How Should an Executor Set Up Estate Files?

by Beverly Bird

With any challenging job, your odds of success increase if you pay attention to the details. Executing an estate and guiding it through probate can be time-consuming and difficult. The more organized your files are, and the more files-within-files you create, the easier your job becomes.

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Miscellaneous File

Your miscellaneous file should include the basics you need to probate the estate. You want to include folders within this file for copies of the death certificate, which you later have to provide to financial and insurance institutions, and for your letters testamentary, documents the court issues to permit you to legally act on behalf of the estate.

Asset File

Assets include everything the decedent owned at the time of his death, but not all of them will pass through the probate process. You won’t have to worry about those that do not, but you should keep a record of them all the same. In a folder for non-probate assets, include documentation regarding anything that will pass to a named beneficiary, such as life insurance policies or retirement funds. You should also create folders for each of the decedent's probate assets. Make one each for significant items, such as real estate, expensive jewelry, artwork and collectibles, and automobiles. You can save related insurance policies and appraisals in each folder. Make a folder for cash assets as well. If the decedent left bank or investment accounts, you’ll probably want to move the funds into a single estate account. This involves registering with the Internal Revenue Service for an EIN, or employer identification number. You can retain all these documents in a "liquid assets" folder.

Creditor File

As you go through the decedent’s paperwork, set aside every trace you can find regarding his creditors. Save this paperwork in a separate folder for each, even if you find invoices indicating that he paid off an account. Early in the probate process, you have to give notice to all these creditors that the decedent has died. They’ll have an opportunity to make claims against the estate for their money. If you have documentation showing that the decedent actually paid one such creditor, but the creditor makes a claim anyway, you can deny the claim. However, you need to put your hands on proof that it’s not valid.

Estate Expense File

You incur costs as you probate the estate. When you close the estate, you have to provide proof to the court of what you paid and why you paid it. You need a file for these expenses. You probably want one for postage costs, one for newspaper advertisements and one for court filing fees. Don’t neglect to include a folder for yourself. If you spend anything out of your own pocket, you’re entitled to reimbursement from the estate, but you need receipts to prove the expenditures. Other estate expenses include the deceased’s funeral costs and medical bills from his last illness.

Tax File

As executor, you have to pay all taxes for the decedent. These include returns for his estate, as well as his final personal tax return. You need folders in your tax file for all income the decedent earned prior to his death and any income his estate earned during probate, such as if the estate bank account produced interest. If your state imposes estate taxes, or if the decedent’s estate is large enough to warrant a federal estate tax return, you can copy the contents of your assets file, including non-probate assets, to a tax file folder. This will allow you to easily identify the estate's value when you prepare the estate tax returns. Estate taxes are based on the overall worth of the decedent’s entire estate, including non-probate assets, after creditors and expenses are paid. Therefore, it's a good idea to copy your creditor and expense folders into your tax file system as well.