Settling an Estate

[imoldernu]

Despite my age, I have never been directly involved in settling an estate, and would appreciate real-life advice from anyone who has had the experience.
The subject is so broad that any and all first hand experiences would be welcome, from the very beginning of the process to the final settlement. The "good", the "difficult", and the "bad".
Also, anything that involves the legal process, the timeline, and the cost.
In short, anything that would make settlement easier, and any problems or roadblocks that were encountered.

What to do, to make the process easier, and to avoid problems that might face the estate administrator? The simplest answer is always to "get a lawyer", but from personal experience, even with prior planning, there are often unforeseen issues that might have been avoided.

We have prepared all of the recommended documents, but don't want to leave loose ends that could cause our administrator son unnecessary work or anxiety.

We have read many of the advice columns and articles about estate planning, so have a idea of what to look for, but nothing helps more than hearing about first hand experience.

So... any personal insights that could help?

[MichaelB]

This is a very broad topic, difficult to apply generalities to a specific situation. The estates I've dealt with always had a will, so there was no question about how to distribute the assets, and an executor, so there was no question who was in charge.

Getting the house in shape to sell was time consuming, and family members all have different ideas regarding what to do with the furniture left behind.

The biggest difficulties I've faced have been with the "stuff left behind". Personal items, things collected over the years, gifts, memories. Lots of small items around the house "passed down through the generations". Going through them has been emotionally challenging, and it's not clear what things have value, and what to do with those that do, also what to do with those that don't. Lots of family tensions come to head here. I'm dealing with that right now, for the third time, and it's a major PITA.

As a result of this, in my instructions to my heirs I discuss how to distribute the large furniture. I also list, among my personal possessions, what items have real value, what items have sentimental value, and how they should be distributed. Also instructions to donate or throw out everything else, with no feelings of guilt or distress.

[Senator]

I dealt with both my Mother's and father's. Only one savings account/CD needed to go through probate. It cost ~$300 to settle a $5K C/D. They really did not have too much. Neither had a will.

Any account that a beneficiary can be put on, it's REAL easy. Do that for all your accounts. You just show a death certificate, and an ID, and it's done.

And real estate should have a quit claim deed, perhaps in a safe deposit box, with the new owners already on the quit claim deed. Or a co-ownership, so that ownership passes on with the death of the other.

A full list of accounts and monthly bills. When I took over my fathers affairs, I had bills coming in from everywhere. He never balanced his checkbook, and did not have them on a computer. I had to enter the previous 12 month's of bank statements in Quicken, so I could make sense of what was happening.

Perhaps a list of userID s and PWs to get access to accounts.

A pre-arranged funeral. My mother paid for her cremation and everything from the pickup at the hospital. the only thing I had to pay was for additional death certificates and mailing the ashes to my home. My father I set up when he was in a nursing home, so it was easier to plan. Not as rushed, no guilt feelings for buying a standard casket over a 'premium' one. He was then buried in a VA cemetery.

[eytonxav]

I would suggest having a sufficiently detailed will and/or side instructions so that your wishes are known and can be carried out without leaving those decisions to the heirs. Also, shelter as much of the estate from taxes as you can; use TOD or other mechanisms that would keep some parts of the estate out of probate for expediency. This can be a problem if large amount of $s are in IRAs which have there own rules for inheritance. Probate laws vary by state, but I would get a lawyer you can trust, they may do a fixed price which could be arranged upfront, but usually they receive a % of the estate as a fee for services.

[Bamaman]

I agree that this is a very complicated subject. You're doing good to address the subject while you have the facilities to make hard decisions.

I choose to keep my business, and potentially my estate very simple. Most of my stocks and money is sitting in IRA Rollovers, and my wife and I have each other as "beneficiaries." We also have the children as secondary beneficiaries in case we die together. The retirement accounts are excluded from the estate.

As life gores on, situations change. Right now, our wills are mirror images of each other--everything going to the surviving spouse. After one of us is gone is when things will get a little more complicated, as we have 4 homes.

Few estates are over the $5 million ish net worth and void of "death taxes." Big estates require trust funds and detailed planning to minimize tax loads.

When my father died, all his assets went to my mother and we didn't have to do any probate proceedings. We had to go through probate when my mother died only because of a house. If the deceased doesn't own real estate, there's a good chance no probate proceeds may be required. Probate essentially is where a judge gives the estate administrator the authority to transfer assets (often real estate) to someone else.

