The Essential Executor's Handbook: A Quick and Handy Resource for Dealing With Wills, Trusts, Benefits, and Probate (2016)
Meet Your Team
In Chapter 1, you learned about the four kinds of estates: the Probate Estate, the Contract Estate, the Knick-Knack Estate, and the Trust Estate. Now it is time to meet your team. They are (in no particular order): lawyer, accountant, appraiser, realtor, auctioneer, insurance agent, banker, broker, assorted bureaucrats, and the people who haul away a lifetime’s worth of junk. Some of your team members will help you with all four estates, and some will take charge of only one. In later chapters, you will learn the job and responsibilities of each team member in detail. The purpose of this chapter, however, is to give you an overview—a chance to meet your team.
The law is everywhere and effects almost every aspect of our lives. This is especially true in the case of settling estates. While lawyers may not be realtors, they know property law. While lawyers may not be accountants, they know tax law. And while lawyers may not be bankers, they know banking law—in particular, the Uniform Commercial Code. And so it goes with each member of the team. As such, one of the lawyer’s principal responsibilities is to coordinate the efforts of the team as a whole and prevent one member from doing the job of another. For example, if the lawyer is going to prepare the Federal Estate Tax return (as many do), it is important that the accountant be aware of this so that it is not prepared twice.
In addition to coordinating the team, it is the lawyer who guides you through a court proceeding known as probate: gaining access to assets that were held in the decedent’s name alone. And finally, the lawyer acts as negotiator, helping you deflect complaints from and among your decedent’s beneficiaries as well as settle the claims of your decedent’s creditors (usually at a substantial discount).
The accountant’s principal job is as tax preparer. The accountant will be responsible for preparing the decedent’s final tax return as well as preparing the annual tax returns of both the Probate and Trust estates. The accountant will also act as counsel. Questions such as whether it is a good idea to distribute income to beneficiaries or what is the tax effect of selling property are directed to your accountant.
The accountant also serves as liaison with the Internal Revenue Service. Should you forget to file a tax return or should you fail to pay the tax, the IRS will impose substantial penalties on the Probate and Trust estates. It is the accountant who will negotiate a reduction in these penalties. Many times, an experienced accountant can eliminate the penalties altogether.
There are two kinds of appraisers: one for real estate and one for personal property (e.g., jewelry). The real estate appraiser is necessary for two reasons. First, you will need to know what your real estate is worth so that you will not waste time asking too much for it. On the flip side, you don’t want to ask too little or you will become the target of vengeful beneficiaries. Furthermore, by providing a high value that the IRS will accept, the appraiser makes it possible to reduce capital gain tax when you sell the property.
The appraiser of personal property ensures that the knick-knacks are distributed fairly. For example, I know of a case where the executor divided two diamond rings between two sisters. The rings appeared to contain identical stones but, in reality, one stone was diamond while the other was cubic zirconium. The executor, in that case, opened himself to a lawsuit by the cubic zirconium sister.
For most people, real estate is the most valuable asset they will ever own. And so it follows that the decedent’s real estate is the most valuable asset in your estates. Therefore, an excellent realtor is an absolute necessity. The realtor will take responsibility for putting the home on the market (i.e., listing), promoting the sale of the home (i.e., marketing), accepting or declining offers for you at your direction (i.e., contracting), and completing the sale of the home (i.e., closing).
Realtors are also expert in the daunting number of regulations that govern the sale of real estate these days. Your realtor will guide you through the maze of regulations, as it is critical that you comply with all of them. Failure to comply will result in some pretty stiff penalties. Not to put too fine a point on it, but executors who attempt to sell without a realtor may as well just stand in front of an oncoming train.
The auctioneer’s job is to tell you which of the stuff lying around the decedent’s home is worth something and can therefore be auctioned and which stuff lying about the decedent’s home is just trash. In short, the auctioneer forces you to accept that things that may have sentimental value for some are, in fact, valueless to everyone else.
