Closing the Probate Estate
Estates may be closed when the executor has paid all debts, expenses, and taxes, has received tax clearances from the IRS and the state, and has distributed all assets on hand. Trusts terminate when an event described in the document, such as the death of a beneficiary, or a date described in the document, such as the date the beneficiary attains a stated age, occurs. The fiduciary is given a reasonable period of time thereafter to make the actual distributions. Some states require a petition to be filed in court before the assets are distributed and the estate or trust closed. When such a formal proceeding is not required, it is nevertheless good practice to require all beneficiaries to sign a document, prepared by an attorney, in which they approve of your actions as fiduciary and acknowledge receipt of assets due them. This document protects the fiduciary from later claims by a beneficiary. These formalities are recommended even when the other heirs are relatives, as that alone is never an assurance that one of them will not have an issue and pursue a legal claim against you. Finally, a final income tax return must be filed and a reserve kept back for any due, but unpaid, taxes or estate expenses.
Common Questions
How do I title (own) bank and other accounts?
Each bank, trust company or investment firm may have its own format, but generally you may use, for a trust, "Alice Carroll, Trustee, Lewis Carroll Trust dated January 19, 1998," or, in a shorthand version, "Alice Carroll, Trustee under agreement dated January 19, 1998." For an estate, you should use "Alice Carroll, Executor, Estate of Lewis Carroll, Deceased."
How do I sign my name in a fiduciary capacity?
An executor signs: "Alice Carroll, Executor (or Personal Representative) of the Estate of Lewis Carroll, Deceased". A trustee signs: "Alice Carroll, Trustee"
Where do I hold the estate or trust assets?
You should open an investment account with a bank, trust company, or brokerage company in the name of the estate or trust. All expenses and disbursements must be made from these accounts, and you should receive regular statements.
How (and how much) do I get paid?
Because being a fiduciary is time-consuming and is often difficult, it is appropriate to be paid for your services. The will or trust may set forth the compensation to which you are entitled. If the document does not, many states either provide a fixed schedule of fees or allow "reasonable" compensation, which usually takes into account the size of the estate, the complexity involved, and the time spent by the fiduciary. Executor's or trustee's fees are taxable compensation to you. Several states do not permit you to pay your own compensation without a court order, so ask your attorney before you write yourself a check. Many fiduciaries in the same family as the decedent are quick to waive fees. Before doing this, however, consult with the attorney for the estate and be certain you understand the full scope of your duties and any ramifications of waiver.
What if a beneficiary complains?
Even professional fiduciaries, such as trust companies, receive complaints from a beneficiary from time to time. The best way to deal with them is to do your best to avoid them in the first place by following the guidelines set forth in these FAQs and consulting with an attorney experienced in estate administration. Many complaints arise because beneficiaries are not kept up to date about the administration of the trust or estate. Frequent communication with beneficiaries is a must. The best approach in all instances is to be proactive by communicating throughout the estate or trust administration process and handling all matters with appropriate formality. If a complaint involves more than routine issues, consult with an attorney who specializes in trust and estate matters.
Can I be sued or be held personally liable?
Your errors or mismanagement of a trust or estate can subject you to personal liability. Common pitfalls include not paying taxes or filing returns on time, improper investment choices (whether too conservative, too speculative, or favoring one beneficiary over another), self-dealing (buying assets for yourself or a family member from the estate or trust, whether at market price), or allowing property or casualty insurance to lapse, resulting in a loss to the estate or trust. Your best protection is to get good professional advice as early as possible in the process, communicate regularly with the beneficiaries, treat everything with appropriate formalities as if you were not a related party (even if you are), and fully document your actions and decisions.
How am I discharged as fiduciary at the end of the administration? What if I want to resign?
Whether you stop acting as a fiduciary because the estate or trust has terminated or you wish to resign before the conclusion of your administration, you must be discharged, either by the local court or by the beneficiaries. In some states, discharge is a formal process that involves the preparation of an accounting. In other states, you can be discharged with the use of a relatively simple document signed by the beneficiaries. If you are resigning prior to the conclusion of your administration, check the will or trust document to see who succeeds you as fiduciary. If no successor is named, you may need a court proceeding to appoint a successor before you can be discharged.
source http://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/guidelines_for_individual_executors_trustees.html
