Granite Bay Decedent Estates
and Trust Administration Lawyer

Managing Estate Assets

• Accessing assets. The fiduciary must take control of all the assets that comprise an estate or trust. The administrator needs to secure and value all the testator’s assets as soon as possible after their death. If certain prerequisites are met, some assets may be accessed immediately. The prerequisites for these assets, such as brokerage accounts, may include producing a death certificate and obtaining formal authorization from the court. In some cases, as with insurance, a claim must be filed.
• Tangible property. If items such as collectibles, artwork, jewelry, automobiles, furniture, and other tangible property are part of the estate, a professional appraiser is often hired to assess their value. Unusual and rare items may require consulting a specialist appraiser. Business interests and commercial and residential properties must also be appraised. This allows for the assets’ valuation on the inventory required by the court, state, and federal estate tax return use and gauging whether the insurance coverage the decedent had on the property was sufficient. The fiduciary should maintain this insurance throughout their tenure.
• Accounts. Valuing financial assets such as securities and bank accounts is also the job of the fiduciary. It is important to note that certain estimates are allowed for federal estate tax returns if the estate does not owe any federal estate tax. This can sometimes lessen the cost of appraisals.

Settling Debts and Expenses

• Bills. One of the executor’s duties is to determine when expenses incurred while settling the estate and the decedent’s unpaid bills should be paid, then see to it that they are paid or that creditors are notified of any delay in payment. This is important because certain unpaid bills, such as real estate taxes and casualty or property insurance, may directly affect the estate. In most places, one must provide written notice to any reasonable ascertainable or known creditors.
• Executor liability. It is always recommended that an administrator works with a reliable trust administration attorney to assist in handling these matters, as there are unique circumstances in which a fiduciary may be held responsible and personally liable for failing to properly protect estate assets or spending trust or estate assets improperly. Ensuring adequate insurance coverage throughout the process is one example.
• Tax returns. Filing a decedent’s tax returns is one of the duties of being the executor of an estate. This may include the decedent’s final income tax return, current generation-skipping or gift tax returns, and tax returns for previous years that are on extension. The fiduciary must investigate whether the decedent missed filing taxes in any previous year due to declining health or other reasons. A federal estate tax return will also need to be filed if the estate is valued at a greater amount before deductions than the estate tax exemption shelters. In other cases, such as situations in which the surviving spouse intends to use an estate tax exemption that the decedent did not use, a federal estate tax return will still need to be completed.

Bequest Funding

• Cover expenses first. A fiduciary must ensure that all the decedent’s expenses, taxes, and debts are paid before distributing any money or tangible property to beneficiaries. Failure to do so may result in the executor being held personally responsible if insufficient assets are left to cover estate expenses. For this reason, any will or trust that bequests specific gifts of property or cash should be carried out after all expenses are paid. It is possible to distribute these gifts first and obtain a receipt and refunding agreement that ensures the beneficiary will refund any excessive distributions made in error by the executor, but these agreements can be difficult to enforce.
• Handle bequests. In some states and circumstances, court approval is necessary before any distributions may be made. At this point, all specific bequests of gifts or cash may be distributed first. Once those are carried out, the remainder, or residue, may be distributed. This can be done outright or in a different trust, such as that for a surviving spouse or the decedent’s minor children. It is wise to seek a trust administration attorney’s advice to ensure that funding for all bequests is handled properly, especially in the instance of ongoing trusts. The tax consequences involved with estate distribution can be shocking, so it is vital to plan accordingly.

Administering Trusts

• How are trusts paid? When funds are placed into a trust, the trust’s specifics dictate the difference between the income and the principal. Trusts may vary greatly, but in many cases, the trust states that the income should be distributed to the individual named in the trust at one time, and the principal in the trust to be given to that individual or someone else at another time. For example, the trust may state that the income should be paid to the decedent’s surviving spouse when they die. The principal should only be paid to the surviving spouse if they are experiencing a medical emergency. It may further state that any funds left in the trust at the surviving spouse’s death be paid to their surviving children, other beneficiaries, or charities.
• Taxes. When a trust is being administered, the fiduciary must provide a Schedule K-1, an annual income tax statement to each beneficiary who can be taxed on the income the trust earns. They must also file annual income tax returns for the trust. If the taxes are not filed and paid on time, the fiduciary may be held personally liable.
• Investing. A fiduciary handling trust administration should invest within their state’s prudent investor rule that governs the estate or trust while adhering to the terms of the trust or will. They should always have a written investment policy that states their investment goals. Professional advice is often needed to ensure that wise investments are made. The proper assets are sold to obtain the cash needed for expenses, and capital gains and income taxes are minimized. This can also prevent an heir from claiming that the fiduciary violated trust investment laws or invested unwisely.

Closing an Estate

When an executor has distributed all assets, satisfied all expenses, taxes, and debts, and gotten clearance from the state and the IRS, they may close the estate. When an event such as the death of a beneficiary or the time that a beneficiary reaches a certain age occurs, a trust may be terminated. In some cases, a petition may need to be filed in court to distribute all remaining assets and close a trust or estate. Even if this is not necessary, it is a good idea to have an attorney prepare a document for all beneficiaries to sign that states they approve of the executor’s actions and have received the assets they are due.

When all these obligations are settled, the fiduciary must file a final income tax return and keep a reserve back for any unpaid estate expenses or taxes.

If you need the help of a Granite Bay decedent estates and trust administration lawyer, contact our office. We can offer your advice for every stage of the process.