If you are the heir or beneficiary to a decedent’s estate, you have a right to a full accounting of the estate by the executor. This accounting is a requirement of the probate court before the executor or administrator may distribute remaining estate assets to heirs and beneficiaries. If the decedent left a will, those persons, organizations or institutions to whom he left the estate are beneficiaries. If the decedent died intestate, the estate goes to heirs depending on state laws regarding intestate succession. Estate Account TitlingThe executor named in the decedent’s will and officially appointed by the probate court must contact the Internal Revenue Service for an employer identification number for the estate. All of the property titled solely in the decedent’s name must be retitled as “The Estate of …” with the name of the executor. All checks made out to the decedent must be endorsed by the executor and deposited into an estate account. The executor is responsible for managing the decedent’s accounts, any rental properties or other assets of the estate. While the executor makes financial decisions, she may also be personally liable by beneficiaries or creditors for mismanagement of assets. Most states require executors to post a surety bond at the time of appointment for this reason. Executor DutiesThe executor’s duties include collecting and safeguarding all probatable assets and establishing the fair market value as of the date of death. The executor must post a notice to creditors in the decedent’s home county newspaper, pay outstanding and ongoing debts out of estate assets, hire professionals such as attorneys and accountants, file the decedent’s final tax return along with any applicable state or federal estate taxes, and pay any taxes due. She must provide the probate court with an inventory of all probatable assets with a copy to the beneficiaries. All of these activities and related costs are part of the estate accounting. Estate AccountingThe executor has a fiduciary duty to the estate, and must account for all expenses, as well as managing estate assets. The final accounting to the probate court must include estate checking account statements, invoices, receipts, financial statements, gains or losses on sale of assets, bills of sale and other items applicable to the particular estate. The executor may also receive payment for services, generally a percentage of the estate assets. If the executor is a relative of the decedent as well as a beneficiary, he may choose to waive payment. Depending on the size and nature of the estate, settlement may take months or years. The executor should provide beneficiaries with a regular accounting, and if this does not occur the beneficiaries may file a petition with the probate court to receive this information. Estate AccountsThe Executors named in the Will must administer the Estate in accordance with the terms of the Will. If there isn’t a legally valid Will in place, the Personal Representatives who are taking on the role must act in accordance with Intestacy Rules. When the Estate administration is complete, the Personal Representatives should produce a final document detailing the Estate’s Accounts. The Estate Accounts will show the final total of assets, liabilities, fees and administration expenses, and how the balance of the Estate has been distributed. The only people entitled to receive a copy of the Estate Accounts are the Residuary Beneficiaries. A Residuary Beneficiary is someone who is given the remainder of the Estate (known as the Residue) once all the funeral expenses, debts, taxes and other gifts have been paid out. There are different types of gift that can be left in a Will. For example, a Pecuniary Legacy is when an individual is left a specific sum of money. If an individual is bequeathed a Pecuniary Legacy of £1,000 and he/she receives £1,000, he/she would then have no further rights as far as the Estate is concerned. But if an individual is to receive a share of the Estate after the specific bequests have been distributed, then the individual is a Residuary Beneficiary and would be entitled to receive a full account of all of the assets and how they have been distributed. Exceptions to the RuleThere are some exceptions to this rule. The following also have a right to see the Estate Accounts: The executor accounting to beneficiaries is a critical part of the executor’s duties and it must be done properly. It takes place after all expenses and debts have been paid, including income taxes, and before the remainder of the estate are distributed. The executor must give the accounting to all the residual beneficiaries and they must approve it before distribution takes place. It is the executor’s legal duty to be ready to provide accounts at any time. The duty of account is owed to all residuary beneficiaries, the court, and people interested in the estate who get a court order for an accounting. Non-residual beneficiaries who are to receive a specific gift are also entitled to an accounting with respect to the gift. Executor accounting to beneficiaries is expected to take place regularly. At the minimum, it must take place every two years after the date of death and after the most recent accounting. The court has the ability to change the length of reporting intervals. The executor statement of account should include: Formal and Informal Executor Accounting to BeneficiariesThe Surrogate Rules give a formal