How a Future Executor Should Prepare for an Estate Administration

10 Wednesday Apr 2019

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Abatement, Ademption, Assets, Beneficiaries, Common Estates, decedent, Distributing Property, Embedded Mistakes, estate, Estate Administration, Estate Attorney, Estate Documents, Estate Plan, Estate Planning, Executor, Financial Arrangements, Future Executor, Lawyer, Legal Arrangements, Opt-Out, Real Estate Agent, Tax Professional, Taxes, testator, Unintended Consequences, Will

prepare for an estate administration

Essentially, a future executor should prepare for an estate administration while the testator is still alive. By reviewing the estate plan with the testator, the future executor will understand the wishes of the testator. Additionally, depending on the level of knowledge the future executor possesses on estate planning, correcting embedded mistakes in the estate plan is possible. Regardless, at the very minimum, knowing the basic details of the estate plan and the wishes of the testator may be enough. If the future executor has a higher understanding of estate planning, then perhaps an extensive review is possible. Either way, preparing for an estate administration with the testator is an important step towards a smooth estate administration.

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Appointing Multiple Executors to Handle Your Estate

11 Monday Feb 2019

Posted by Robert Dowling in Planning Tips

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Appointing Multiple Executors, Closing the Estate, Co-Executor, Common Estate, Common Estates, Complex Common Estate, estate, Estate Administration, Estate Business, Estate Planning, Executor, Out-of-State Executor, Planning, probate, Probate Court, probate process, Spouse, Surviving Spouse, Tax Professional, Taxes, Unintended Consequences

In common estates, appointing multiple executors happens regularly. There are many reasons for this occurrence such as sparing feelings of family or lack of confidence in the surviving spouse. Regardless of the reason, using multiple executors can be beneficial to an estate or disastrous to an estate. There are valid reasons to use multiple executors for a common estate, but not many. Unfortunately, those planning their estates tend to overlook essential factors in selecting executors. As a result, they appoint executors for the wrong reasons causing unintended consequences for the estate. So, before appointing multiple executors, those planning their estates must consider the essential factors in selecting executors.

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Executor Obligation beyond the Closing of the Estate

06 Tuesday Nov 2018

Posted by Robert Dowling in Probate

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Acting Executor, Beneficiaries, Common Estates, Debts, Estate Income Taxes, Estate Tax Rates, Estates, Executor, Executor Obligation, Fiscal Year Return, Formal Probate, Formal Probate Process, Obligations. Estate Closing, Personal Tax Rates, Property of the Decedent, Short Year Return, Tax Professional, Taxable Income

In common estates going through a formal probate process, executor obligation may extend beyond the estate closing. Essentially, the core obligations an executor must achieve are the following:

Pay the debts of the estate.
File and pay all taxes of the estate.
Distribute remaining property of the decedent.

Normally, completing the core obligations is necessary to close an estate. Then again, there is always an exception to the rule. One exception is that tax filing deadlines may carry over beyond the estate closing. In essence, since the estate closed, the former executor becomes an acting executor until completing all obligations of the estate.

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Grandchildren Inheriting Savings Bonds for Education

08 Sunday Oct 2017

Posted by Robert Dowling in Beneficiaries

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529 College Savings Investment Account, Beneficiaries, Common Executors, Distribute Savings Bonds, Education Tax Exclusion, estate, Executor, Financial Professionals, higher education, Inherited Savings Bonds, Interest Income, Medallion Signature Guarantee, Payable on Death, Redeem Savings Bonds, Reissuing Savings Bonds, Savings Bond Registration, Savings Bonds, Series EE Savings Bonds, Series I Savings Bonds, Tax Liability, Tax Professional, TreasuryDirect, TreasuryDirect Account, Will

Presently, many grandchildren find themselves inheriting savings bonds left for them by deceased grandparents. Although savings bonds can be problematic when it comes to inheritance, inheriting savings bonds for education can be helpful. In fact, with a correct registration, the savings bonds may qualify for the education tax exclusion. According to TreasuryDirect the following must apply, in part, to qualify for the education tax exclusion:

When using bonds for your child’s education, the bonds must be registered in your name and/or your spouse’s name. Your child can be listed as a beneficiary on the bond, but not as a co-owner.

Ultimately, the registration for the savings bonds must be in a parent’s name to qualify for the education tax exclusion. Unfortunately, many grandparents mistakenly register the savings bonds in their own name while designating the grandchild as the beneficiary. Consequently, complications arise when applying for the education tax exclusion after redeeming the savings bonds.

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How Estate Size Will Influence Your Estate Plan

15 Friday Sep 2017

Posted by Robert Dowling in Planning Tips

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Abatement, Abatement Process, Asset Management, Beneficiary, Bequests, Debts, Earned Income After Death, estate, Estate Income Taxes, Estate Obligations, Estate Plan. Common Estate, Estate Planning, Estate Size, Estate Taxes, Expenses, Large Beneficiary Pool, Net Worth, Order of Payment, probate, Probate Avoidance Strategy, Probate Court, Retirement Accounts, Simplified Probate Process, Small Estate, Tax Planning, Tax Professional, Unintended Consequences, Well-Funded Estate, Will

To properly plan your estate, it’s important to understand how your estate size will influence your estate plan. As explained in the article The First Step to Estate Planning: Estimate Your Net Worth, your net worth will determine your estate size. By calculating your net worth, some important questions will come into focus regarding your estate plan:

Are there enough assets to cover your debts and other estate obligations?

If there are enough assets to cover the estate obligations, are the remaining assets enough to cover bequests?

Do I need to plan for estate taxes or estate income taxes?

Do I need to plan for abatement?

