Many people have heard how much faster and easier it is to administer a trust than a will. They often hear this from the Estate Planning Attorney who is preparing their estate plan. This may not be true, as an Estate Administration, whether a trust or will, often occurs during one of the most emotionally taxing periods in a person’s life, the death or incapacity of a loved one. In this article, I will attempt to explain why it is necessary to go through an organized and systemic Estate Administration process. In this article, I will break this process into steps. These steps may be more involved than described in this article and as such you should discuss your Estate Administration with a qualified attorney.
Step One: Gathering Information about the Estate
The first, and perhaps most important step, is to collect the information about the Estate that you are administering. You must gather the entire estate plan, including the Will, Trust, Health Care documents and death certificates. These documents will inform you who is going to be responsible for the next steps and what those step are. These documents name the Trustee and Personal Representative I will refer to these roles collectively as the Administrator. This person is responsible to making sure that the estate is distributed in a timely fashion in a manner consistent with the estate creator’s wishes. These documents disclose who will be getting something from the estate, the beneficiaries, and how much each person or entity will be receiving.
Step Two: Gather Information about the Assets and Debts
Once you have determined who is in charge and who the beneficiaries are. The next step is to collect the information about the assets and debts of the estate. This is critical since the Administrator is a fiduciary who is responsible not only to the beneficiaries of the estate but also to the creditors. It is essential that the Administrator determine current values for all of the assets, as an Estate Administration can result in major tax benefits to the beneficiaries, for example Step-Up in Basis and/or the preservation of Proposition 13 real estate values. The Administrator should also secure the assets of the estate in a secure location to prevent their loss or a reduction in value. The Administrator should also prepare a preliminary inventory and present that inventory to all of the beneficiaries.
Step Three: Paying Creditors
The third step, is to make pay the valid debts of the estate. The debts will include filing a final tax returns, one for the Decedent and another for the estate. Medi-Cal and Social Security must be notified and any claims paid. These creditor claims must be paid before any distributions are made to the beneficiaries. Remember, if you are acting as the estate Administrator you are a fiduciary and therefore you may be personally liable if a creditor does not receive the amount to which they are entitled.
Step Four: Distribution to Heirs
Finally, the beneficiaries will be paid. It is essential that the terms of the estate plan be followed. When making this distribution you will need to prepare a final accounting and a notice of proposed distribution. Receipts should be prepared and signed by each beneficiary when they receive their share. These receipts are to protect the Administrator from claims from beneficiaries that they did not receive their entire share.
As you can see from this article there are many steps to an Estate Administration. It is essential that each step be taken and completed before moving on to the next one. Further, one should always discuss this process before undertaking it with a competent attorney.