Archives

You’ve Been Appointed As Fiduciary Of An Estate: Now What?

by Mary L. Rhodes, Esq.

An executor or an administrator of an estate is a fiduciary who has a duty of impartiality towards the beneficiaries and is held to a higher standard. The main goal of a fiduciary of an estate is to collect the decedent’s assets; pay his or her debts and estate taxes if there are any; and to then distribute the remainder of the assets whether by the terms of the decedent’s last will and testament, or by the laws of intestacy. In other words, the job of a fiduciary is to wind up the affairs of the decedent.

Control must be taken of assets as soon as possible to prevent wasting. If there is real estate, property taxes must be paid and upkeep maintained until the property is transferred or sold. Debts of the decedent have to be identified and settled. However, before final distributions can be made there are many responsibilities to be fulfilled by the fiduciary, some of which have deadlines. These may include the filing of federal and state estate tax returns, if necessary; the filing of the decedent’s final personal income tax returns; and the filing of fiduciary income tax returns.

The first step is to identify and obtain specific date-of-death valuations of the decedent’s assets for the purpose of determining whether the gross estate is taxable under either or both the federal or state laws. The gross estate includes the following:

• The value of individually-owned bank accounts, stocks and bonds, real estate, automobiles, and other personal property;
• The value of assets that are held jointly with other parties;
• The value of assets that are owned by the decedent and have named beneficiaries, such as life insurance, annuities, certain types of trust accounts, and retirement accounts; and
• The value of the decedent’s share in a business.

Appraisals of real and personal property will also have to be obtained. If there is a business, a proper business valuation must be performed. In addition, there may be post-mortem estate planning decisions that you as the fiduciary may have to facilitate. These decisions may impact the tax liability of the decedent’s or beneficiary’s (ies’) estate(s).

At the time of this writing, for decedents who passed away in 2010, it does not matter how large the gross estate is as the Federal Estate Tax has been abolished, and no Federal Estate Return will have to be filed, unless Congress acts and makes changes that are retroactive to January 1, 2010. (See SideBar Winter 2010 issue.) However, any gross estate valued at over $1 million would cause a New York State Estate Tax Return to be filed. This return is due nine months from the date of death. All assets that the decedent had sole ownership of, and any in which he or she held a joint tenancy, must be reported as part of the gross estate. New York State estate tax rules are the same as the federal rules had been prior to their 2010 repeal, and 100% of the value of any asset held in a joint tenancy is to be reported in the estate of the first to die unless the joint tenant is a spouse, or a non-spouse joint tenant who furnishes proof of his or her contribution to the asset. Many people are under the false impression that because a jointly-owned asset will pass to the joint owner, the asset is not includable in the estate of the first joint tenant to die.

As assets are collected and/or liquidated, the proceeds will be placed in an estate or brokerage bank account. Care must be taken to observe the limitations of FDIC insurance, and if necessary, multiple estate accounts must be maintained.

The fiduciary will be responsible for preparing an accounting report that should include: the assets collected; income earned by the estate; and debts and administration expenses paid; gains or losses from any assets that are liquidated; and the proposed distribution of the assets remaining on hand in the estate. If the beneficiaries have no objections to the accounting, the appropriate Receipt and Release will be obtained from them, and the fiduciary will be released from further responsibility and liability.

Mary L. Rhodes, Esq. is an Associate in the Trusts & Estates Department. She focuses her practice on Estate Planning and Administration, and can be reached at 516-437-4385, ext. 141 or via email at Mrhodes@vmmlegal.com.