accounting procedure that includes financial statements. Those entitled to executor accounting can sign a release that dispenses with the requirement for a formal accounting. If all the beneficiaries sign the release and there are no issues with compensation, a formal accounting is not required. This is referred to as informal accounting. The releases should be filed with the court so they are on the record to protect the executor. If the executor cannot get everyone to sign the release, if compensation needs to be set, or if the executor needs to discharge a bond, he or she can request another form of accounting that is less work and costs the estate less. Format for Accounting to BeneficiariesThere is no set format for accounting, be it formal or informal. However, it is critical that executors keep detailed records and evidence supporting each transaction. Additionally, it is in the personal representative’s best interest to keep track of how much time is spent for each step, be able to provide evidence of each step taken, and describe instances where he or she has had to use personal discretion. Keeping such information will be useful if the executor’s fee is contested. Once the final accounting has taken place and the estate has been distributed, the court can discharge the executor. However, the executor will always be the executor of that particular estate so if issues arise in future he or she will need to take up the role again. Discharge means that the executor cannot be held personally liable for how the estate was administered, unless fraud or undisclosed acts are discovered in the future. An executor assumes the legal responsibility to essentially “close the books” on that life and act in the best interest of the estate. Responsibilities include but not limited to: • Misunderstanding Fiduciary Responsibilities: Once you’ve been appointed the executor of an estate you also become a “fiduciary,” and expectations around your actions are high. As a fiduciary, your responsibility is to manage the money on behalf of the state. This that can get emotionally dicey for everyone, especially if the executor is also an heir or beneficiary. Unfortunately, being fair and honest when following the Will isn’t enough. You have to be able to prove that all of your actions and motives are transparent, objective, and completely above board. This is where we’ve seen many get tangled up in executor misconduct. As executor, your record keeping must be scrupulous, with paper copies of every transaction. Your communications with beneficiaries should be clear and consistent. That means everything related to the estate and probate should be put in writing and sent to everyone at the same time. Keeping everyone up-to-date on what’s happening with their inheritance can help allay concerns and resentment down the road. • Mismanaging Real Estate: This is an issue we run into all too frequently. Scammers and flippers make their living combing through death notices and hitting grieving relatives with hard sales pitches. Executors overwhelmed with their grief and the job in front of them are often quick to take the first offer they receive. It doesn’t help when there is little cash in the estate or if the house is in disrepair. As the executor, though, you have a fiduciary duty to make your best effort to receive the “fair market value” of that asset. So, while you do want to move quickly on a house sale you also want to move deliberately to maximize the value of the house. First, you’ll need to have the property appraised for probate court. Then you should talk to a trusted real estate professional about the best way to move forward. For example, if the house has a lot of deferred maintenance, is it better to invest estate assets in repairs before putting it on the market or selling it as is. If the property is to be sold and the proceeds distributed through the estate, the executor decides on the sale price and the amount of the commission. In order to head off questions from the beneficiaries about those numbers, it’s wise to get the blessing of the probate court before signing a contract. • Not Securing Tangible Assets: Yes, your father willed his valuable coin collection to your brother. But when your father died, the ownership of that collection didn’t immediately transfer to the brother. When the executor follows the Will and probate requirements, the coin collection is the property of the estate until probate is settled. It’s the executor’s responsibility to ensure the safekeeping of the collection until that time. We’ve seen this legal hurdle trip up many executors, especially when multiple family members have keys to the decedent’s house. It’s very common for even well-meaning beneficiaries to come in and help themselves to whatever they were promised. It becomes a huge problem if there are valuable antiques, collections or artwork left unprotected in the house. As an executor, one of the first things you need to do is change the locks of the house and secure anything of value. As part of the required estate accounting, you may need to have valuable items appraised and secured until probate is settled. Only then can they be distributed or sold. Estate Administration LawyerWhen you need legal help with Estate Administration, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
Ascent Law LLC
8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506
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