By Dave Rowan, CFP®
Being named the executor of your parents’ estate is a great honor. Your duty as executor is ultimately to carry out the final wishes of the deceased. While this can be a lot of work, it can also be rewarding to know that you are serving in this important role.
If you have been named the executor of your parents’ estate and they are still alive, don’t wait until the day after the funeral to start thinking about what you need to do as executor. There are a number of things you can do while your parents are still alive to ensure that the process of carrying out their final wishes goes as smoothly as possible. Here are eight steps you can take right now:
1. Know What’s Involved
As noted above, there is a lot of work involved with being the executor of an estate. In addition, there are many subtleties and complexities involved that can prove to be daunting even for the most seasoned, organized project manager.
You could choose to hire an attorney at the expense of the estate to handle the entire process for you. However, this is often a very expensive proposition and may create discord among your siblings and other heirs who do not want you to spend thousands of dollars on an attorney for something you’ve been asked to do.
Nolo is an excellent legal resource on a variety of matters, and being an executor is no different. Consider picking up a copy of the Executor’s Checklist and Notices Kit to give you the background you need to get started on the process.
2. Make a List of Important Information
Help your parents pull together a list of all their important information including credit cards, bank accounts, passwords, retirement and investment accounts, life insurance policies, tax records, safe deposit boxes real estate and the location of their most recent will. File this information in a small three ring binder and put it in a fire proof box, safe or other secure location you’ll remember and can easily access. Plan on updating this with your parents once every two to three years to keep it up to date.
3. Make a List of Important People
Important people include lawyers, accountants, financial advisors and any other financial professionals who may be involved in your parents’ financial affairs. Add this information to the three ring binder you created from step two and plan on updating this every two to three years as well.
4. Find the Money
In step two, you compiled a list of bank accounts, investment accounts and life insurance policies. Hopefully this makes up the majority of the estate’s assets, but there can be other hidden assets in the estate. Ask your parents if there is money or stock or bond certificates hidden in the house. If they have a safe on the premises, know the combination and exactly how to get in. Practice getting into the safe with your parents if necessary.
Note the location of any collections or other valuables in the house. For example, my dad has a penny collection. Most are worth very little, but a few are worth thousands of dollars.
Another example of valuable things to keep track of in the house is artwork. Your parents may have 20 paintings on the walls. Most could be donated to a thrift shop, but one or two may have significant value. Knowing which items are valuable in the house ahead of time can save lots of guesswork and potential fees to have an appraiser value the contents of the home.
5. Get a Jump Start
My parents moved into their house in 1968. They have 50 years of accumulated possessions inside. When your parents have retired and have time on their hands, consider asking them to start going through the house, donating items that they don’t need but could be of use to someone else and discarding items that no longer have value.
In addition, if they have specific items that they want to go to specific people, instruct them to make a list that includes each item and who it should go to. This can include cars, jewelry, paintings or even trivial things that have high sentimental value. They should then attach this list to their will. Your parents may not be comfortable sharing this list with you at this point which is fine. The important point is that they have made the list so that you can readily find it.
Your parents will feel better knowing that they are making it easier to identify items that are either valuable or have significant sentimental meaning and you’ll feel better knowing that you can concentrate more time and effort on other aspects of the estate.
6. Consider Asking for a Co-Executor
Some estate planning attorneys recommend only hiring one executor of the will. However, if you have a good relationship with one or more siblings and they have some or all of the skills needed to be an executor, you can consider asking your parents to name that sibling or siblings as co-executor(s). This can help make your workload more manageable and give you a second mind to work through the complexities of the estate.
Things to think about when considering whether to ask your parents to name a co-executor are:
- Do you have a great relationship with this sibling? When you are both named executor you are both 100% responsible for making decisions on the estate and as a result must be able to reach consensus on what will be dozens of decisions.
- Co-executors will in some cases need to both be physically present to carry out some duties such as appearing in court to submit the will to probate or signing checks. If you live in the same town, that’s no problem. However, if you live far apart, this can present an administrative hassle.
Skills and life circumstances you and/or your co-executor(s) should have include good organizational skills, the time to administer to the estate, the ability to either grasp the rules associated with the process or work with an attorney to do so and the financial means to travel when needed to carry out executor duties in person if these expenses are not covered by the estate.
7. Keep the Peace
If you have been named executor by your parents, ask them if they would mind if you told your other siblings of their choice. In addition, if your parents have a complex estate and plan on paying you a fee to be the executor, consider informing your siblings of this decision as well. Keeping your siblings in the loop on the very front end of the process as well as during the process can avoid damaging your family relationships and keep the process moving forward smoothly.
For example, during the process, you may want to let your siblings know when you will seek their input and when you will act independently. You will also want to keep them up to date on time frames as well as any expenses you are incurring that will be billed to the estate such as travel expenses and legal fees.
8. Decide If You’ll Need a Lawyer
In many cases, you will be able to handle closing out the estate on your own. Nolo, provides the following list of circumstances that would suggest you probably don’t need to hire an attorney:
- Most of the estate can be transferred without probate.
- The estate qualifies for simple “small estate” procedures.
- If probate has to happen, the state has a simple process for it. One way to tell is if your parents’ state has adopted the Uniform Probate Code.
- The estate doesn’t contain a complex asset, such as a functioning business.
- No one is fighting and talking about potentially contesting the will.
- The debts of the estate are small and can be easily paid off.
- The estate won’t owe either federal or estate tax. Almost all estates will owe zero federal tax. However, approximately 20 states now levy an estate tax of their own. If your parents live in one of those states, you will need help with tax preparation.
If it does seem like you will need an attorney, start the process now of identifying one or more candidates. Talk to friends who you think may have had to deal with one or more estate issues that could require a lawyer and see who they used. Interview candidates until you land on an individual who you feel will act in your best interest and truly facilitate the process of closing out your parents’ estate.
Recent articles by Dave Rowan: Do You Need a Living Trust? 7 Reasons Why Not
This article was originally published on Investopedia.