Being a Personal Representative Serve as Executor For a Loved One by Darla Dernovsek

What is an executor Questions or “personal representative”? n What is an executor or personal representative? When you die, you leave behind loose ends: personal belongings, utility connections, n What are the biggest rewards and medical bills, perhaps a mortgage and other pitfalls of being an executor? debts, and more. n What are the executor’s duties? The executor is the person named in your will or the person a probate court n How much time will it take? appoints to tie up those loose ends. n Can I get help? Some states prefer the term “personal representative,” while other states appoint n My loved one just died. What an “administrator” when there is no will. should I do right now? The responsibilities are similar, although n After the funeral, what should I state laws vary on some details. do? What are the biggest n What’s the biggest mistake executors make? rewards and pitfalls of Serving as executor for a loved one is a being an executor? n How can I avoid family quarrels? way to make sure that his or her wishes are The executor is usually eligible to receive a n How do I figure out what taxes followed after death. fee under state law. For example, Wisconsin are owed? But before you agree to serve as an sets the executor’s fee at 2% of the estate; n My loved one died broke. What executor—or ask someone else to serve as the fee is often higher in states on the East should I do? executor on your behalf—it’s essential to and West Coasts. understand the executor’s responsibilities Vogel says many family members refuse to n What happens if I make a legal and the potential impact on family members accept the executor’s fee—both because mistake? and friends. they are acting out of “love or affection” and n When is an estate settled? Patricia Swanson, Extension to Families because they are named in the will, which program specialist at Iowa State University, means the executor’s fee comes out of their n My life has changed and I can’t Ames, and attorney Michael W. Vogel, inheritance. handle an executor’s responsibilities. principal and sole owner of Vogel Law What are my options? Swanson says many executors feel it is Firm Ltd., Janesville, Wis., have extensive an honor to help fulfill a loved one’s last n I don’t own much. Do I need to experience with these issues. “The wishes despite the major time commitment appoint an executor? position of executor needs to be taken very involved. seriously,” says Vogel, who concentrates n Who makes a good executor? his legal practice in the areas of estate Yet, there also is the potential for planning, probate, and trust administration. resentment among family members or “This is not a game. This is real life and friends who were not chosen for the job, there are real relationships that can be are unhappy with the will, or disapprove destroyed.”

Turning Points 2 Being a Personal Representative of the executor’s actions. There also is the supplies” and assigned a lump-sum value. n Filing individual and estate tax returns. potential for the executor to resent all of the See “How do I figure out what taxes are n Locating and paying all creditors and time spent carrying out executor’s duties. due?” for details. debts. The executor must arrange for a Other family members often don’t realize newspaper advertisement alerting creditors n Distributing proceeds to heirs. or appreciate how much time and effort it to submit claims within a specified time, Vogel says a typical will lists three to six takes to carry out this responsibility. usually four months. heirs. Some wills are considerably more “Trying to keep peace among all the family complicated, such as that of a Florida n Caring for property until the estate members is often the pitfall of serving as an woman who left her estate to her 23 nieces is settled. The executor must change executor,” Swanson says. and nephews. legal ownership of many items from the deceased’s name to the estate’s name and What are the executor’s then continue to pay mortgages, loans, How much time duties? utilities, and other obligations until assets will it take? can be sold or handed off to heirs. The executor is charged with “settling” the The number of hours involved can vary estate, which includes: n Disposing of property. This may require depending on the size of the estate, the working with real estate agents, contacting number of heirs, whether assets are n Providing an inventory of assets, potential buyers, running “for sale” ads, including real estate, bank accounts, concentrated in a small number of financial donating low-value items, or holding an stocks, and personal property. firms or scattered among many firms, family auction or garage sale, depending on the relationships, and whether you retain an n Determining the value of significant nature and value of the property. When attorney or trust firm to manage the estate. assets. The executor should ask an expert deciding how to sell things, keep in mind The task usually takes more hours right to appraise any item with a value close to or that different emotions will come into play after the death of the loved one and then more than $3,000. Low-value items, such with each avenue you take. requires attention in spurts for roughly as household goods, may be grouped in six months to a year or longer until the categories such as “hand tools” or “kitchen estate is settled. Regardless of the size of the estate, expect the time commitment to be significant. It will take longer if the My family and friends keep offering deceased was not organized, or if you are not organized. to help. Should I let them?

