Questions the Executor should ask the Estate’s Accountant

The house is sold, the estate’s debts and bills have all been paid, the accounting has been presented to the beneficiaries, they have signed off on the Release & Refunding Bonds, and now it’s time for the estate’s Executor or Administrator to distribute the estate to the beneficiaries according to the Will or according to the requirements of the law. The estate may have acquired dividends or interest or rents on which income tax must be paid. An income tax return has to be filed for the Estate if more than $600 in gross income was received, and in fulfilling his/her fiduciary duty, the Executor/ Administrator wants to be sure to investigate all available income-tax saving opportunities.

Here are a few of the questions to ask when you call the estate’s accountant: :

  1. What is the estate’s expected marginal tax bracket?
  2. Is it beneficial to pass the estate’s income and losses (if there is a loss on sale of assets such as stock or real property) through to the beneficiaries?
  3. Can income or loss be passed through in a year that the property isn’t actually distributed?
  4. If assets have to be distributed out in order to pass thru the tax liability, which plan saves the most taxes — distributing or holding?
  5. Is there any limit on the amount of losses that can be passed through to the beneficiaries?

Serving as Executor or Administrator is a job with many responsibilities. It’s vital that the fiduciary get advice on all of the steps required so that the interests of the beneficiaries are protected, and so that the fiduciary can be protected as well.

Call us for complete advice “A to Z” about the estate administration for decedents’ estates … 732-382-6070

“Keep it Simple” by signing a Last Will and Testament

Countless times, clients have told me they just want things kept “simple” if they die. Yet they never signed any Last Will and Testament. Why? “too complicated.” I’ve had meetings with panicky children who are dealing with a health crisis or death of a parent, who have just learned that in mom or dad’s quest for “simplicity,” they had never signed any Will (or power of attorney for financial and health care, for that matter). If a person dies without a Will, the law dictates what will occur, as a court cannot create a Will for a person who never signed one. The necessary legal procedures and administrative red tape that are caused by the absence of a Will can certainly destroy that hoped-for “simplicity,” and cause great delay and expense. And “simply” putting everything in joint names  can create problems of its own. The N J probate process itself is simple … but only if there is a Will.

Here are some suggestions to help you prepare for the meeting with your attorney about a Will. First, choose your Executor and a few successors (as life is uncertain). Appointing Co-Executors can be fine as long as they get along with each other and both of them are responsible, willing to be accountable, understand the job to be done, and are able to work cooperatively with the other Executor. Once I had a situation in which a parent had several children who  had been bitter enemies for years. This parent appointed them as co-Executors, in essence saying : “if you don’t work together now, no one will ever be able to receive a dime from the estate.” Unfortunately, this set of co-Executors couldn’t even agree on who should be hired to appraise the house. It took years to finish that estate.

Next, identify specific bequests such as to grandchildren, charities or friends. Unless you write these into your Will, you cannot assume that those gifts will ever be given. You can’t assume that the beneficiary of your estate will share their new-found wealth with someone else you had asked them to give some to, and sometimes, legal problems intervene that make it impossible for your beneficiary to honor such a request.

Consider if a bequest should be placed in a trust. You may want to protect that bequest if a beneficiary is young, has special needs and receives government benefits, or is in the midst of a divorce, a binge, a lawsuit, or has addictions or debtor-creditor problems. But make sure to pick a trustee who is up to the task, as they could have a relationship with this beneficiary that will go on for many years.

Next, you’ll need to specify how the estate is to be divided. If you are leaving one person “the house,” does it matter that its value could skew the overall distribution? Specify who receives each shae if the beneficiary predeceases you. Will there be estate and inheritance tax? Talk to the attorney about how to make sure here is enough cash in the estate to pay the tax.

Finally — Safeguard the original Will! If it’s lost or misplaced, someone will have to go to court. Let the Executor know where you are keeping it. Some people choose to leave their Wills with their attorneys.

Believe me — estates without WIklls can be anything but simple to administer, and often the outcome is not what the person would have preferred.

 Call for advice on the estate planning that’s right for you … 732-382-6070