Tips for Settling Estates
Being the resident CPA for the family isn’t always a good thing. Not only do you get the questions at tax time, you get the opportunities to be the power of attorney and personal representative/executor for many family members.
This last year I have had many opportunities to assist family members and clients with the ‘paperwork’ when a loved one passes. The ‘hands on’ experience has generated a list of Do’s and Don’ts everyone should at least tune into.
It can be uncomfortable to have to think about your own death so preparing for it may not be a high priority. Once you have the experience of processing an estate after a loved one passes, you may have a greater sense of urgency. It is easier to do when you have instructions to follow.
I was a college student working in an office and a co-worker was a young widow. She was sharing with me her plans for her funeral. I thought she was morbid. Now I get it. She had to plan her husband’s funeral unexpectedly when she was devastated with her sudden loss. She didn’t want to leave others in a similar position.
What do you want to happen with your hard earned assets, family heirlooms, favorite collections, and life savings? This is your opportunity to give directions – be the boss even from the grave.
Make a list of all your assets. Have a note book or computer file to keep updates of where your investments are held, what bank accounts you have, list of all insurance policies, contact information for retirement plans.
Make a list of all your liabilities. What debts need to be paid off before any assets can be disbursed. Creditors have the right to collect against the heirs if they have received assets from the estate.
Make a will. This is a step that can hang people up because you may need to consult an attorney. Think of it as a gift to your loved ones – this is your road map of what you want to happen with your assets.
Match your beneficiaries. A will is your big picture. The retirement plans and life insurance are contracts and will go to the beneficiaries listed. Accounts may also have a Payable on Death (POD) and Transfer on Death (TOD). These also are contractual in nature. You want your contractual beneficiaries to match your will. When you have life changes such as divorce or remarriage, you need to update.
Make funds available. When a loved one passes, you have final expenses to handle. If there isn’t a surviving spouse, you have an estate to close. Many times there is a home that needs to be maintained until it is sold. Having monies to handle those needs makes the executor’s job easier.
Give directions for personal belongings. What do you want to happen to your personal belongings? Wills often have a place to list out specific items and whom you want to receive that item. Asking people what they would like may help you match items to people who want them. Many may not be comfortable with assigning items or asking for them. So then what do you do?
If the beneficiaries are congenial, you may be able to do a round robin of picking items until you are all picked out. Or you may have beneficiaries submit a list of items of what they would like. Compare lists and see what ‘issues’ need to be resolved. (This is how we handled my family – it worked well; 7 kids and 86 years of accumulation of personal assets and memories.) If you get a few items that you really would like, it is easier to make peace with not get everything you want.
If beneficiaries are not congenial, you may try an auction with monopoly money. Every beneficiary is given the same amount of money. They can bid on what they want, bidding higher for items of greater importance to them. It is probably wise not to include spouses in this effort.
When you have your action plan, inform the personal representative/executor of the plan and where that information may be found. And if you have the dubious honor of being the executor, be sure to check the action plan.
My mother-in-law was the executor for her sister’s estate. She didn’t even know her sister was deathly ill when she was thrust into the responsibility of closing the estate. She had no action plan. In going through the files, we found the bank accounts. Looking at bank statements, we found contact information for pension plans. Tax returns didn’t surface until much later – that too can provide some road map of where assets are held.
However, there were 2 plots of land in the mountains that family was not aware of. We only became aware of the land because we continued to get county tax assessment notices when we had already sold the only property we did know about.
If you are the executor, be sure to check the action plan. I had put together a notebook of my dad’s estate information. (It was a Father’s Day gift. I visited with him in Denver and together we put the book together.) My mistake was to give it to my brother without first making a copy. My brother lives in Colorado and was the personal representative. He has moved a couple of times since the book was put together – couldn’t find the book. We didn’t have our road map. We experienced a few bumps that could have been avoided, had we had the book to follow.
This is only a few practical tips for handling the basic estate settlement. You also need to consider issues before death like power of attorney for medical and financial and your medical directives. Leaving funeral directions.
As I am not an attorney, this article should not be construed as legal advice. If you need legal assistance, you should contact an attorney in your state of residency.
Securities and Advisory services through KMS Financial Services, Inc.
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