There are some things friends can do and some things only the executor Can I get help? should handle. You can let friends help by: Yes. The executor can hire an attorney or a firm that specializes in administering n Making calls to notify friends and family. estates or trusts—typically called a trust n Looking after—or even adopting—pets. firm—to manage administration of the estate. The executor can hire this firm n Providing basic home maintenance, such as mowing the lawn. either to provide advice or to take over n Preparing meals when out-of-town family members arrive in large management of the estate.

numbers for the funeral or memorial service. Executors sometimes can handle small n Handling other small chores that have little risk to the estate if they are estates by themselves, but most executors not completed. benefit from working with an attorney. Large estates also may require the services In contrast, only the executor should handle anything to do with legal of an accountant. You draw payments for obligations, property disposal, bookkeeping, or paperwork. While you these professional services directly from the can consult family and friends for their expertise or advice, the final estate. responsibility is yours. Consulting an attorney also is a good idea, because most people have not had experience being an executor.

Turning Points 3 Being a Personal Representative My loved one just died. a guardian if one is not named in the will. What should I do right The executor is not required to become the dependents’ guardian. You may, however, now? have to deal with pets who will need daily Some items can wait for a few days or even care and eventually new owners. a few weeks, but you, along with other n Find or obtain documents related to the family members, perhaps, must take care of estate. These documents include: some tasks as soon as possible, including: n Checkbooks n n Make arrangements for the memorial Credit card statements n service or funeral and the burial or Financial statements for investments n Safety deposit box information and cremation. These tasks are much simpler its contents if the deceased has told you what he or n Birth certificate she wants or left a file of information n Insurance policies that indicates his or her wishes. When n Stock certificates information is lacking, consult family or n Tax returns friends and aim for simplicity to minimize opportunities to offend. Verify that funds n Protect the deceased’s identity and are available to pay for these expenses, property. It’s important to find the wallet, because you’ll be held personally for example, to prevent anyone from taking responsible if you make arrangements and advantage of the deceased’s credit cards the estate cannot pay. or driver’s license. Shred unnecessary n Contact family and close friends. papers. If you need information that’s “Trying to keep Family members can help you identify on the deceased’s computer, change the friends to notify. You also should check passwords so important information is still peace among family the deceased’s address book or computer there, but protected from others. Later, e-mail list. properly dispose of the hard drive. Consider members is often the changing the locks if you’re unsure who n pitfall of serving as Prepare an obituary. The funeral home has a key, since friends and family may often helps with this task. otherwise remove items from the house executor.” n Notify sources of income of the death. without waiting for the estate to be settled. This list includes the Social Security You also may want to recruit someone to Administration, which must be informed stay in the house during the funeral to deter within a month of the date of death, as well burglars. as pension and annuity administrators. n Get copies of the death certificate. n Get a notarized letter from the court Anyone with a financial relationship with or an attorney stating that you have the the deceased will require a certified copy authority to write checks and perform other of the death certificate, so obtain 20 to financial duties on your loved one’s behalf. 30 copies. In most instances, financial You often will need this to conduct financial institutions and other companies will transactions. not help you proceed with business transactions unless you have a death n Inform agencies or employees involved certificate. It’s also important to have the in medical payments or daily care, such as a decedent’s Social Security number on hospice agency or Medicare. hand; this is the way your loved one will n Arrange for the care of others or pets be identified in many cases. The Social Security number is on the death certificate. who relied on the deceased to meet their daily needs. A court typically will handle the care of dependents and will appoint

Turning Points 4 Being a Personal Representative After the funeral, what should I do?

