As we age, the prospect of dealing with our parents’ end-of-life issues becomes increasingly real. One of the most significant responsibilities that can fall to an adult child is serving as an executor for their parents’ estate. While it may be considered an honor to be asked to be an executor (also known as a personal representative), it can be a daunting task, both emotionally and practically. Here are some of the responsibilities and critical issues that you should consider when serving as the executor of an estate.
Gather important information
One of the first things you will need to do as an executor is to gather important documents and information. This includes things like their will, insurance policies, financial statements, business interests, and deeds to any property they may own. If they have a safe deposit box and you don’t already have authorized access, you may need to go through a bank’s process which can take some time. You will also need to take inventory of any personal property in the estate, such as automobiles, boats, furniture, jewelry, or other valuables.
Manage the Estate
Once you have gathered all the necessary information, you will need to begin managing the assets of the estate. This includes everything from safeguarding the assets of the estate, to paying off any debts and liabilities, and distributing assets to beneficiaries in accordance to the Will.
If there is a home, you may need to keep paying property tax, insurance, and utilities to keep it in good order while the process of settling the estate is ongoing. You want to avoid inadvertently creating more fees or fines from a late payment.
It’s very important to be organized and diligent in keeping track of all financial transactions related to the estate.
Review Financial Impacts
A critical financial issue to consider as an executor is the tax implications of your parent’s estate. You will need to determine if any estate taxes are due and, if so, make sure they are paid in a timely manner. You should also consider any income taxes that may be due on income earned by the estate or your parent before their passing.
It is also important to consider a step-up in cost basis when it comes to any real estate or investments owned by the estate. When a person dies, the cost basis of their assets is “stepped up” to the fair market value at the time of their death. This can have significant tax implications when it comes to the sale of property by heirs.
Review Non-Financial Impacts
In addition to financial issues, there are also non-financial issues to consider when serving as your parent’s executor.
Manage Expectations of Family Members: It is not uncommon for family members to have different ideas about how assets should be distributed or how the estate should be managed. Discussing important decisions with beneficiaries can help prevent estate disputes from arising. As the executor, it’s important to be sensitive to differing opinions while also making sure that the wishes of your parent, as outlined in their will or trust, are followed.
Get Professional Advice: We highly recommend that you coordinate with professional advisors, such as attorneys, accountants, and financial advisors, to ensure that all aspects of the estate are managed properly. This includes making sure that all legal requirements are met, all taxes are paid, and all assets are distributed according to your parent’s wishes.
Keep Accurate & Complete Records: You will need to keep thorough records of your financial dealings with the estate. An executor who cannot account for all assets, receipts and disbursements, may be personally liable for any losses or assets not properly accounted for in respect of the estate.
Take Care of Yourself: Finally, it is important to be mindful of your own emotional well-being when serving as your parent’s executor. Dealing with the loss of a loved one is never easy, and being an executor can be a time-consuming and emotionally draining task. Make sure to take care of yourself and seek support from family and friends when needed.
Lastly, items might come up later on for things that were in process at the end of life, so it might be worth checking into your state’s lost property website near the end of the estate settlement process, to make sure refunds or cancelled items aren’t sitting around unclaimed.
By being organized, diligent, and sensitive to the needs of all involved, you can navigate the process successfully.
If you have questions or concerns about caring for your aging parents, please reach out to your Heritage Financial Wealth Management team.
Here is a checklist of some things to consider before your parents pass: What Issues Should I Consider For My Aging Parents.