After securing "Letters Testamentary", specific, raised-seal documents from a Surrogate's Court, an executor is in place and the real work of estate administration begins.
Podcast Transcription:
WRVO Producer Mark Lavonier:
This podcast is part of the series Estate Planning Pro Tips, hosted by attorney Tim Crisafulli of Crisafulli Estate Planning and Elder Law P.C., an estate planning, probate and elder law firm serving clients throughout central New York. A former school teacher, Tim explains complex legal subjects in an easy-to-understand way. The commentaries focus on the central aspects of estate planning, such as wills, trusts, asset protection, long-term care, and probate. And now here's Tim.
Tim Crisafulli:
After securing Letters Testamentary, that specific raised, sealed document from a Surrogate's court, an executor is in place and the real work of estate administration begins. The three main parts are marshaling estate assets, fulfilling tax requirements, and closing the estate.
As for marshaling assets, this is the process of gathering in all the assets that must move through the probate process. Executors should remain mindful that not all of a decedent's assets will be marshaled into the estate or controlled by a decedent's will. Specifically, any asset that the decedent jointly owned with someone else is not part of the estate and is not affected by the will. Similarly, any asset on which there is a beneficiary designation is not part of the estate and is not affected by the will.
For those assets that are part of the estate, it is the executor's job to take possession of those into the estate. For example, if the decedent was the individual owner of a checking account with no transfer on death beneficiary designation, then the executor must close the decedent's checking account and transfer the proceeds into an estate checking account. The process of marshaling assets becomes ever more complicated if the estate includes any business interests, real estate, or assets that may fluctuate in value, such as brokerage accounts. This is because the executor must protect the value of those assets, or perhaps liquidate those assets while the estate administration plays out.
Turning to tax obligations, there are multiple types of tax that an executor needs to pay attention to in fulfilling fiduciary duties. First, the executor must ensure that the decedent's final tax return gets filed. Second, the estate itself is a tax-paying entity. Just as an individual has a Social Security number and has tax obligations, an estate has a tax identification number and has tax obligations. It is the executor's duty to ensure that all income tax obligations of the estate itself are fulfilled. Stated differently, if the estate assets generated income during the estate administration period, then the estate itself may need to file an estate income tax return. Finally, some estates also have an estate tax obligation. This is somewhat rare, but it occurs where a New York decedent had assets worth approximately $7 million or more.
Last, after all assets are marshaled into the estate and all tax obligations are fulfilled, the executor must close the estate. There are two ways to do this: informally and formally.
To informally close an estate, the executor circulates an informal accounting, such as on an Excel spreadsheet, and answers any questions that beneficiaries may have. So long as all beneficiaries sign a release, the executor simply files a few documents with the court, and the estate is closed.
In the event there are disagreements that cannot be resolved, then the estate must resort to a formal closing that involves the executor commencing a court proceeding through which beneficiaries can make their objections known. Ultimately, a court decides all controversies and rules on how the estate assets are to be distributed.
Probate can take a long time. If there are no complications and all goes smoothly, it generally takes about 9 to 15 months to probate an estate. If there are disagreements or other complicating factors, probate can last for years.