It’s time to figure out what the estate owns and what it owes. Your next steps should include: n Obtain an employer identification number (EIN) from the IRS (Internal Revenue Service) for the estate, which is required for the estate’s income taxes. n Open a checking account for the estate. Get carbon checks so you will have a record of every check you write. Make all purchases using these checks. by searching personal records. In addition, Transfer ownership to the estate’s name so n Start a paper trail. Every expense state laws typically require that you run you can make mortgage and property tax or interaction made on behalf of the an advertisement in a local newspaper to payments, for example. estate should have a paper record such notify creditors that they have a limited as receipts or invoices. Use a file folder amount of time—usually four months--to to store receipts and invoices as well as What is the biggest submit claims to the estate. Getting a credit other correspondence you have about the mistake executors report in the deceased’s name also can decedent to keep documents organized. identify creditors. make? n Create a list of debts. Locate all creditors n Manage assets to maintain their value. Vogel says it’s essential to ensure that who are owed money by the estate. Start all creditors and taxes are paid before distributing property. If assets are transferred to heirs before creditors are Simple Service Provides Support paid, the creditors often can force the executor to pay the estate’s debts, although When Don died at age 76, his family needed to avoid expensive payments must be limited to the total arrangements to preserve assets to support his widow, Rebecca, age 75. assets that were part of the original estate.

Don refused to plan for his death, but he did make it clear that he had “Don’t distribute assets until everything is a low opinion of funerals, according to Michelle, one of the couple’s four settled,” Vogel advises. “That’s critical.” adult children. So Don was cremated at roughly one-fourth the cost of a traditional burial. How can I avoid family

Instead of a memorial service at a funeral home, friends and family were quarrels? invited to a potluck gathering at the couple’s home on a Saturday afternoon. Communication is essential. Swanson says Michelle used Rebecca’s address book to find names and telephone numbers this communication should start when the so she could notify potential guests. The family prepared and served simple will is made. At that time, the individual refreshments, although guests brought much of the food. should explain the rationale for his or her decisions to the family, including the The gathering of roughly 75 people helped Rebecca reconnect with friends reason for any differences in the amount left at a time when she was feeling isolated and lonely. It also showed her to different children. The individual making children that a support system was in place to help Rebecca adjust to life the will also should tell the executor where without Don. final instructions and vital documents are “Mom could see and feel the proof that she has an amazing pool of people kept. to rely on,” Michelle says. “She was deeply moved and reassured.” If the decedent failed to share information

Turning Points 5 Being a Personal Representative with the family, Swanson says the executor ortheir share of the estate. can reduce dissension by continually Vogel notes that, in his practice, roughly emphasizing that it is his or her duty by 80% of executors are family members. law to make sure the loved one’s wishes But when family members already have are carried out. Keeping family difficulty getting along, it may be members informed as the better to nominate an attorney estate goes through the or a professional executor. settlement process also “Don’t distribute The estate is likely to pay can be helpful. more in fees, but you’ll save assets until Families often quarrel on misery. about issues of what is everythng is settled.” Similarly, setting up a trust “fair,” particularly when can be an invaluable gift to it comes to personal heirs. Having a trust prevents property with sentimental inheritances from having to go value. Swanson says parents through probate, which can be a can use several strategies to avoid drawn out process. A trust can help reduce this scenario, including: stress for the executor and other family n Asking each child what item is most members as well. important to them and leaving it to them in the will. How do I figure out n Providing a letter of last instructions what taxes are owed? to guide the executor. Vogel says this The executor must handle several tax letter or other informal methods—such as obligations: placing pieces of tape on the bottom of treasured assets to indicate who should n Income taxes. You must file an individual get them—is not binding on the executor tax return for the decedent to cover the unless it is expressly written into or period from Jan. 1 through the date of referenced in the will. death. Any earlier tax returns that were If the decedent failed to give instructions, not filed must be completed and any taxes the executor can reduce friction by creating due must be paid. In addition, the estate a “fair” system to distribute property. must file IRS Form 1041 for income received Swanson offers the example of having each by the estate from the date of death family member draw a number from a hat. until the estate is settled. The IRS offers Family members then choose personal more information in IRS Publication 559: items in order of the number drawn. The Survivors, Executors, and Administrators. value of the items is then deducted from n Additional IRS taxes owed by the heirs. Inheritances are subject to special taxes and credits under the federal tax code. IRS Is the executor always responsible Publication 559 also provides information for all property of the deceased? about these taxes, which are paid by the estate before an inheritance is distributed No. Property held in “joint tenancy” or assets that have a “pay on death” or to the heir. “right of survivorship,” such as IRAs (individual retirement accounts) or share n certificates/certificates of deposit, can pass directly to the surviving owner Federal estate taxes. The estate tax is without waiting for an estate to be settled. Insurance benefits also pass imposed on the property the decedent holds directly to beneficiaries without becoming part of the estate. at death and is paid by the estate. Congress allowed the estate tax to expire in 2010 but

