The emotional trauma brought on by the death of a close family member often is accompanied by bewilderment about the financial and legal steps the survivors must take. The spouse who passed away may have handled all of the couple’s finances. Or perhaps a child must begin taking care of probating an estate about which he or she knows little. And this task may come on top of commitments to family and work that can’t be set aside. Finally, the estate itself may be in disarray or scattered among many accounts.
Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor or personal representative in the deceased family member’s will. Matters can be a bit more complicated in the absence of a will, because it may not be clear who has the responsibility of carrying out these steps.
First, secure the tangible property. This means anything you can touch, such as silverware, dishes, furniture, or artwork. You will need to determine accurate values of each piece of property, which may require appraisals, and then 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 adverse repercussions. It’s more important that you and your family have time to grieve. Financial matters can wait.
When you’re ready, but not a day sooner, meet with an attorney to review the steps necessary to administer the deceased’s estate. Bring as much information as possible about finances, taxes and debts. Don’t worry about putting the papers in order first; the lawyer will have experience in organizing and understanding confusing financial statements.
The exact rules of estate administration differ from state to state. In general, they include the following steps:
- Filing the will and petition at the probate court in order to be appointed executor or personal representative. In the absence of a will, heirs must petition the court to be appointed “administrator” of the estate.
- Marshaling, or collecting, the 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.
- Paying bills and taxes. If an estate tax return is needed—generally if the estate exceeds $1 million in value—it 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.
- Filing tax returns. You must also file a final income tax return for the decedent and, if the estate holds any assets and earns interest or dividends, an income tax return for the estate. If the estate does earn income during the administration process, it will have to obtain its own tax identification number in order to keep track of such earnings.
- Distributing property to the heirs and legatees. Generally, executors do not pay out all of the estate assets until the period runs out for creditors to make claims, which can be as long as a year after the date of death. But once the executor understands the estate and the likely claims, he or she can distribute most of the assets, retaining a reserve for unanticipated claims and the costs of closing out the estate.
- Filing a final account. The executor must file an account with the probate court listing any income to the estate since the date of death and all expenses and estate distributions. Once the court approves this final account, the executor can distribute whatever is left in the closing reserve, and finish his or her work.