as well. Whether you want or need to take the RMD, you must take it and include it as taxable income.

A QCD allows individuals required to take RMDs to donate up to $100,000 to one or more qualified charities directly from a taxable IRA without the funds being counted as income.

The RMD age has increased to 73, but the $100,000 will be indexed for inflation. Under SECURE Act 2.0, individuals will be allowed to make a one-time election of up to $50,000 inflation-indexed for QCDs to certain entities, including Charitable Remainder Annuity Trusts, Charitable Remainder Unitrusts and Charitable Gift Annuities.

QCDs cannot be made to donor-advised funds, private foundations and supporting organizations, even though these are often categorized as charities.

It must be noted that the rules concerning QCD are detailed and strict—you’ll want the help of an experienced estate planning attorney.

The QCD must be made by December 31 of the tax year in question.

Reference: The Mercury (Nov. 22, 2023) “Planning Ahead: Expanding on year-end tax strategies for Qualified Charitable Distributions”

Is Your Estate Plan Ready for Sunsetting Tax Cuts in 2026?

“The sweeping tax overhaul enacted in 2017, known as the Tax Cuts and Jobs Act (TCJA), provided a number of income and estate tax reductions and changes.”

Many of these changes are set to expire at the end of 2025, meaning the time to prepare for their impact on estate plans is now, according to the article “These Tax Cuts are Sunsetting in 2026. Are your clients ready?” from Think Advisor.

The most visible change will be the lifetime estate and gift tax exemption changes. Before 2018, the exemption was $5 million per person and $10 million for a married couple. In 2023, those limits are $12.92 and $25.85 million, respectively. In 2024, those limits will be $13.61 million for an individual and $27.22 million for a married couple.

The annual gift tax exclusion was also increased because of the TCJA. In 2023, it is $17,000; in 2024, it will rise to $18,000. It’s not yet clear what it will be after 2025.

Unless something changes, on January 1, 2026, the estate tax exemption will revert back to $5 million; adjusted for inflation, it’s expected to be approximately $7 million per person.

There won't be much of an impact for estates that won’t exceed the expected 2026 levels. However, the increases in home values may bring some unexpected increases to the size of many estates.

For those whose estates exceed the 2026 exemption levels, there are many options to reduce the size of the estate to minimize the impact of the lower exemption levels on their heirs in the future. An experienced estate planning attorney can make a strategic plan to address these changes.

One option is to spend down part of the estate, especially if you are older. Now would be the time to travel or make purchases you might have been putting off.

Making lifetime gifts is another way to reduce the size of your estate, while enjoying watching heirs enjoy their inheritance. Gifts could be to children, grandchildren, or others.

The same generosity could be focused on charity. If you’ve been meaning to make a gift at some point, this could be the year to make a legacy gift.

Another tactic: a Roth conversion. If your retirement accounts consist of IRAs, converting to a Roth can help with tax diversification. Money in a Roth is not subject to Required Minimum Distributions, which reduce taxes during retirement. Under the SECURE 2.0 Act, inherited Roth IRAs are tax-efficient for leaving an IRA to non-spousal beneficiaries.

The TCJA increased the standard deduction level, making it difficult for many taxpayers to itemize deductions. The higher standard deduction will revert back to roughly the pre-TCJA levels, which were $6,350 for single filers and $12,700 for those filing married and joint, both indexed for inflation.

Speak with your estate planning attorney to determine how the sunsetting of this law will impact your estate plan and choose your best options in the short and long term.

Reference: Think Advisor (Nov. 22, 2023) “These Tax Cuts are Sunsetting in 2026. Are your clients ready?”

Don’t Make These Estate Planning Mistakes

“It can be difficult to put a value on a lifetime of accumulation—your money, your home, its furnishings, souvenirs from vacations and treasured gifts from your family. It’s a joy to collect these items over the years. However, too few consider what will happen to it all when they’re no longer around.”

Everything from life savings to digital assets to pets must be considered when creating an estate plan, according to the article “Seven Big Mistakes People Make When It Comes to Estate Planning” from Kiplinger. No matter how good your intentions are, some mistakes are commonly made. Use the tips below to avoid them.

Implementing the estate plan. Creating an estate plan with an experienced estate planning attorney is step one. However, there are further tasks to be done. For example, if trusts are created, they must be funded. This may mean retitling accounts or moving assets. If trusts are not funded, they won’t perform as planned. In addition, your trusted loved ones should be told about the existence of an estate plan and where documents can be found when needed.

Don’t ignore your own mortality. People often wait until it’s too late to start planning, thinking they have a world of time. None of us knows when we will become incapacitated or die. Don’t delay.

Neglecting to create a trust. Having a trust created by an estate planning attorney can help avoid the costs and delays of probate. A trust can also ensure opportunities to provide specific assets to beneficiaries and could be a better way to distribute assets to children, especially if they are not financially responsible.

Failing to create a deadline-driven checklist for your estate plan. Most people simply do better when they have a checklist with deadlines. The tasks are clearly identified, and the date keeps most people focused. This is essential to have a secure estate plan and avoid missing crucial steps.