I would never have a quit claim done ahead of time on real estate as it screws up the "basis" value of the real estate. If real estate has appreciated greatly since it was purchased, you want to get an immediate property appraisal for tax purposes. Nothing worse than paying taxes that could e avoided.

I'm not going to get into trusts or other such matters--keeping it simple.

Let me just say you should have a really good will and it should be your decision on who gets what. There's nothing worse than a family fighting about money, as it happens more often than not.

Another important issue is having one of the children authorized to sign checks, etc. so your funeral can be paid and other expenses dealt easily.

[Whisper66]

Some ideas from personal experience with parents estate:

Key is picking an executor that is willing / able to stick to your wishes. Early on, sit down and discuss your wishes and your estate with them. Have a discussion yearly to update them on any changes and to answer any questions. Hard discussions include things like how to handle various medical conditions. Or where the executor should watch for problems with relatives (arguing over inheritance for example).

My parents had a list of all their main belongings and let the kids highlight ones they were interested in. As they grew older, they passed on items they no longer wished to keep (if the children still wanted the items) based on that list. The executor has instructions to hand out anything left from the list to folks if still want them when parents pass.

Provide an estate book with anything the executor may need. Include obvious things like copies of wills, medical directives, financial details, passwords, etc.... (Big Book of Everything by Dewey is a good "go by")

Writing out your own obituary and outline plans for funeral services takes a lot of stress off those folks left behind right when stress is the worst. Can even include who should be invited (with addresses), sometimes children won't know their parents main friends they would like notified of their passing. And certainly would have a hard time locating many of them if parents have moved a couple times.

Hope these help a bit.

[Another Reader]

Normally I agree with Senator, but this is one important case where I do not. A quit claim deed will cause the basis to go up prior to the death of the grantor, even if it recorded later. The proper way to deal with assets that are significant in most cases is to put title to the assets in a revocable living trust. IRA's should pass by beneficiary outside of the trust so they may be stretched over the beneficiary's life as determined by the IRS life table. That allows you to bypass probate and get the proper beneficial tax treatment of the assets.

Estates large enough to require filing a 702 and paying estate tax should be set up by a very good estate planning attorney. That likely includes you, Senator, or will at some point.

[imoldernu]

Thank you for the great replies... Exactly the kind of things that I was looking for.
One more item I didn't mention, but would be very interested in. Has to do with who else should know the plans, and how much should they know. We trust all of our sons implicitly, and are thinking to have a meeting to get them up to date on our finances... and all of the private things that we think they should know... where everything is located, and a suggested way of selling our three "homes" (campground trailer, FL retirement mfg home and CCRC residence). Not simple.

What Michael said about disposing of "belongings" really hits home. I don't believe that all of our "stuff" put together would amount to enough to be concerned about, but it could be a time consuming process.
After MIL's demise, the plan for distribution worked out well. They made a listing of all items of value and had a quiet session of taking turns to pick jewelry, and the other major items. It worked out well, and was relatively smooth.
The thought of "decluttering" is too daunting to us at our age. Dollar value not worth the angst. The "Got Junk" guys will do well.

[Senator]

Quote:

Originally Posted by Another Reader Normally I agree with Senator, but this is one important case where I do not. A quit claim deed will cause the basis to go up prior to the death of the grantor, even if it recorded later.

If you have a quit claim deed, you claim the basis the day of the transfer. If the basis goes way up (+10%), and both parties are still alive, you can do it again with the new dates. No different than updating any other end-of-life document.

Do not record the quit claim deed. Keep it in a safe or deposit box to be recorded at the time of death. The basis should be the same to both owners as if it had gone through probate. In the end, the basis is declared by the new owner when they file the county and IRS paperwork. It must be reasonable, but not exact. There is no exact number.

You can still go through probate and shred the quit claim deed if you want to. It is an option you can use IF you have the quit claim deed to make it easy, but do not have to use it. I did it with my father's two properties while he was in a nursing home, and it made it MUCH easier.

[Senator]

Quote:

Originally Posted by imoldernu One more item I didn't mention, but would be very interested in. Has to do with who else should know the plans, and how much should they know. We trust all of our sons implicitly, and are thinking to have a meeting to get them up to date on our finances... and all of the private things that we think they should know... where everything is located, and a suggested way of selling our three "homes" (campground trailer, FL retirement mfg home and CCRC residence). Not simple.

