Wealth Planning News
Vol. VI, No. 2
Administration is a process that occurs after someone dies.
If the one who died (the decedent) left a Will or left no Will but owned any interest in real estate or other assets over $68,000 that will pass to others in a way that does not involve joint tenancy or passage by beneficiary designation such as exists for items such as life insurance or annuity proceeds, then the process is called Probate Administration because it normally involves proceedings in the Probate court. In fact, use of a Will alone will usually guarantee a Probate Administration.
If decedent had made and funded a living trust, then regardless of the value of the assets in the trust, the process is called trust administration.
What Happens During Administration?
Determine Who Is In Charge
Administration involves making a determination of whether the decedent left a will or used a funded living trust. In each case it requires a review of the controlling document to see whom the decedent named to be in charge of administration. If probate is involved, the person in charge of it is called a Personal Representative, or the older term of Executor. If a funded trust is involved, the person in charge of it is called a successor Trustee. For brevity we will use the term "fiduciary" for Personal Representative or successor Trustee.
Prepare Job Instructions For The Fiduciary
In each case where we are engaged to help with administration we furnish to the fiduciary a helpful Operating Manual that answers most questions a fiduciary may have, and provides a description of the duties of the fiduciary.
Determine Who Is To Inherit And In What Manner?
Administration requires a review of the controlling terms of any will of the decedent or terms of the funded trust made by the decedent. The ones due the inheritance under a will, or under a funded trust, or by statute in the absence of any will or any funded trust, are called beneficiaries.
Up to this point, if we had done the planning and prepared dispositive documents for the decedent, we normally have all this information in our records, and so we normally reduce our total fees incident to administration to reflect that work savings for us, and as a courtesy to beneficiaries of our deceased client.
A fiduciary must of course study and come to a full understanding of the instructions contained in the will or the funded trust made by the decedent.
Even so, we normally need to obtain current accurate contact information, including full address, phone number, and email address of each beneficiary, and it becomes the job of the fiduciary to obtain and provide this information to us.
Lodge Any Will Left By A Decedent
The law requires anyone in possession of a will of any decedent to lodge it in the probate court, even if probate will not be necessary. We do this in each case.
Determine What Assets Pass On Death Of An Owner Of An Estate
This job of listing and providing exact date of death market values for all assets owned by or passing on death of a decedent falls on the fiduciary.
Again, if we had done planning for the decedent we normally have a list of assets with values of each provided to us when the decedent used our services. But we still need accurate values for assets as of date of death, and the personal representative can do most of the leg work to obtain exact bank and investment account values. For items such as motor vehicles, internet websites can be of much help. For real estate or other difficult to value items that will pass to beneficiaries without being sold, we help the fiduciary to obtain any appraisals.
Prepare An Accurate Inventory
An important duty of the fiduciary is to prepare a complete and accurate inventory of all assets passing on death of a decedent. Again, we help the fiduciary do this job. The inventory is needed in order to show beneficiaries what will pass to them or to any testamentary trust for their benefit.
The inventory is also needed for any estate or inheritance tax returns that may be required, and to establish a step-up in basis for inherited assets that will be needed later for capital gains tax determination when inherited assets are later sold by beneficiaries.
Manage The Estate Or Trust During Administration
After someone dies owning assets there is normally a need for an administrative estate or administrative trust bank account. The fiduciary will have a duty to deposit all estate or trust liquid funds into this account, and pay all administration expenses out of this account, and upon conclusion of administration distribute remaining funds to the beneficiaries.
If any income is received during administration from assets of the decedent, the fiduciary must file an income tax return for the administrative estate or administrative trust. The fiduciary must also file any final income tax return required to report taxable income of the decedent up to date of death. The fiduciary must pay any income or estate or inheritance taxes in order to avoid personal liability for the same.
Prepare An Allocation Summary
There is often a need to prepare a list of beneficiaries, showing how much each should receive, and listing items allocated to each beneficiary. We normally do this work for the fiduciary.
As assets are distributed from an administrative estate, the fiduciary should obtain receipts and liability claim releases from each beneficiary who receives such a distribution. We prepare such forms for use of the fiduciary.
Re-Title Assets For Distribution
As assets are distributed they must pass to the beneficiaries, or to testamentary trusts for beneficiaries, via proper documentation. We normally prepare funding instructions for all assets and the necessary documentation for changes in title.
Prepare All Court Filings For Probate Administration
Any time Probate Administration is required we prepare all necessary items for filing in the probate court. Our normal approach is to use funded trusts for estate planning clients, but it is sometimes necessary to do Probate Administration if we are hired to help with administration of the estate of someone who was not a planning client of ours, or for a client who failed to keep a trust properly funded for one or more reasons.
For more information on administration, please call us for a consultation.