Basics of Estate Administration

Settling one’s Estate can feel overwhelming, especially during a time of loss. Estate administration is a legal process, but also a profoundly personal responsibility. The outcome is ensuring the decedent’s wishes are honored, the assets are managed prudently, and the Estate is settled in accordance with the law. This article provides basic information about estate administration and outlines some steps an Executor should take. The checklist below is not exhaustive. Please consult your attorney and CPA before beginning estate administration.

Who to Name as Executor

While this article primarily focuses on the administrative side of estates, we also include insight into the estate planning side by briefly discussing who to name as Executor. When it comes to naming an Executor, there are two options: a trusted family member or a corporate Executor.

When considering naming a trusted family member as Executor, there are a few things to keep in mind. The age of the person you are naming matters. If they are likely to predecease you due to their age or health status, it may be best to consider naming someone else as the beneficiary. Estate administration is complex and challenging at times. Think about whether the person you are naming as Executor is qualified to do the job.

When considering naming a corporate Executor, look for a team with expertise and experience in investments, taxes, property and asset management, and estate administration. There are a few key benefits to naming a corporate Executor. First, it removes potential liability from family members. Second, it eliminates the burden of time from the grieving family. Third, a corporate Executor removes the potential for conflicts of interest that family members may bring.

Here is a noncomprehensive checklist of steps typically required in estate administration.

Steps to Administer an Estate

 Hire an attorney

 Hire a CPA

 Obtain the original Will (Check safety deposit boxes and safes)

 Obtain Letters Testamentary (Court-issued documents authorizing an Executor to act on behalf of a deceased person’s Estate)

 Probate the Will

 Some non-probate assets will pass outside of probate (Such as accounts with Transfer on Death designations, retirement accounts, and life insurance)

 Obtain an EIN number

 Open an estate account

 If appropriate, change the mailing address

 Discontinue any subscriptions

 Begin tracking down and gathering assets (This includes real Estate, investments, retirement accounts, bank accounts, and personal property)

 Value the assets and real Estate

 Prepare and file an Inventory

 Consider liquidating assets or holding them to distribute in-kind

 Pay off liabilities (This includes debts, taxes, and probate costs)

 Pay funeral costs

 Discuss personal property distributions with heirs

 Consider offsetting residual distributions with real or liquid assets received to ensure equitable distribution amongst heirs

 Make specific bequests

 Step up the cost basis

 Inform residuary beneficiaries of tax consequences (Schedule K-1)

 Sell the property that is not bequeathed or desired to be kept by heirs (Ensure to get a fair market value and do an arms-length transaction)

 Consider filing a Form 706 (Also consider Portability election)

 Prepare final Forms 1040 and 1041

 Pay the final accounting and legal expenses

 Distribute the residual Estate

 Close the Estate

Please note that not all these steps will be relevant to every Estate, and more steps may be required for other estates.

Conclusion

While these steps are not exhaustive, they provide a solid foundation and outline for administering an estate. It is essential to consider who to name as Executor and to be aware of the necessary steps to take to honor the deceased’s wishes and settle the Estate properly. Please consult your attorney, accountant, and financial advisor to confirm the Estate is settled correctly.

For a deeper dive into Estate Planning, visit our Estate Planning 101 article.