How to settle your will
When a loved one passes away, you may be left in charge of their affairs. Personal tasks like notifying family and making funeral arrangements, legal matters such as gathering records and reporting the information to beneficiaries, and financial affairs such as distributing assets and paying taxes must be completed. Knowing what to do can keep you from feeling overwhelmed during such a difficult time.
Months 1 through 3
Review the will and gather documentation. Examine the will and all trust documents carefully to ensure you understand all instructions, terms, and conditions. Pay funeral expenses and other urgent debts, and gather documents such as the death certificate, life insurance policies, birth certificates, marriage certificates, and real estate titles. Gather financial records for the previous three years, such as a bank, brokerage, and retirement account statements, and handle creditor claims.
File the Will and Probate Petition: Even if the estate is held in trust and thus does not require formal probate, most states require the executor to file the will in probate court. If needed, the court schedules a hearing within 30 days to determine the will's validity and officially appoint an executor. The hearing must be announced to all parties who are interested.
Secure Personal Property: Home, boat, furniture, antiques, artwork, clothing, photographs, and jewelry, as well as personal documents such as journals, diaries, and correspondence, should all be secured and protected. It is critical to keep all items, including those promised to a child or relative, until the estate has been properly settled.
Appraise and Insure Valuable Assets: After identifying and locating all estate holdings, consult with appraisers and insurance specialists to ensure assets are properly valued and insured
Cancel Personal Accounts: Cancel personal accounts, subscriptions, and memberships.
Months 3 through 6
Gather financial assets. Transfer assets from IRA/401(k) accounts, brokerage and savings accounts, and financial interests in partnerships or other businesses into the estate account.
Determine Cash Needs: Examine estate holdings and decide what to sell to cover estate taxes and other expenses.
Months 6 through 9
Distribute tangible items to beneficiaries: Personal property should be distributed under the terms of the will or trust document. Because surviving family members frequently have strong emotional attachments to things of sentimental value, this area requires the diplomacy of an experienced executor.
Remove Estate Tax Lien: Obtain a release of the federal estate tax lien that the IRS attaches to all real assets before selling any property or assets. When the IRS releases the lien, the buyer can take possession of the property. All creditor claims should be resolved by the sixth month.
Determine Location of Assets and Secure "Date of Death Values": Taking an inventory of the entire estate and calculating the value of all assets, including investment accounts, business interests, insurance policies, bank deposit boxes, and intellectual property is one of the most challenging aspects of the executor's job (patents, licenses, and copyrights). Taking possession of property outside of the United States can be especially difficult.
Submit Probate Inventory: To probate court, submit a detailed inventory of all real estate, personal property, bank accounts, and debts.
Months 9 through 12
Submit tax returns and other IRS forms and make partial distributions: Return the estate tax and distribute financial assets to beneficiaries under the will's instructions. This could mean an outright distribution (transfer of title) or distributing property to a trust and distributing it over time. Maintain reserves, usually at least 20% of the total estate value, to cover estate expenses until the estate is closed.
Federal Estate Tax: Within nine months, prepare and submit a federal estate tax return. The IRS typically takes another six to nine months to process the return.
State-Level Estate Taxes: Many states now levy their estate or inheritance taxes, including Connecticut, Delaware, Massachusetts, Maine, and New York, as well as the District of Columbia. Rates can reach as high as 20%.
Information about Beneficiaries: Provide the IRS with information about all beneficiaries and the property they inherited thirty days after filing the federal estate tax return.
Gift and Generation-Skipping Transfer Tax: Fill out a generation-skipping transfer (GST) tax return and a gift tax return if necessary. It is frequently advised that family members use their GST tax exemption to create Delaware dynasty trusts that can last in perpetuity to ensure that future distributions to grandchildren and other distant descendants are not subject to transfer taxes.
Estate and Income Tax: Estates and irrevocable trusts are treated as separate taxpayers. This necessitates obtaining separate tax identification numbers and filing fiduciary income tax returns. These are specialized returns that require the services of a CPA who is familiar with the filings.
Final Individual Income Taxes: The estate or trust must file tax returns. The executor or successor trustee ensures that the decedent's final individual returns are filed and deals with any issues with previous filings.
Months 18 through 36
Make your last contributions.
Obtain closing letters from the IRS.
Pay any outstanding bills.
Distribute any reserves held pending the resolution of contingencies.
Complete and submit the final accounting.
Complete final distributions
Submit a petition for the release of executor responsibilities.