Leaving room for misinterpretation. Vague wording can sink your estate plan. Use complete, legal names when designating beneficiaries. If there are a number of people in the family with the same name, include their date of birth to avoid any confusion.

Forgetting to distribute personal property. Create a home inventory, and if any items are of high value, have them valued by a qualified professional appraiser. Family members often fight just as much over personal possessions as financial assets—don’t underestimate the emotional impact of sentimental value.

Getting it done! Most people don’t have a will, power of attorney, named guardians for minor children, health care power of attorney, living will and more because they fail to finish what they’ve started. Even smart people procrastinate over estate plans. The result is loved ones having to deal with taxes, legal fees, inaccessible assets and even family litigation. Contact an estate planning attorney and get this done sooner rather than later.

Reference: Kiplinger( Nov. 21, 2023) “Seven Big Mistakes People Make When It Comes to Estate Planning”

What Kind of Trust Works Best for Your Estate Plan?

“Trusts are common. However, there are numerous variations, and there is still considerable confusion about what is legal and what is not.”

There are two major categories of trusts, one in particular that everyone should have. Regardless of their financial status, most people could have an estate plan incorporating a trust to eliminate the need for a will to go through probate, according to a recent article from Forbes, “Which Trusts Save Taxes, Which Do Not, And Which Are Illegal?”

Probate is the process by which a court reviews a will, approves it as valid and approves the named executor. Depending upon your jurisdiction, probate can take a very long time and be quite costly. Documents going through probate also become part of the public record, and anyone can read them. However, there is a way to keep your wishes private and avoid the expense of probate.

A revocable trust can be created, directing the disposition of assets. You will still need a will, but the will states that everything you own goes into the revocable trust. This is known as a “pour-over-will” since it pours all assets into the trust.

The trust is private, is not separately taxable and you may change it at any time. You may wish to add or subtract beneficiaries over time to be sure that the people inheriting your property are the ones you want.

A revocable trust is also tax neutral. Let’s say you transfer your house or stock into a living trust. It’s not considered a transfer for tax purposes.

The other major type of trust is an irrevocable trust. Generally speaking, once created and funded, assets in the trust may not be taken out of the trust, and the trust may not be amended. It is separately taxable and must file its own tax return. Transfers to an irrevocable trust can lead to gift taxes. However, it is an excellent means of saving income, gift, or estate taxes in the long run, depending upon how the estate is structured.

Two other types of trusts are foreign and domestic trusts. Most living and irrevocable trusts are domestic, meaning U.S. law is applied. However, if the trust is foreign, many complex rules could make U.S. beneficiaries taxable on their share of the tax income, even if the trust income is never distributed to them. For most people, these are not a useful option.

Other trusts are designed to save on state taxes. Some California residents want to avoid paying California taxes without moving. The typical living trust won’t help since the grantor must include the income on their tax return. They seek to shield assets from California’s 13.3% tax rate via a “NING,” a Nevada Incomplete Gift Non-Grantor Trust. There is a similar trust in Delaware, “DING,” and one from Wyoming known as a “WING.”

These trusts can be tricky, so be sure to work with an experienced estate planning attorney who is familiar with these trusts and the intricate details. Some taxpayers have found themselves in court for pushing the trust envelope too far. A man from Estes Park, Colorado, and another from Frisco, Texas, along with others, were indicted for conspiring to defraud the United States and assisting in the preparation of false income tax returns for promoting and selling abusive trust tax shelters for clients nationwide for fees ranging from $25,000 to $50,000.

An ethical local estate planning attorney will not put their clients at risk with overly aggressive trusts but will instead craft an estate plan to achieve realistic goals of protecting assets, minimizing taxes and preparing the necessary documents to protect their clients.

Reference: Forbes (Nov. 24, 2023) “Which Trusts Save Taxes, Which Do Not, And Which Are Illegal?”

Are You Neglecting Your Estate Planning?

“Estate planning is a vital part of financial management that often gets overlooked.”

Estate planning is about more than ensuring that assets are distributed according to your own wishes after you die. It’s also about what you’d like to have happen to your assets and who you want to be in charge of your health care decisions if you become incapacitated. A recent article from Go Banking Rates, “8 Key Signs You’re Neglecting Essential Estate Planning,” outlines the top signs showing that you need to take care of this critical task.

You don’t have a will? This is the biggest red flag of estate planning mistakes. A will, or last will and testament, is a critical legal document specifying how you want your assets to be distributed after you die. If you don’t have a will, the laws of your state will determine how everything in your estate will be given to heirs. If you have estranged family members, they may end up owning everything. There won’t be anything your beloved family members can do about it. All state’s laws are different, so speak with a local estate planning attorney to address this critical document.

How outdated are your beneficiary designations? Many people open accounts as young adults and forget to update them as the decades pass. If you’ve been married, divorced, had children, experienced loss, or if your beneficiaries are no longer part of your life, you will want to update your beneficiary designations. Your assets could very easily go to people like an ex-spouse or a former friend. Beneficiary information should be updated every few years to be sure that your current wishes are followed.

Do you have a Power of Attorney? Everyone of legal age should have a Power of Attorney. A Power of Attorney is a legal document giving a person of your choice the legal power to make decisions on your behalf if you cannot do so because of illness or an injury. Without a POA, your family will need to go to court to apply for guardianship to take care of various duties, like paying bills, managing investments, or maintaining your home.

Do you have an inventory of digital assets? If you pay bills online, are active on social media accounts, or own any digital assets like cryptocurrency, you need a plan for digital assets. Start by making a complete inventory of your accounts—you’ll be surprised at how much of your life is lived online. Some platforms have an option for naming a “legacy” contact—someone who can access your data and manage it after you pass. Your digital executor will also need usernames and passwords. Otherwise, they won’t be able to access your accounts.

Have you planned for taxes? Estate planning includes understanding the tax implications of assets. There may be estate taxes or state estate taxes due from your estate, and failing to plan could leave heirs with a smaller or no inheritance.

Do you need a trust? Trusts are valuable tools for addressing specific needs, from caring for a disabled family member to managing minor children's assets. Without trusts, these individuals could face unexpected complications that could otherwise be avoided.

If you own a business, do you have a succession plan? Business owners need a succession plan to protect their work and family. Planning for a smooth transition includes naming key employees, creating partnership or shareholder agreements and determining if the business can continue to operate and provide income to family members, including the retiring owner.

What about end-of-life care plans? Estate planning includes end-of-life care, including a living will or healthcare directives. Your family will be less stressed if you have documented your wishes for what kind of health care you want or don’t want if you become incapacitated.

Reference: Go Banking Rates (Nov. 25, 2023) “8 Key Signs You’re Neglecting Essential Estate Planning”

What Does the Executor of an Estate Do?

“Dealing with death is never easy and overseeing the estate can be complicated. However, staying organized can help you manage things smoothly.”

Being named the executor of an estate usually means you’ve lost someone close to you, and it’s a challenging time. The article “What to do when you’re the executor of an estate” from Bankrate explains what you’ll need to do and outlines the steps to stay on track.

The executor is the personal representative of a deceased person’s estate until the probate process is completed and all assets have been distributed. One of the key tasks is distributing assets according to the terms of the decedent’s will.

You can say no if you are not able or willing to serve as the executor. A secondary executor may be named in the will, or the probate judge can name a replacement. However, this task is doable if you set up a detailed checklist and work with an estate planning attorney.

Obtain the death certificate. The funeral home issues these; you’ll need them to notify banks, investment firms, life insurance companies, the Social Security Administration, the Department of Veterans Affairs and others. You’ll also need them for filing final tax returns. You’ll also need to notify Social Security to turn off payments going directly into the person’s bank account.

Locate the will and any trust documents. Hopefully, the person who notified you of the death will know where these documents are. Depending on the state where the decedent was domiciled, the last will needs to be filed within a few days to a month to a year after the death. If there are trusts, the trust documents name the trustees in charge of distributing assets owned by the trusts. Trust assets can be distributed immediately by the trustees without court approval.

Seek professional advice. After reviewing the will and trust documents, you’ll better understand how complex the estate is. You may want to consult with an estate planning attorney, CPA, appraiser, or other professionals whose expertise can help you avoid any mistakes. Trying to do it yourself could leave you personally responsible for mistakes, and the process may take far longer.

File “letters testamentary.” If the estate goes through probate, the court will legally confirm your appointment as executor with letters testamentary, sometimes referred to as surrogate certificates. These are legal documents proving your authority to act on behalf of the estate, pay bills, file tax returns, manage and distribute assets, deal with beneficiaries and open or close bank accounts.

Locate and protect assets. In the best scenario, the executor is given a complete list of assets and related information. This would include wills, trusts and paperwork related to insurance, investment accounts, prearranged funeral plans, bank accounts, real property, artwork, business interests and partnerships. A complete list of digital accounts is also needed.

Pay bills and taxes. The estate is responsible for paying debts, including income and estate taxes. If the debts exceed assets, beneficiaries are not responsible for paying them. The executor opens an estate bank account, which pays bills for the estate. Before paying debts, the executor must confirm the estate’s ability to pay. If a list of monthly bills, income and debts were not left for the executor, they’ll need to figure this out.

Don’t rush. It’s common for the executor to want to get the tasks done, distribute any inheritance to beneficiaries and have done with the process. However, if you rush and miss some important tasks, you could be found personally liable. It can take six months to a year to work through an estate. Keep careful records of all transactions and a copy of everything sent and received from creditors, beneficiaries, financial institutions, the IRS, the Social Security Administration and others.

Having an estate planning attorney can help. An attorney can also mediate between the executor and beneficiaries if things take a turn for the worse.

Reference: Bankrate (Nov. 17, 2023) “What to do when you’re the executor of an estate”