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Administering our loved one’s estate is one of the more challenging things that will ever be asked of us. During the process, we are in mourning, we do not have all the answers and we are already busy with what makes us who we are as a person. Administering an estate can be a relatively short period in our lives, but it can also span several years. Several factors contribute to the complexity and the amount of time an estate will take to administer. Let’s take a look at four of those factors: planning, professionals, property and people (The Four “P”s) and how to move through them while administering an estate.
The Four “P”s
PLANNING
The steps you’ll need to take in order to administer your loved one’s estate will look very different depending on the type of planning that had been done before they passed. The two forms of planning that are most common around one’s estate are wills and trusts.
- Wills
A will helps us administer one’s estate because it communicates to us the person’s wishes and provides for the distribution of certain property. However, a will cannot transfer assets without involving a court process called probate. If only a will has been left, and there are assets (cars/houses/investment accounts) needing to be transferred, some form of probate may be needed.
- Trusts
A trust helps a trustee carry out the wishes of a grantor (mom/dad) by giving specific directions of how to distribute the assets that the trust owns. If all the assets of mom and/or dad are properly titled in the trust, probate may be avoided all together. The trust and the trustee will have all the power and authority they need to properly distribute the assets.
What happens if mom and dad do very little planning, or no planning at all? These situations do tend to make for a longer estate administration. If there are assets, then probate will most likely be necessary to distribute property. The process of distributing the estate will look to state laws and precedents, and it will seek testimony from all who believe they have a claim to the assets of the estate. Some property may be distributed outside of probate if beneficiaries were assigned. For financial assets like retirement and bank accounts, there are often beneficiary designations. If these assets have beneficiary designations, those directions will supersede a will or trust’s plan.
PROFESSIONALS
Estate administration is not a DIY endeavor. At some point you will need to enlist the help of professionals, such as: an attorney, CPA, appraiser or a financial planner. Professionals will help you file the appropriate court docs, title transfers and tax filings.
Professionals who specialize in estate and trust administer countless estates throughout a year. Compare this to a first-time administrator, executor or trustee, who may do this only once in their lifetime. Good estate professionals will help guide you through all steps of administering your parents’ estate. They will save you time and sanity by keeping you on task, explaining next steps and keeping you from thinking you need to learn everything there is to learn about estate administration.
PROPERTY
The type of property in an estate is one of the other major factors that determines how long it will take to properly administer an estate. Some property, like a bank account with a transfer on death clause, is relatively easy to transfer. A death certificate will allow the bank to transfer the funds to whomever is named as the beneficiary of the account. No court or trust document is needed in most cases.
Property like a house can be a more difficult asset to transfer. A house has a title or deed. For a title to be transferred, there needs to be a document or a court order to enable the transfer. Location of property can also be a factor. Property in more than one state or jurisdiction could lead to needing more than one probate court. Collectibles and rare items may need specialized appraisals to help determine value before an estate can be distributed. The more complexity there is with the underlying property of an estate, the more important planning becomes.
PEOPLE
The specific people involved in the estate will have an impact on the timeliness of administering an estate. Those who were close to mom or dad are generally also beneficiaries of the estate (or they may think they should be!). However, if plans are not clearly understood by the beneficiaries, challenges to the estate administration arise. An example of these challenges may be as simple as the question of who gets mom’s china set, while others may be more complex, like making a decision to keep or sell a large asset. The people factor can be unpredictable and hard to plan for every possible outcome. As an estate administrator, your professional advisors can help you make informed decisions when faced with tough challenges.
Administering Your Mom or Dad’s Estate
Now that we’ve looked at the Four “P”s of estate administration, understanding how to administer an estate should be a little clearer. Here is a brief summary of the process.
To administer an estate, you will want to identify all planning that has taken place, if any. Gather all known documents. If you are not finding any, contact the professionals your parents worked with, and try to determine if any planning was done. Their attorney should know if a will or trust was ever drafted, and where a current copy can be found.
After you have gathered the planning, contact professionals. This process can lead you back to mom and dad’s professionals, and other times, you will end up reaching out to your own network of referral sources. Understand that mom and dad’s professionals may be retired, not taking on new clients or a bad fit with you personality-wise. All of these situations are perfectly acceptable and okay. Do not get discouraged when trying to find your own professionals. Ask friends and family for referrals. Look for professional organizations in the estate field as a possible resource. There are countless folks out there willing to help you.
Once you have assembled your team, they will begin to advise you on next steps. Listen carefully. Be timely in responding to their requests. They will work with you at your pace, so it is important to work through what is asked of you. If you are unclear or unable to do what they ask, share that with them. No professional in this space expects you to have all the answers. Professionals do want to let you work on what you can, and they don’t want to charge you for unnecessary time.
One of the big tasks that you will be responsible for is to help your team of professionals identify all of the property and people. Be thorough. It is important to get this done right early on, to avoid unwanted surprises later in the administration. Finding a new beneficiary or piece of property further along in the process can add more time.
With the planning in hand, a team of your own professionals and the property and people identified, you should be well on your way to successfully administering your parent’s estate. Remember that no professional expects you to have all the answers. Though it is a daunting task, work with your team and they will help you through it.
Neil Langlois is a senior manager at Jones & Roth CPAs and Business Advisors. He is a key member of the Construction & Real Estate, Family Business and Estate & Trust teams. He provides a broad range of services in tax planning and business consulting to his clients, thanks to his years of experience in government, management and public accounting.
