When completing Schedule B in the final accounting, setting up an estate reserve and the final distribution becomes necessary. As mentioned in the article Closing the Estate: Complete the Final Accounting, Schedule B takes more time to complete than Schedule A. The reason is that the executor has to step out of the final account to complete the following tasks:

• Set up an estate reserve that will pay expenses beyond the closing of the estate.
• Calculate a final distribution using the remaining funds in the estate account.

Since the estate reserve and the final distribution represent future expenses of the estate, they become part of Schedule B. Also, because the two items are future expenses, planning and estimating future expenses becomes necessary. As a result, the executor may have to delay completing Schedule B for at least a couple of days. 

Setting up the Estate Reserve

Although the estate reserve and the final distribution are part of Schedule B, the estate reserve involves more work. The purpose of the estate reserve is to put aside funds to pay expenses beyond the closing of the estate. Therefore, the executor has to take some time to estimate the expenses that could occur beyond the closing. Usually, the expenses that could occur are the following:  

• The final attorney fee when releasing the attorney.
• The final tax professional fee.
• Miscellaneous expenses such as postage.
• Unexpected expenses caused by beneficiary contests or belligerence.

Fortunately, at this point in the estate administration, expenses are minimal. The only known future expenses are making final payments to hired professionals. So, all the executor needs to do is ask the hired professionals for a final invoice and reserve that amount. Additionally, the executor should put an extra amount aside for miscellaneous and unforeseen expenses. After covering all known and estimated expenses, the executor has established the estate reserve.

Setting up the Final Distribution

After setting the estate reserve, the executor will calculate the final distribution using the remaining funds in the estate account. Moreover, the executor will calculate the distribution according to the terms of the will. In my experience, the task of calculating a final distribution was easy because a template for the calculation existed from a previous distribution as depicted in the article The Estate Income Tax Returns: Execute the Plan. Basically, all I had to do was plug-in different numbers into the template derived from the will. However, in a well planned estate, the executor won’t need a template to set the final distribution. The distribution formula will most likely be straight forward. Anyway, after setting the final distribution, then work on Schedule B can resume.

The Final Word on the Estate Reserve and the Final Distribution

Since this article relates to Massachusetts probate law, differences in probate laws in other states may occur. Even though not all estates are the same, any estate going through a formal probate process will require a final accounting and a final distribution. As a result, this article is relevant to any executor handling an estate going through a formal probate process.

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