Settling an Estate

ARE YOU NAMED AS executor of an estate? Here are some steps you’ll likely need to take:

Hire an attorney. Don’t feel compelled to use the deceased’s lawyer, especially if he or she doesn’t specialize in settling estates. A lawyer might charge a flat fee, a percentage of the estate’s gross value or by the hour. Try to avoid an hourly fee, because it’s hard to know what you will end up getting charged.

If the deceased has investments in a regular taxable account, ask the attorney whether you should sell the assets. That may be an especially smart move if the deceased’s portfolio consists of large investments in just a few stocks. Thanks to the step-up in cost basis upon death, the capital gains tax bill should be little or nothing. You may also want to diversify the deceased’s retirement account if the investments don’t appear prudent.

Gather financial papers. Find the latest statements from the deceased’s bank, credit cards, mortgage companies, mutual fund companies, brokerage firms, insurance companies and any other financial firms the deceased had dealings with. See if there’s a safe-deposit box. Also study the deceased’s most recent tax return and see what arrives in the mail. That way, you can make sure you’ve located all assets.

Check with financial advisors. If the deceased used a broker, financial planner, insurance agent or accountant, these folks may be helpful in locating assets and settling the estate. Ask the insurance agent about any life insurance. Talk to the accountant about filing final federal and state income tax returns for the deceased and, if necessary, federal and state estate tax returns. Even if federal estate taxes aren’t owed, spouses may want to file a federal estate tax return to claim the right to use the deceased spouse’s unused estate tax exclusion.

Call current or former employers. If the deceased was still working, he or she may be due a final paycheck and a payout on employer-provided life insurance. Even if retired, the deceased may have 401(k) assets at an old employer, or heirs might be eligible for survivor benefits from the pension plan.

Contact Social Security. You’ll need to stop benefits and see about any survivor benefits. If the deceased served in the armed forces, also call the Department of Veterans Affairs.

Think before you spend. If you’re the executor, you are likely also one of the estate’s beneficiaries. It can take a few months before you receive a distribution from the estate. That’s good news—because it will give you time to contemplate what to do with the money. This could be the windfall that puts you on track for retirement, so think twice before going on a spending spree.

As executor, you might want a quick education on estate planning. For that, check out the chapter on giving.

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Articles: Unsettling Experience, Left With the Details, Follow Those Values, All in the Execution, Execution Matters, Take It Slow and Contain Yourself