Even the best-laid estate plan can leave an executor overwhelmed by the amount of work involved in administering an estate. An informed executor is better able to navigate this process. Listed below are common mistakes executors make.
Not keeping accurate accounting records. An estate becomes its own entity, with its own tax ID, upon the decedent’s death, and should have its own bank account for financial purposes. Executors should not comingle personal funds with the estate. The executor has a duty to account for the estate’s cash flow. Consider using a computer spreadsheet or bookkeeping software for larger estates as a checkbook register may not be sufficient.
Not picking up the mail. Have the post office hold the mail (or have it forwarded) so you don’t miss important pieces of mail. A growing stack of mail at the decedent’s residence may be an invitation to criminals and vandals that the premises are vacant and unattended.
Losing track of tangible assets. As soon as possible, take an inventory of the deceased person’s assets and personal belongings to get an account of the entire estate. Having a record of these assets can help ensure that valuable items don’t disappear.
Paying bills too quickly. Understand the priority of payments that need to be made. A spousal or child award, if warranted, takes priority over creditors. Paying creditors too soon, or in the wrong order, may leave insufficient resources to pay taxes, for which the executor may be liable.
Making distributions too early. Paying the beneficiaries before paying the taxes and settling with creditors may leave insufficient resources should unexpected claims arise.
Mishandling real estate. Real estate must be secured, insured and properly maintained. If the property is to be sold, obtain an appraisal and estimates for any needed repairs or improvements as quickly as possible so the property can be brought to market promptly.
Underestimating the time commitment and fiduciary responsibilities. Filing life insurance claims, opening bank accounts, picking up and sorting through the mail, overseeing the preparation and filing of income and estate tax returns and contacting beneficiaries all takes time.
Expecting the (probate) process to be quick. In Illinois, for example, a probate estate typically takes a minimum of one to two years to complete its administration. Each jurisdiction has its own set of rules so understanding your jurisdiction’s probate procedures will leave few, if any, surprises.
Not managing beneficiary expectations. Executors must avoid making promises they can’t keep. Understanding the administration process, overall timeframe and keeping open communications with the beneficiaries puts everyone on the same page.
Not asking for help. Seek counsel from knowledgeable professionals (i.e., estate and trust attorneys, tax accountants, real estate brokers) who are experienced in estate administration and tax matters and can provide the executor with proper guidance. The last undertaking an executor wants or needs is lawsuit.