Obviously, these are just a few basic questions as life circumstances can make estate planning much more complicated. However, the answers to these questions will influence how you begin to properly plan for your estate.

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Estate Income Tax Returns: Review and File the Returns

07 Monday Aug 2017

Posted by Robert Dowling in Estate

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Attorney, Beneficiaries, Distribution Checks, Distributions, estate, Estate Closing, Estate Income Tax Returns, Estate Reserve, Executor, Fiscal Year Returns, Massachusetts Schedule 2K-1, Record Keeping System, Schedule K-1(Form 1041), Short Year Returns, Tax Professional

The time to review and file the estate income tax returns occurred simultaneously with closing the estate. According to the article Closing the Estate: Final Tasks to Close the Estate, on October 29, 2013, I was dealing with the professionals to send a final invoice. On that same day, the fiscal year returns, both federal and state, arrived in the mail for my review. Since the tasks of closing the estate and reviewing the fiscal year returns weren’t burdensome, the timing was fortunate. The arrival of the fiscal year returns would allow me to review and file the returns while closing the estate. So, the only task remaining after closing the estate would be dealing with the short year returns.

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Closing the Estate: Final Tasks to Close the Estate

31 Monday Jul 2017

Posted by Robert Dowling in Estate

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Acting Executor, Attorney, Belligerent Beneficiary, Beneficiaries, Close the Estate, estate, estate account, Estate Income Tax Returns, Estate Reserve, Executor, Final Distribution, Fiscal Year Return, Massachusetts DOR, Massachusetts Schedule 2K-1, Schedule K-1, Short Year Return, Tax Professional

After making the final distribution to the beneficiaries, final tasks remained to close the estate. As mentioned in the article Closing the Estate: Send Assent Forms to Close the Estate, distributing all the funds in the estate account was necessary to close the estate. Unfortunately, after the final distribution, the $5000.00 estate reserve was still part of the estate account. As a result, the final tasks to close the estate were as follows:

Make the final payments to the professionals.

Distribute the remaining funds in the estate reserve to each beneficiary.

Close the estate account.

Although eager to complete the tasks, making another tedious distribution dimmed the mood.

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Setting up the Estate Reserve and the Final Distribution

17 Monday Jul 2017

Posted by Robert Dowling in Probate

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Attorney, Beneficiaries, estate account, Estate Administration, Estate Closing, Estate Reserve, Executor, Final Account, Final Accounting, Final Distribution, Formal Probate Process, Miscellaneous Expenses, probate, Schedule B, Tax Professional, Unexpected Expenses, Will

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.

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Why is Calculating a Distribution from a Will Necessary?

22 Monday May 2017

Posted by Robert Dowling in Planning Tips

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Attorney, Beneficiaries, Common Estate, Distribution Formula, Distributions, Estate Planning, Executor, Final Accounting, Formal Probate Process, probate, Tax Professional, Will

Typically, calculating a distribution from a will, in a common estate, is a result of poor estate planning. If an executor needs an analysis pad to figure out a distribution involving many beneficiaries, the estate plan has the following flaws:

There are too many beneficiaries in the estate plan.
The estate plan has a complicated distribution formula.

In the article The Estate Income Tax Returns: Execute the Plan, calculating the distribution written in the will forced me, as executor, to use an analysis pad, then an excel spreadsheet. The distribution formula consisted of twenty beneficiaries receiving different amounts of property calculated in percentages and shares. In fact, the complicated distribution formula took me a few drafts to get to a final draft. After completing the final draft on an excel spreadsheet, to make sure the distribution calculation was accurate, I emailed the spreadsheet to my attorney and the tax professional. The professionals reviewed the final draft and approved the distribution. Finally, after the review, I was able to distribute the property to the beneficiaries. In addition, the spreadsheet of the final draft became the template for the next distribution.

Although the distribution worked out well, an executor of a common estate should never have to calculate a complicated distribution. Therefore, calculating a distribution from a will should rarely be necessary.

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The Estate Income Tax Returns: Execute the Plan

15 Monday May 2017

Posted by Robert Dowling in Estate

≈ 1 Comment

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Attorney, Belligerent Beneficiary, Beneficiary, Distribution Checks, Distribution Formula, Distributions, Estate Income Tax Returns, Estate Property, Executor Compensation, List of Beneficiaries, Partial Distribution, Rental Property, Social Security Numbers, Tax Planning, Tax Professional, Tax Strategy, Tax-Deductible Expenses, Tax-Id Numbers, W-9 Form, Will

Soon after receiving the plan to complete the estate income tax returns, I began to execute the plan. As described in the article The Estate Income Tax Returns: The Plan to Complete the Returns, the plan, in part, involved distributing the proceeds of the rental property sale and paying out tax deductible expenses. However, before I could begin to execute the plan, I had to complete the following tasks:

Mail W-9 forms to beneficiaries refusing to give their social security number through email or by phone.
Contact the two charities for their tax-id numbers.
Contact the attorney and the tax professional for invoices.

So, after requesting the information, there was nothing left to do but to wait for the information to arrive.

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The Common Executor

~ A Journey into Estate Administration

Tag Archives: Tax Professional

How a Future Executor Should Prepare for an Estate Administration

Appointing Multiple Executors to Handle Your Estate

Executor Obligation beyond the Closing of the Estate

Grandchildren Inheriting Savings Bonds for Education

How Estate Size Will Influence Your Estate Plan

Estate Income Tax Returns: Review and File the Returns

Closing the Estate: Final Tasks to Close the Estate

Setting up the Estate Reserve and the Final Distribution

Why is Calculating a Distribution from a Will Necessary?