In the event a homeowner has died, the family often has many more things to consider beyond preparation and sale of the home.
Typically, a family member or family friend has been named Personal Representative of the decedent. This role is may be referred to as Executor or Administrator and is the fiduciary put in charge of settling the estate. If there is a Last Will and Testament, a probate judge will typically appoint the Personal Representative named in the will as the Executor.
In general, the decedent’s estate planning documents such as the Last Will, funeral plans and living trust, should be organized for the estate attorney. In most cases, set aside three years of tax returns and locate a 3 month inventory of all account statements, such as checking, savings, cd’s, retirement accounts and brokerage accounts. Stock and bond certificates are required, as well as life insurance policies and the beneficiary designations for payable on death accounts such as insurance and IRAs, real estate deeds, titles for automobiles and other recreational vehicles, corporate records, household and utility bills, medical bill and funeral bills. The Executor must also try and identify all creditors and outstanding debts.
The next step is determining the value of the estate at the time of death. For all items listed on the inventory, this is typically the fair market value of the asset at the time of death. Bank and retirement accounts are listed per the most recent statements. Real estate may be listed at its value as assessed for real estate taxes. For other property, fair market value is normally “the price at which the property would change hands between a willing buyer and a willing seller in the retail market.” Appraisals are often required and the cost of appraisal or advice of accountant in these matters is usually allowable as an administrative cost of the estate.
An account is typically set up for the estate and used to pay estate management expenses and pay the decedent’s outstanding debts. Careful records of all transactions must be kept.
Typically, estate taxes must be filed within a specific time frame. Estate taxes can be very complicated and can have a significant impact on the value of the estate, as well as heirs and beneficiaries. It is advisable to seek the experience of an estate tax attorney or CPA, who can help determine state and federal liability.
After all else is done, the executor will distribute the decedent’s assets to the beneficiaries named in the Last Will, or if there was no will, according to decedent’s heirs at law. The estate is closed by filing a “final accounting” with the court. The Executor also files a “closing statement,” that indicates all taxes and debts have also been paid and all property distributed.
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