In our last issue, we met the Ashby family. The Ashbys are the fictitious family that will help illustrate some of the issues and concerns that arise when a friend or family member passes away.
When we last saw the Ashby family, William Ashby had passed away at age 85. Now that the Ashby family has taken care of the funeral arrangements and Jillian (William’s wife) has probated William’s Will, their first question is, not surprisingly, “What happens next?.”
First, Jillian should contact the Social Security Administration in order to file for the death benefit of $255 to which she is entitled and to see if she qualifies for any survivor benefits. She may also want to contact the Department of Veterans Affairs if William was a veteran to see if there are any benefits or life insurance to which she may be entitled.
Next, since William’s Will has been probated and Jillian has been appointed as the executrix, a taxpayer identification number should be obtained for the estate. This number is comparable to a social security number. Using this number along with a certified copy of Letters Testamentary, Jillian should open an estate checking account titled in the name of the Estate of William Ashby. It is through this account that she will operate the estate.
For instance, what does Jillian do when she receives a check made to William or to his estate? This check should be deposited into the estate account. If she receives a check that is titled in joint names, this check should not be deposited into the estate account but it belongs to the surviving joint owner. It is extremely important that if any post-mortem planning techniques, such as a disclaimer, are going to be utilized for tax purposes, the family should consult their estate attorney as soon as possible before doing anything with the jointly held assets.
Also, if there are any non-probate assets such as life insurance policies or retirement accounts, the family should speak with their estate attorney to determine whether a disclaimer may be appropriate for tax purposes before touching these assets.
Another question that often arises is “How do we pay outstanding debts and administration expenses?.” These should be paid out of the estate account. This would include items such as medical bills, credit card bills, outstanding income tax obligations, etc. Jillian should also pay the expenses of administering the estate, such as legal fees, accounting fees, probate fees and various other fees and expenses from this account. What happens if there is not enough money in this account? Jillian or another family member could pay these expenses directly from their own funds and be reimbursed from the estate or alternatively they could loan money to the estate.
Jillian should also be compiling a list of the estate’s assets, debts and expenses as of William’s date of death. This task has a twofold purpose. First, it is necessary that Jillian have a working knowledge of all of William’s assets (i.e. any assets he owned individually, jointly, in trust, etc.). Second, this will aid in determining whether the estate will be required to file any state or federal estate tax returns (or a state inheritance tax return).
How does one accomplish this task? Because this is a very emotional time, it is possible that Jillian may overlook assets titled in William’s name. What should Jillian do to make sure she is not missing any assets when compiling her list? She should begin by taking a look at the couple’s last income tax return, reviewing the mail for any asset statements, checking the safe deposit box for important documents, etc. These are tasks that not only can Jillian tackle but she can also enlist the help of her estate administration counsel if the task seems too overwhelming.
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