The death of a loved one brings forth emotions that defy description. But if you are appointed executor (sometimes referred to as personal representative) of the individual’s estate, you carry an additional level of stress. Not only have you suffered a personal loss, but you also have the responsibility of ensuring the intent of your loved one is carried out correctly. Beneficiaries will look to you for answers and to take care of “the formalities.”

What are those formalities, and what is the job of an executor? This article serves as a general guide to some of the typical responsibilities involved in an estate administration to help organize your thoughts and, by itemizing tasks, make the administration process more manageable.¹

In the immediate term

• Arrange for your loved one’s funeral and memorial services. Ideally, his or her preferences would be recorded or discussed in advance. Funeral and related expenses are considered an expense of the estate, so if the services occur prior to having access to estate funds, out-of-pocket expenses can be reimbursed by the estate. Keep all receipts since the funeral expenses are deductible for estate tax purposes.
• As executor, you are responsible for safeguarding estate assets from the outset. If the decedent’s assets include a home or other property that is now unoccupied, make sure it is secured and protected. For example, this includes making sure the door is locked, seeing that the insurance coverage is updated to include the estate as policy owner and, when appropriate, hiring a property manager.
• A very important step to being legally recognized as an executor is to probate the decedent’s will. While you can generally accomplish this step without hiring an attorney, this is a good time to consider doing so. If you do, the attorney will arrange for the probate of the will. If you choose not to hire an attorney, in most states you will need to make an appointment, depending on where your loved one lived, with either the Surrogate office or Register of Wills in the county in which they were domiciled. The Surrogate or Register of Wills can advise about the information and forms needed, but in all instances you will need to present the original will and original death certificate, and pay a fee. At the appointment you will be asked to swear an oath that you will properly administer the estate by collecting assets, paying bills and taxes and eventually distributing the estate as directed in the will.
• Once the probate process is complete, you will receive, in all states, “short certificates” that evidence your appointment as executor and enable you to deal with banks, brokers and other organizations to collect, sell and distribute assets. After being appointed, one of the first steps is to open a bank account for the estate. This will require you first to obtain a tax identification number, which you can do via the IRS website. Good recordkeeping is paramount, as you will need to reconcile all estate bank transactions for filing tax returns and closing the estate when you are finished.

In the near term

• Deadlines for giving beneficiaries and potential creditors notice vary depending on where the decedent lived, but typically you will need to notify the Social Security Administration, the beneficiaries under the will, potential heirs of the decedent and others of the death and your appointment as executor for the estate. In some states, you will be required to advertise your appointment as executor in a local newspaper. Other early responsibilities include arranging to forward the decedent’s mail and to identify, collect and inventory estate assets, as well as identifying liabilities. An executor should also review whether assets should be held or sold, which may be influenced by whether cash will be needed to pay inheritance and estate taxes.
• For instance, if the estate is being administered in Pennsylvania, a payment of Pennsylvania inheritance tax made within 90 days of the date of death will result in the estate receiving a 5% discount on the amount of tax paid. This can represent substantial savings.
• If the estate includes real estate, partnerships, business interests, art or other hard-to-value assets, you will need to obtain appraisals of those assets, which will require hiring experts specializing in the valuation of the particular asset. Remember, if a federal estate tax return is required, these appraisals will need to withstand IRS scrutiny.

In the long term

• Federal and state inheritance and estate tax returns are generally due within nine months of date of death, but state filing deadlines will need to be determined. A six-month extension to file a return may be available, but approximate tax due will need to be paid by the original tax filing deadline. In certain jurisdictions, if no state inheritance tax is due, tax waivers may be requested to permit the executor to sell and transfer assets. A final lifetime income tax return will be due by April 15 of the year following the date of death. The estate becomes its own taxpayer and will have to report income and expenses on an estate income tax return (Form 1041).
• Four months after filing a federal estate tax return, you may request a closing letter from the IRS. The distribution of estate assets can occur once the inheritance and estate taxes have been paid and a closing letter is received. As a final matter before distribution, you, as executor, should be paid for your work.² Payment to you should be considered in preparation of the tax returns since it is also a deductible expense of the estate. When an executor is paid a commission, that commission will be considered taxable income and will need to be reported on the executor’s income tax return in the year of payment.
• When all aspects of the administration have been completed, the executor will need to decide whether to close the administration of the estate by either a formal or informal method. (In most states, the executor/personal representative will have that option.) The formal method is to prepare and file with the Court a petition and an accounting setting forth the estate’s transactions by which the executor asks for the Court’s approval of the administration process. This method can be expensive and slow. The most often used and less formal method is to have counsel for the estate prepare an agreement, often referred to as a Receipt, Release, Indemnification and Refunding Agreement, which is circulated to the beneficiaries for their review and signature. By signing this agreement, the beneficiaries ratify that the executor has properly administered the estate. In both cases, the executor prepares a schedule of distribution stating the assets to be distributed and who is receiving those assets. Finally, once the assets have been fully distributed, the estate administration can be closed, and final federal and state income tax returns can be filed. In many states, a notice of the end of the administration will need to be filed in the county where the will was probated.

Conclusion

The administration of any estate is an enormous task. For this reason, a trusted professional advisor may be named in a will to serve as executor, or when not formally named, the family can nonetheless seek the help of the advisor to work with them as agent for the executor. In either capacity, the professional advisor can take on or assist with many of the burdens of overseeing the estate administration, enlisting the assistance of investment advisors, tax professionals and other experts.

For more information about how Glenmede can help with an estate administration, contact Thom Melcher, Regional Director, at Thomas.P.Melcher@glenmede.com or at 215-419-6027.