Turning Points 6 Being a Personal Representative it is scheduled to return in 2011. If Congress well as with a copy of the death certificate. takes no action, a tax of 55% of the estate Some creditors may try to collect from you will be imposed on all estates valued at personally; be prepared to fend them off but more than $1 million in 2011 and beyond; never pay them. Your legal responsibility to however, many experts say Congress is pay ends when the assets run out. likely to act to lessen the tax burden. n State inheritance taxes. Many states What happens if I make charge inheritance taxes, which are paid a legal mistake? by each individual who inherits from the You can be sued for unpaid debts or estate; they may be dependent upon the improper distribution of assets for up to heir’s personal situation and relationship five years after the estate is closed. If you to the estate. Some states do not charge settle the estate and later discover that the this tax. I don’t own much. Do deceased had unpaid taxes, the IRS can Advance planning can help minimize the force you to personally pay the taxes up to I need to appoint an taxes that an estate owes; however, once the limit of the assets in the estate. Family executor? the individual dies, options may be limited. relationships could be affected as well. The You need an executor whenever an estate possible repercussions are one reason that is large enough to go to probate court for expert help can be invaluable. My loved one died settlement, which depends on state limits. broke. What should In Illinois, for example, estates with a value I do? When is an estate of more than $100,000 must go to probate. settled? Other states set the limit as low as $50,000. First, be careful when making funeral or An estate is considered “settled” when all burial arrangements. Unless your loved Who makes a good one prepaid these expenses, you will be the estate accounting has been completed, held personally responsible for the cost. including the payment of taxes and debts, executor? and all property has been transferred to Explore your options for reducing costs with Vogel says most of his clients name a family its new owners. You must present proof of cremation or at-home services. member—usually the eldest child—to serve these actions to the probate court, which Be aware that creditors legally can take as executor. But many states require a then declares the estate “closed.” any assets used to secure a loan, such probate bond when an executor resides out as a house or a car. Some states make of state, so it can be worthwhile to name exceptions for surviving spouses who wish My life has changed an executor who lives nearby. A probate to continue to live in a home. and I cannot handle bond is a financial instrument, similar to collateral, which acts as a safeguard The executor is not personally responsible an executor’s that the executor will handle assets for debts unless he or she co-signed a loan responsibilities. What appropriately. with the deceased, held joint accounts with are my options? the deceased, or acted illegally to remove An executor also must be a legal adult and money from the estate to protect it from If the person who asked you to be his or her a legal resident of the U.S. Finally, in some creditors. executor is still alive, notify that person as states the executor cannot be a convicted soon as possible so he or she can change felon. When some funds are available but not the will. If the individual is already dead, enough to cover all debts, consult state Other factors to consider include: you can decline and the duty will pass to probate laws for a priority list of creditors. the deceased’s second choice of executor. If n Is the person good at managing money? Any assets remaining in the estate should there is none, the probate court will appoint n Does the person keep good records? be allocated to creditors in order of the list. another executor. n Will he or she communicate well with Once the money is gone you should contact other family members? any remaining creditors with a letter n Is the person trustworthy? stating that the estate has no assets, as n Is he or she willing to take on this responsibility?

Turning Points 7 Being a Personal Representative Useful resources

Choose the Right Executor, Forbes.com

Clearing Out Dad’s house, MSN Money

Estate Planning, a publication of Iowa State University Extension

FAQs on Being the Executor of a Will, findlaw.com

IRS Publication 559: Survivors, Executors and Administrators

Nolo.com, a Web site offering free legal information

7 Ways to Protect Your Parent’s Good Name, Kiplinger.com

Should You Be the Executor? Kiplinger.com

Steps you must take when someone dies, MSN Money

What can you get for Mom’s stuff, MSN Money

When your parents die broke, MSN Money

Who Gets Grandma’s Yellow Pie Plate

Turning Points 8 Being a Personal Representative

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