When someone dies, everything they own at the time of their death must be transferred to living beneficiaries or heirs, also known as a probate estate. Probate can be quite lengthy and often last for months or years in Probate Court. The assigned executor or executrix (if a woman is assigned) holds the roles and responsibilities to manage the affairs while in probate.
What is Probate?
Probate is a legal process set in place to make sure the debts and liabilities are paid off out of any money or assets that were left behind. Once paid off, the transfer of ownership to any beneficiaries takes place.
Most generally, if the deceased decedent did not leave a will (intestate estates), a “personal representative” or “administrator” assumes the role of assigning and transferring assets according to state law instead of wishes outlined in a will.
Defining the Probate Process and Executor Roles
The executor is responsible for the estate management throughout the entire process and may at times need approval from probate court before making decisions or actions.
The executor will wear many hats that include filing court documents, attending court appearances and dealing with heirs, beneficiaries, accountants, and appraisers. Many times, executor duties will have a chronological order.
Submitting the Last Will and Testament
Typically, the first duty is to submit the last will of the decedent to the probate court to open the probate estate. The judge will determine if the will is valid and meets the letter of the law with no errors. At this time, any individual with an interest in the estate has this opportunity to come forward and contest the will. If there is no contest, the judge typically will grant the authorization of the proposed executor through “letters of testamentary” or “letters of administration.” These letters are used to send to entities to confirm the legal authority to act on behalf of the estate.
Gathering Assets & Resources
During this period, the executor will act as a research investigator to accumulate assets and resources of the decedent. This could be jewelry, artwork, banking information, safe deposit box contents, or any other valuables that need to be secured until adequately distributed.
During this process, any insurance policy premiums, loan payments, or debts will be paid by the executor out of the estate funds. Any personal bank accounts or cash are transferred into the estate fund account for debt payment. In most situations, the executor will need impeccable record keeping and to report a listing of all assets to the probate court.
Notifications of the Death
One job of the executor is the bearer of bad news, and they will have to notify beneficiaries named in the will if they have not been notified already. They will also communicate in writing, typically through certified mail, to any services, subscriptions, credit cards, other creditors, and the Social Security Administration.
Once all creditors are notified, they may make a claim for payment. The executor determines if the credit claims are valid and pays or declines the payment from the estate funds. The creditor can petition the court to override their decision.
Since the estate is responsible for paying debts and final bills, beneficiaries or heirs are not responsible for the decedent’s liability. The exception being the spouse, in some states.
Tax Valuation
All assets must be valued for tax assessments to determine if estate taxes are due either by date of death valuation or six months after death alternate valuation. Alternate Valuation is specified by the Internal Revenue Code using the alternate date for assets not sold or passed to heirs within the six months and valued at the distribution date.
The executor is also responsible for filing a personal income tax return for the final year of life, and an income tax return on the estate if any income is earned during the probate period.
Estate Closure
Once all these matters are handled, it is time to submit an accounting document detailing all transactions made for the estate’s behalf. Once approved by the judge, the distribution of the remaining funds and property is granted to the beneficiaries and heirs that were named in the will.
While every estate can be different, the executor is usually paid for their time depending on state laws and where the estate is probated. Often this is defined in the will and paid out of the estate funds. The payment is considered taxable income for the executor unless specified as a cash inheritance in the will.
This is a short version of the roles of an executor, and not all estates nor state requirements are the same. Some may be more complicated.
If you are planning your will proactively think about estate planning the woodlands TX can handle these roles the best and act accordingly. If you are taking on the role of an executor, find out what is required from you at a state level.