You can even record a video, and upload it as a private YouTube video. Send the link out to all the sons. No one without the link can even find the video. Or put it on a DVD and mail it.

[Another Reader]

I have properties that I have owned for 15 to 20 years that are worth more than twice what I paid back then and continue to increase in value. Even if I could avoid probate by signing a quit claim deed today, the basis would go up as of that date. Then there is the sticky little problem of gift tax and gift tax returns. Finally, if your heir recorded that quit claim deed in California, your heir would owe increased property taxes under Prop 13 rules from the date of the QC deed forward.

By placing the assets in a revocable living trust, I accomplish two things. The basis goes to market as of the time of my death and the estate does not go through probate. No gift tax returns are required and the inevitable IRS inquiry will be limited to number verification (the IRS loves auditing estates).

Instead of gaming the system and risking an IRS tax audit, in your shoes, I would spend a few bucks to consult a good estate planning attorney and use the tools that were created to allow your estate to avoid the probate process and maximize the tax advantages.

[Amethyst]

As I recall, my Dad had bought a lot of U.S. savings bonds in the 1960's and when Mom died in 2002, we had to pay income tax, at regular-income rates, on our 1/3 share of the proceeds from selling the bonds, even though the estate itself was quite small. I never did understand why we, personally, had to pay taxes, but our CPA assured us it was so.

[GrayHare]

If there is one clear heir, such as an only child, the process should be relatively simple. Most difficult situations arise when there is more than one heir.

If I expected disputes, I'd use a video recording to make clearer my intent, with date clearly stated in case I later revise it.

[easysurfer]

Quote:

Originally Posted by Whisper66 Some ideas from personal experience with parents estate: Key is picking an executor that is willing / able to stick to your wishes. Early on, sit down and discuss your wishes and your estate with them. Have a discussion yearly to update them on any changes and to answer any questions. Hard discussions include things like how to handle various medical conditions. Or where the executor should watch for problems with relatives (arguing over inheritance for example). My parents had a list of all their main belongings and let the kids highlight ones they were interested in. As they grew older, they passed on items they no longer wished to keep (if the children still wanted the items) based on that list. The executor has instructions to hand out anything left from the list to folks if still want them when parents pass. Provide an estate book with anything the executor may need. Include obvious things like copies of wills, medical directives, financial details, passwords, etc.... (Big Book of Everything by Dewey is a good "go by") Writing out your own obituary and outline plans for funeral services takes a lot of stress off those folks left behind right when stress is the worst. Can even include who should be invited (with addresses), sometimes children won't know their parents main friends they would like notified of their passing. And certainly would have a hard time locating many of them if parents have moved a couple times. Hope these help a bit.

+1. Especially about the part of choosing an executor that is willing and able to stick to your wishes.

Just looking in the news of two very high profile deaths recently, one seems very organized and pre-planned where the other was not pre-planned at all.

[akck]

Get multiple certified copies of the death certificate. Banks and brokers require them and usually keep it for their records. When my FIL died, I believe 8 were gotten. We ended up getting another in order to create and transfer an inherited IRA from his full service broker to a discount broker. If we ever decide to transfer it again, we'll likely need another for the new broker.

[ERD50]

Quote:

Originally Posted by imoldernu .... What Michael said about disposing of "belongings" really hits home. I don't believe that all of our "stuff" put together would amount to enough to be concerned about, but it could be a time consuming process. After MIL's demise, the plan for distribution worked out well. They made a listing of all items of value and had a quiet session of taking turns to pick jewelry, and the other major items. It worked out well, and was relatively smooth. The thought of "decluttering" is too daunting to us at our age. Dollar value not worth the angst. The "Got Junk" guys will do well.

One thing I plan to do someday, to help with that process, is to make a list and/or video of anything that might be worth something to someone (either monetary value, possible sentimental value to family, or maybe just stuff that should be given away to hobbyist/collectors that I know, or donated). And also go through all the stuff that is just junk - that would make it easy to bring in the dumpster and junk that stuff w/o worries of throwing away something of value.

-ERD50

[ERD50]

Quote:

Originally Posted by GrayHare ... If I expected disputes, I'd use a video recording to make clearer my intent, with date clearly stated in case I later revise it.

