Steps in Closing an Estate of a Decendent With Beneficiaries

By Dennis Masino

Acting as the executor -- known as a personal representative in some states -- of an estate can involve a lot of work, but it all comes to a conclusion when the assets are ready for distribution to the beneficiaries. An executor must use caution in closing the estate, making certain that all debts and taxes are paid prior to any distribution of assets to the beneficiaries as he can be held personally liable if a premature distribution to beneficiaries leaves insufficient assets to pay estate debts and taxes.

Pay Debts of the Estate

Step 1

Notify creditors and potential creditors of the decedent's death. Most states require executors to notify known creditors by mail. However, some states require executors only to publish notice of the death in the local paper to notify creditors; some states require both types of notification. The creditors must file their claims with the executor within the time set by the law of the state in which the estate is being probated.

Step 2

Determine the validity of creditor claims. The personal representative must review the creditor's claims and decide the validity of each. If the representative feels a claim is not valid, either in whole or in part, she must notify the creditor. Unless a dispute about the validity of a debt can be resolved between the creditor and personal representative, the representative should seek the assistance of the court in resolving the issue.

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Step 3

Pay those creditor's claims considered valid, or have been found to be valid by the court. The executor uses the assets of the estate to pay all valid claims. If a creditor does not assert a claim within the time period set by state law for filing claims against an estate, the debt does not have to be paid.

File Tax Returns and Pay Taxes

Step 1

File federal estate tax return. If the value of the estate exceeds the amount specified in the Internal Revenue Code, a federal estate tax return (IRS Form 760) must be filed. From time to time, Congress changes the specified value in its code. Contact the Internal Revenue Service or an accountant who is familiar with federal estate taxes for current information

Step 2

File all required state estate tax returns. Whether or not an estate is liable for estate taxes is determined by state law. Some states impose a tax on estates valued in excess of a specified amount; others impose it depending on the date of death of the decedent, while others do not impose any estate tax at all. Consult an accountant familiar with the tax laws of your state, or contact the state taxing authority for current information.

Step 3

Pay the estate taxes and obtain a release from the taxing authorities. If any federal or state estate taxes are owed by the estate, obtain a release from the taxing authority proving the tax obligation has been satisfied. These documents are needed to close the estate with the probate court.

File Final Accounting and Distribute Assets to Beneficiaries

Step 1

File final accounting with the probate court. The final accounting is a form obtained from the court on which the executor lists all assets, income and expenses of the estate. If all beneficiaries sign an acceptance of the accounting and waiver of a formal hearing, the court will approve the accounting without holding a hearing. If all the signatures cannot be obtained, the court will hold a formal hearing at which any of the beneficiaries can voice objections.

Step 2

Distribute the assets of the estate to the beneficiaries. Once the court approves the accounting, the estate representative may distribute the assets to the beneficiaries in accordance with the terms of the will.

Step 3

File a closing statement with the court. After all assets have been distributed to the beneficiaries of the estate, the estate representative files a closing statement or closing affidavit with the court. The type of document to be filed varies from state to state, but it serves the purpose of establishing for the court that all assets have been distributed in accordance with the will.

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References

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