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Your Uncle died. You are his Executor. What do you have to do?

Myths about Probate

What is an executor?

An executor is someone nominated by the maker of a will (the “testator”) to administer his or her estate. In order to act as executor, the nominee must be confirmed by the probate court.

How do you start as an executor of a will?

File the Will with the Probate Court. The will has to be “admitted to Probate” in order for the Executor to be officially appointed. This first step may be easy or complicated, depending on the circumstances.

In Connecticut, the Executor submits the original will, a certified death certificate and an “Application for Probate” to the Court. Sometimes, we are able to admit wills to Probate in less than a week.

Other times, it takes substantially longer because:

  • Someone objects to the will. Example: A child been cut out or, in his or her opinion, treated unfairly.
  • Ambiguities in the language. Example: In 1990, Ajax left his stock in Lands’ End Corporation to his nephew, Bjax. There is no more Lands’ End Corporation. It was bought by Sears in 2002. Does Bjax get his uncle’s Sears stock or not?
  • Having real property in more than one state also complicates the process. There will have to be a separate probate proceeding in each state. This can take quite a bit of time and add to the cost. These “ancillary administrations” can be avoided by using trusts.

What assets of the estate is an executor responsible for?

An Executor is personally responsible for all the assets. He or she must locate and take control of them. When we open an estate, we search the “unclaimed property” lists of every state in which the decedent lived. We also review recent tax returns because interest and dividends can reveal assets which the executor did not know about.

If an executor receives bills for the estate, should they pay them?

You’ve no doubt seen the newspaper notices entitled “Limitation of Claims.” These serve as announcements to the world that potential creditors have a fixed time to present claims to the executor. Claims presented after that time period may be barred. This time limit can protect an executor of an estate from personal liability claims in the future.

Suppose the executor receives a fraudulent claim? We settled the estate of a man who owned a “collector car.” He had made an arrangement with a local dealer to leave it in his showroom. This was a mutually advantageous arrangement. The owner received free storage. The dealer had an attractive display. After the owner died, the dealer presented the Executor with a bill for over $30,000 for “storage.” We successfully denied the claim in court.

What records does the executor need to keep?

You should retain the deceased person’s tax returns for at least four years. You also need to keep supporting documents for all deductions claimed on the estate tax return until after you have received a closing letter from the IRS. You might want to keep cancelled checks and other records of payment for at least two years because, even though creditors’ rights against the executor are cut off after the claims limitation period, beneficiaries can still be responsible for claims.

What tax returns does the executor have to file?

You need to file the deceased person’s final income tax return. In addition, you should file income tax returns for the estate and any trusts. If the estate is greater than $5.4 Million, you have to file a federal estate tax return. Every estate, regardless of size is required to file a Connecticut estate tax return.

Other Tips for Executors

Learn all the facts. Be aware of the decedent's prior gifts. This is another reason to carefully examine prior years’ tax returns. The IRS certainly will in an estate tax audit. A significant drop in interest or dividends from a specific source could indicate a gift. A few years ago, we were involved in an estate where an Executor didn't know about gifts in excess of $900,000. The IRS initially threatened a criminal prosecution until the Executor persuaded them that he was a victim, not a perpetrator.

Take Care of Tax Matters. The Executor is legally responsible for filing necessary income and estate-tax returns (federal and state) and for paying all estate and income taxes. The IRS penalty for failure to file a return on time is 35% of the tax for each month that the return is not filed. The penalty for non-payment is .05% of the tax per month. In an egregious case, an executor could receive a visit from the criminal division of the IRS.

Value the Assets. It may actually be better to value assets higher rather than lower in order to save capital gain taxes when they’re sold. On the other hand, in taxable estates, the executor often needs to determine whether the “estate tax value” of an asset could be less than its “actual” value. Failure to see these issues and opportunities can subject the Executor to personal liability.

Advance distributions. If an Executor is certain that he or she has sufficient assets to pay all claims, expenses and taxes, they may distribute some assets to the beneficiaries. However, an Executor acts at his or her own risk in making distributions that have not been approved by the Court.

Accounting. In order to close the estate, the Executor must prepare an accurate accounting or financial report. He or she is personally responsible for any errors in dealing with estate assets. We have the experience and access to highly competent co-professionals to prepare accountings which satisfy all of the requirements of the probate court.

Final Distribution. After all debts and expenses and taxes have been paid, an Executor's last job is to distribute the assets in accordance with the will.

Not a Time for “On the Job Training.” Most executors have no prior experience and no training. This is not a time for 'OJT.' There is too much at stake, including the possibility of personal liability. Wow. We have a whole ‘nother piece on “fixing five fiduciary fumbles.” It’s on our website. Perhaps it can become another post or more than one.

Our TrustLawyer team has been representing individual and bank Executors for over forty years. We can explain the Executor's jobs in plain English. We can help him or her to make tax and administrative decisions.