Even w/o expected disputes, I highly recommend that you review your docs with the executors and/or successor trustees.

In two recent family cases I've been involved with, I think the wishes were clear. But it appears the lawyers did not get those wishes into the documents as desired.

IME, older people especially may have a very large amount of trust/faith in lawyers and others to do the right thing. So much, that they just accept that all that legalese does what was intended, w/o checking it with a critical eye. And after I sorted through the legalese, I found it wasn't what they intended (in the case of my in-laws, with MIL surviving my FIL, we were able to adjust things back the way they wanted by getting a new trust agreement for MIL, which balanced things out overall).

Take nothing for granted.

-ERD50

[eytonxav]

Quote:

Originally Posted by Amethyst As I recall, my Dad had bought a lot of U.S. savings bonds in the 1960's and when Mom died in 2002, we had to pay income tax, at regular-income rates, on our 1/3 share of the proceeds from selling the bonds, even though the estate itself was quite small. I never did understand why we, personally, had to pay taxes, but our CPA assured us it was so.

If your Dad had cashed these himself he would owe taxes on the taxable interest portion. So beneficiaries of such assets are no different.

[MooreBonds]

Quote:

Originally Posted by DFW_M5 Quote: Originally Posted by Amethyst As I recall, my Dad had bought a lot of U.S. savings bonds in the 1960's and when Mom died in 2002, we had to pay income tax, at regular-income rates, on our 1/3 share of the proceeds from selling the bonds, even though the estate itself was quite small. I never did understand why we, personally, had to pay taxes, but our CPA assured us it was so. If your Dad had cashed these himself he would owe taxes on the taxable interest portion. So beneficiaries of such assets are no different.

To expand a little further with some technical stuff:

Presumably, your father purchased the savings bonds in his (and maybe your mother's) names. Perhaps with a beneficiary, perhaps not. If there was no beneficiary or other co-owner, then the bonds become part of the estate. Any income earned AFTER the date of death is income earned by the estate. Any income earned by the estate is then (usually) passed through to the heirs, based on the proportion of their inheritance of the overall estate. This income is then declared by each heir on their taxes.

UNLIKE unrealized capital gains (which receive a stepped-up basis upon death, when transferred to an heir), savings bonds do NOT receive a stepped-up basis:

https://www.irs.gov/pub/irs-wd/09-0120.pdf

If you and the other heirs were co-owners or beneficiaries of the bond, then you would declare the income when the bond was cashed in, just as with any other savings bond.

Savings bonds issued in the 60s likely reached full maturity before your mother's death, so they had to all be cashed in at the time of her passing. (Technically, you have to declare the interest when it reaches final maturity whether you cash it in or not, but many people don't know that, and it just slips by the radar, usually because the amounts involved are not gigantic).

[MooreBonds]

I was involved in settling my grandmother's estate. I had knowledge ahead of time of the accounts (and was managing her investments). She had a revocable living trust that owned all of her accounts. The process was very easy in transferring assets. It took a few steps (and one of her accounts at Vanguard involved personnel were actually not that competent all the time), but overall, it was relatively speedy, efficient, and not too cumbersome - compared to something like probate. I strongly recommend everyone create a simple RLT to own financial assets.

Also, make sure your IRAs have updated beneficiary info - and keep your own copies! A financial institution is not necessarily going to just cut checks or transfer assets that necessarily match what that account beneficiary info says, they will often ask the executor to send them a letter identifying who gets how much.

Have several copies of the RLT in your records. Sometimes a financial institution wants another copy when the executor gets involved.

I would also second the comment of having a summary of all accounts and all institutions where those accounts are located. Also, make sure the executor knows what to do after your passing...such as, don't think you can just login with your info and transfer something after your death without telling the financial institution first. When the financial institution asks for a death certificate, and finds out transfers were made after the date of death, they might be rightly pissed at the executor for not informing them, since there is some legal liability they now have exposure to (if an executor somehow swindled some funds and another heir sued).

The financial institution will likely transfer all assets to an estate account, and then disburse funds/assets from there. So the process can take a few weeks - don't keep securities and other assets in an account assuming they can all be disbursed immediately (in 2-3 days).

Also, remember that there is no "trust police" out there checking every transfer and transaction. An executor could do a variety of illegal things. Pick one that you trust, and/or share all info with all heirs, so the executor knows that others are aware of what is out there and will likely be checking over their shoulder.