When a loved one passes away, especially if their passing is unexpected, family members are often left bewildered and overwhelmed by the financial and legal steps that need to be taken to administer the decedent’s estate. If, for example, your spouse passed away and they handled all of your finances, you could be feeling anxious and stressed out over how to move forward and even locate rudimentary financial and accounting documents. Another issue that presents serious challenges to survivors is when the estate is in disarray or scattered among many accounts, which is not unusual.
The information below provide a general road map of the steps the surviving family members should consider taking after the death of a loved one. These responsibilities ultimately fall on whoever was appointed executor or personal representative in the decedent’s will. First and foremost, make sure to secure any tangible property. This means any property you can touch, such as silverware, dishes, furniture, and/or artwork. There will need to be a valuation of each piece of property, which may require appraisals. Later, you will distribute the property as the deceased directed. If property is passed around to family members before you have the opportunity to take an inventory, this will become a difficult, if not impossible, task. Of course, this does not apply to gifts the deceased may have made during life, which will not be part of his or her estate.
Second, take your time. You do not need to take any other steps immediately. While bills do need to be paid, they can wait a month or two without major adverse repercussions.
General Overview of the Probate Process
Probate is the process by which a deceased person’s property (the “estate”) is passed to his or her heirs and legatees (people named in the will). Strictly speaking, “probate” only includes property owned by the deceased in his or her individual name, not joint property, living trusts, life insurance or retirement accounts that pass automatically at death. But the term is often used to encompass the entire estate, including both probate and non-probate property. While the legal process, supervised by the probate court, usually takes about a year, substantial distributions from the estate can be made in the interim.
Disclaimer – The exact rules of estate administration differ from state to state, which is why you should consult with an experienced trust and estate lawyer in your area.
Here is a general overview of the probate process:
1. File the decedent’s will and petition in the applicable probate court to be appointed executor or personal representative. In the absence of a will, next of kin must petition the court to be appointed “administrator” of the estate. In many states in the absence of a will, not only family but any “interested party,” including creditors, may be appointed.
2. Collect the relevant assets. This means that you have to find out everything the deceased owned. You need to file a list, known as an “inventory,” with the probate court. It’s generally best to consolidate all the estate funds to the extent possible. Bills and bequests should be paid from a single checking account, either one you establish or one set up by your attorney, so that you can keep track of all expenditures. The account needs to be a new account in the name of the estate, not the continuation of an account previously owned by the decedent.
3. Paying bills and taxes. A federal estate tax return generally must be filed if the estate exceeds the estate tax exemption equivalent applying in the year when the individual died. Many states have lower taxation thresholds. The return must be filed within nine months of the date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply.