Preface: Key Lessons From This Story: Here are some important lessons we can learn from Mark’s story:
A Lesson Learned By An Executor—The Hard Way
Careful Planning Is Important. Mark’s mother (or her attorney) failed to ensure that her will and transfer-on-death accounts had consistent directions. If Mark had chosen to do so, he legally could have ignored the directions of the will and kept the 1/6th share he received from investment account, as well as the entire balance of the “In Trust For” account. (This is also true when a parent and a child jointly own a bank account, and one of them passes away.) This could have led to conflict in the family if Mark had chosen to be greedy and keep the money. If you know you are named as an executor for someone, consider sitting down with them while they are still alive to talk through their expectations and desires. Also, make sure their documents (will, trust, beneficiary designations, etc.) reflect those desires and that their financial accounts are properly titled. It may be appropriate to have an estate planning attorney be part of that conversation.
It Is Easy to Overlook Important Requirements. For states like Pennsylvania that require payment of inheritance tax, filing the tax return can be easy to overlook if no estate is opened. It is not very difficult to avoid probate if a person plans carefully, but after the second spouse dies (and even sometimes at the death of the first one) an inheritance tax return is often required in Pennsylvania (and some other states). This is true even if no estate is opened. The failure to file will likely be noticed by the Department of Revenue at some point, and filing late often results in interest and penalties. Also, estate administration procedures in all states generally require doing things that the average person simply can’t be expected to know about, such as providing notices to beneficiaries, creditors, and certain government entities. What executors don’t know can come back to bite them because they can be held personally liable for mistakes in how an estate is handled.
It Pays to Seek Out Good Counsel. It is valid for executors to be concerned about the cost of having an attorney assist with administering an estate. Depending how an estate attorney charges, and the size and complexity of the estate, the bill can be sizable. But trying to settle an estate without at least some level of professional help is simply not an option for most people. Rather than risking mistakes or oversights that will cost even more to correct, if you are an executor you should seek professional help (usually an attorney) to ensure that things are handled correctly and that all exemptions and deductions are taken.
An executor does not need to use the attorney that drafted the will! This is a big misconception people have, and often it keeps them from shopping around for a competent and reasonably-priced attorney. This makes it too easy for attorneys who prepare a will to charge high fees when settling the person’s estate. Make sure that you talk about fees before hiring an attorney to do anything, but especially when asking for help to settle an estate. Fees can vary widely between attorneys so it is worth your time to ask. Often attorneys will charge the estate a percentage of the estate’s assets (this is permitted in many states, but it can result in unreasonably high fees). Some will charge a flat rate based on the estimated time required to settle the estate, which allows you to know the cost in advance. Some will charge an hourly rate, but they should at least be able to give you an estimate of the time necessary to do the work. (Because I feel that charging a percentage of an estate is often unfair to the client, I generally charge by the hour or a flat rate when settling estates.)
In conclusion, serving as an executor is an important role and it should be taken seriously. It pays to review plans before death when possible, and it is also important to seek out good counsel to ensure things are handled properly. As Mark learned, “little” oversights can have big consequences down the road.
Nevin Beiler is an attorney licensed to practice law in Pennsylvania (no other states). He practices primarily in the areas of wills & trusts, estate administration, and business law. Nevin is part of the conservative Anabaptist community and is committed to practicing law in a way that builds the Kingdom of God and is consistent with Anabaptist values. His office is in New Holland, PA, and he can be contacted by email at firstname.lastname@example.org or by phone at 717-287-1688. More information can be found at www.beilerlegalservices.com.
Disclaimer: This article is general in nature and is not intended to provide specific legal or tax advice. Please contact Nevin or another attorney licensed in your state to discuss your specific legal questions. In order to protect confidentiality and provide a better illustration, names in the above story have been changed and some facts may have been changed or added.