What you need to know as the executor of an estate

Handling financial affairs of a loved one’s estate requires organizational money smarts. These helpful tips have laid the groundwork to make the process easier for yourself.

Tags: Accounts, Life events, Planning
Published: June 19, 2019

The death of a loved one is devastating and stressful and can feel overwhelming if you’re the executor of their will. Being responsible for the deceased’s property and carrying out the directions in their will can also be complicated. However, there are steps to make the process easier for yourself, while still carrying out your loved one’s last wishes.


You are entitled to an attorney

It’s a good first step to consider contacting an attorney to learn more about your duties. An attorney can also help assist with the executor’s duties. Even if the estate of the person who has died isn’t large or if there aren’t significant debts, an attorney can make the process easier. You may have to contact an attorney before even being appointed the executor via the probate process. This can be dependent on state laws and the details laid out in the will.


You must act in the financial interest of the person who has passed away

Know that as the executor of an estate, you have a binding legal obligation to act in the financial interest of the person who has died (in legal terms, this person may also be referred to as the decedent). And you should fulfill the desires expressed in the will to the best of your ability. It’s also your responsibility to notify creditors, banks and other entities of the death. This includes cancelling credit cards and recurring payments or subscriptions. If your loved one was collecting Social Security benefits, contact the Social Security Administration.

You’ll need to figure out on a case-by-case basis how creditors and debt collectors intend to move forward. Your priority should be finding out what the estate owes to whom, and when it needs to be paid. If the estate cannot pay all its debts in full, you’ll need to negotiate debt forgiveness with creditors. A probate attorney can be especially helpful here.


Securing and appraising assets before they are distributed

It’s a common misconception that heirs immediately become the rightful owners of the property and assets willed to them. However, the executor is responsible for ensuring that the estates’ debts and creditors are paid before any other distribution happens. It’s ideal to not sell property specifically bequeathed to someone. Even so, some valuable items may need to be sold to keep the estate solvent. If distributions are made before all estate debts are settled, you could be held personally liable for coming up short.


Pay the debts, bills and taxes owed by the estate

It’s advisable to open a separate bank account for the estate’s funds that you can use to make these payments. This allows for the clearest possible documentation of your transactions made as the executor. Gather all the liquid assets possible into this fund. Ensure that creditors, bills and taxes are paid in full before money in the account is put toward trusts or distributions.

An important thing to note is that an estate is a taxpaying entity separate from the decedent. Accordingly, you will need to acquire a new tax identification number for the estate from the IRS. The key tax forms to understand are Forms 1041, 709 and 706. Form 56 is how you’ll let the IRS know that you are the fiduciary authority for the estate.


Contact the beneficiaries of the will and keep them in the loop regarding your progress

After completing most or all of the financial business, you can start distributing the remainder of the estate’s property and funds. Do so as described in the will. Keep paper receipts of every single transaction you make before this point. Also know the estate will typically pay for funeral expenses. Check to see whether you may be entitled to some compensation for your work as executor.

Any payments that are going to you or someone related to you should be carefully documented to avoid any misunderstandings.


If the will calls for establishing a trust fund, make sure a professional is handling that money

A skilled accountant can make sure the estate’s money is paid out in a way that will incur fewer taxes. They can also make sure to keep a trust solvent for a long time. Distributing money over time will mean you need to continue filling out taxes for the estate until the trust dissolves.


Close the estate

When all the assets have been distributed and financial matters are settled, you’ll need to fill out another Form 56. This will inform the IRS that you are no longer the fiduciary for the estate.

Being named an executor of an estate can definitely be overwhelming. At a time when you’re grieving, you’re called on to handle a lot of duties. But you are not alone. There are plenty of people and resources to help you along the way and, ultimately, to help honor your loved one’s wishes.


For more information on things you may need to know if you’re settling the financial affairs of a loved one who has passed away, find more resources here