As published in the October 2018 MACPA’S Statement
By: Maurice Offit
Everyone prepares lists – grocery lists, to-do lists and the lists that most spouses dread – the “honey do” list. But, the one list that no one seems to make is the Estate Administration List.
The “Estate Administration Checklist” sets forth the steps that need to be taken to ensure that an estate is administered in a professional and efficient manner. It’s a list that spouses and descendants of a decedent have a hard time reviewing, as they’re struggling with the loss of a loved one and need time to grieve. But, advisors find the list to be indispensable as it carefully sets forth each item that needs to be addressed in the course of administering the client’s estate.
Most estate administration checklists divide the administration of the estate into the following categories:
Locating the original of the decedent’s Will. The original of the Will must be filed with the Court at the time that the Estate is opened. Clients are, therefore, advised to place their Wills in a safe place (i.e. a safety deposit box, a fireproof cabinet, or the courthouse safe). Nonetheless, from time to time, the original Will can’t be located. If this occurs, a photocopy of the Will can be filed with the Court. But, the photocopy of the Will won’t be admitted to probate until there has been a hearing before the Court and the Court is persuaded that the photocopy of the Will is a true and correct copy of the original.
Explaining the terms of the decedent’s Will to the beneficiaries of the decedent’s estate. Wills can be long and complicated (especially if the Wills establish trusts). Practitioners, therefore, rarely “read” the Will to the beneficiaries. Rather, they typically provide the beneficiaries with (i) a copy of the Will, and (ii) charts which illustrate how the estate will be distributed.
Beneficiaries, for the most part, aren’t very interested in the details of the Will. Rather each beneficiary, as a general rule, only wants two questions to be answered – “how much will I inherit” and “when will the inheritance be paid.”
Obtaining a list of the assets that the decedent owned at time of death. Clients should ideally make a list of the assets that they own, how the assets are titled and what the assets are worth. Unfortunately, this rarely occurs. As a result, practitioners are often required to examine documents (like the decedent’s income tax return) in an effort to discover the assets that a decedent owned. Furthermore, they review the mail the decedent receives after the date of death and pay particular attention to bank statements, brokerage statements, life insurance premium notices, and real estate tax bills. Furthermore, if the decedent’s user id and passwords are known, access is obtained to the decedent’s electronic files.
Determining the value of the decedent’s assets as of the date of death. Certain assets (like bank accounts and marketable securities) are easy to value as of the date of the decedent’s death. But, other assets (i.e. real estate, business interests, etc.) need to be professionally appraised. A number of issues arise when the decedent’s assets are professionally appraised as practitioners are called upon to give advice on the following: (i) who should be engaged to prepare the appraisal; (ii) should more than one appraisal be obtained, and (iii) should discounts (for a minority interest and/or lack of marketability) be taken into account in valuing the decedent’s interest in the asset being appraised.
Determining if the estate has enough liquidity to pay the decedent’s liabilities, expenses of administration and estate taxes. Liquidity is a key component to an estate being smoothly and efficiently administered. If the estate lacks sufficient liquidity to pay administration expenses, debts, and taxes, arrangements often have to be made to borrow money to pay the obligations of the estate as they come due.
Paying any taxes that may be due as a result of the decedent’s death. Estate taxes are due to be paid nine months after the decedent’s death of death, but an automatic six-month extension can be obtained. Federal estate taxes come into play if the value of the decedent’s assets, as of the date of death, is in excess of the federal estate tax exclusion amount. In contrast, State estate taxes are only paid by the estates of decedents who reside in a jurisdiction that has an estate tax. Currently, 33 States have no estate tax or inheritance tax.
Distributing the estate in accordance with the terms of the decedent’s Will. If the decedent’s assets consist of cash only, no issues arise in the distribution of the estate. But, a host of issues arise if the estate consists of real estate, marketable securities, tangible personal property, business interests, etc. and practitioners are often called upon to make recommendations to resolve disputes that relate to the manner in which the decedent’s estate will be distributed.
LEARN MORE AT THE 2018 PFP CONFERENCE
Maurice Offit will examine “The Estate Administration Checklist” in detail during a session at the 33rd annual Personal Financial Planning Conference, scheduled for Oct. 23 at the Sheraton Baltimore North in Towson. For details and to register, visit MACPA.org/PFP.
If you have any questions or would like to learn more about this topic, please contact Maurice Offit at firstname.lastname@example.org or 301.575.0308
ABOUT MAURICE OFFIT
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Maurice Offit is an estate planning and asset protection planning attorney. Mr. Offit counsels a large number of clients who share an interest in minimizing estate taxes and protecting their assets from the claims of creditors.
Mr. Offit has more than thirty years of experience with a focus on estate planning, estate and trust administration, and asset protection planning for his clients. While no two plans are exactly alike, Mr. Offit makes sure that they have one thing in common – they meet with the client’s satisfaction and approval.
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