Having sifted the assets from the refuse, most auctioneers will then hold both in-person and online auctions. As a result, you receive the proceeds very quickly. The auctioneer’s value then is in speed and efficiency. Your only alternative is a yard sale.
The Insurance Agent
With regard to the decedent’s life insurance, your insurance agent will most likely be the decedent’s insurance agent. While it is certainly possible to file a claim with the insurance company without the agent’s assistance, why would you want to? Completing claim forms can be time-consuming, especially where there are multiple beneficiaries. The agent will usually do this for you at no charge. You have a million other things to keep track of. Take help when you can get it.
However, life insurance is not the only insurance that should concern you. You are also responsible for the safety of the estate assets themselves. Accordingly, it is imperative that you maintain or replace insurance on real estate, vehicles, and valuable personal property. If you like the decedent’s agent, there is no reason to change horses, as it were. But if not, then you have a duty to find an agent you trust will provide the proper coverage.
Probate Estates and Trust Estates need checking accounts just like you or me. A banker familiar with estate work will be able to set one up for you in no time at all. All that is needed is a death certificate and a Federal Identification Number (supplied by your accountant).
A lesser-known function of the banker in estate work is financing. Since death is an automatic default on the decedent’s mortgage, a mortgage company can insist that the entire mortgage balance is due immediately. Your banker can be invaluable in securing a new mortgage, thereby allowing you the time to find a buyer for the property. Additionally, if you are short on liquid assets (e.g., cash), your banker may be able to provide a line of credit secured by estate assets.
Whether you are an executor, a trustee, or both, your generic title is a fiduciary. And as a fiduciary, you have many duties. One of the most important of these is the duty to invest. While the estate settling process grinds along, you can’t simply stuff assets in a mattress. Instead, you must depend on your broker to convert unproductive assets, such as cash, into secure investments.
Since many people use multiple brokered accounts, a good broker will also be able to consolidate a decedent’s hodge-podge of investments into one account. In this way, you have less paper to deal with and your accountant will have far fewer statements to review come tax time.
Although you don’t get to choose your bureaucrats, for good or ill, they are part of the team. If you want to change title to the decedent’s car, there will be someone at the Department of Motor Vehicles telling you how it is done. If you need the deed to the decedent’s home, you will be talking to an employee at the county land records office. And if the decedent’s estate is audited, you will be coming face to face with an IRS auditor.
That being said, you may find that bureaucrats are people too and many of them genuinely want to help you. In fact, depending on how you ask, you may even get them to bend the rules from time to time. So it is probably best to start brushing up on your people skills.
Your hauler’s job is just that: to haul away furniture, broken appliances, broken china, and whatever else the decedent had been using to make do. Your hauler needs to be efficient and thorough—and most are. I once saw a two-man hauling team remove 60 years of useless stuff from a four-bedroom split-level home in just over three hours.
In my opinion, this is one of the most valuable members of your team. As long as you’re not a hoarder, you will experience sheer delight at watching someone else haul out what is, literally, tons of worthless stuff from the decedent’s home. And since it is impossible to sell a house with 30 years of National Geographic piled up in a corner, your hauler is not only valuable, he is indispensable.
And that is your team. You may not need all of them, but chances are very good that you will need most of them—especially if the decedent owned real estate. However, you should never just break open the phone book and pick your team at random. Instead, you should use a service similar to Angie’s List or the Better Business Bureau to ensure that there have not been multiple complaints filed. That being said, you should realize that there will always be one or two complaints because there will always be people who are never satisfied. In short, you will need to exercise good judgment in picking your team. Remember who is ultimately responsible for absolutely everything. That’s right. It’s you.
Things to Do
1. Contact the licensing agencies for the professionals (e.g., lawyer, accountant, appraiser, and realtor) to get referrals for those members of your team.
2. Select a review and referral service such as Angie’s List to get referrals for the other members of your team.