An estate executor is responsible for managing the estate’s finances. This includes opening a bank account specifically for the estate and collecting any money owed to the deceased, paying ongoing expenses like taxes, utilities, and property insurance, as well as debts, and keeping detailed records of all financial transactions. Here are some situations we’ve encountered as we have assisted our clients who are estate executors.
Decedent’s Debts
Review bills, past and current, to familiarize yourself with the deceased person’s creditors. Once you know who the creditors are, you’ll need to inform them about the death.
Bills and debts may include taxes, medical costs, rent or mortgage, credit card balances, student loans, and so on. You may discover bills that are outstanding or have gone to collections which may involve making some calls to negotiate payment schedules and interest levied after the date of death.
The estate is not necessarily responsible for all the debts. For instance, the deceased spouse’s debts may not be the responsibility of the living spouse, such as a credit card owned solely by the deceased.
There are time limits for creditors to submit claims on the estate, and there are laws that govern the order in which assets are distributed. These conditions vary by state, so be sure you’re informed as you administer the estate’s finances.
Avoiding a Negative Outcome
Before Death:
- Attempt to develop a list of the person’s bills (both routine and sporadic) and outstanding debts.
- Focus on how payments have been made and the funding sources used.
- If possible, bring accounts up to date.
- Consider pre-paying bills that you expect to continue for a period after the person’s death, such as housing expenses, car payments, insurance, as well as estimated taxes.
After Death:
- Review and validate claims on the estate and plan to settle any outstanding debts using the estate’s assets.
- Determine which of the decedent’s bills and debts the surviving spouse will have to pay.
- Attempt to negotiate discounts or structure payment plans for past-due debts that are the responsibility of the estate. Medical debts generally fall into this category.
- Request that debtors stop adding interest and that they give leeway before sending the account to collections.
Paying Expenses
Outside sources of funds may need to be accessed to handle expenses until an estate account is established. Since Power of Attorney authority ceases at death, the agent can no longer use the decedent’s accounts for expenses. To ensure that bills are paid, someone may have to front the money and be reimbursed by the estate once the funds are released.
Ongoing Expenses
The elimination of some expenses is complicated. Whether a person rents or owns, some housing-related expenses tend to go on longer than anticipated. These expenses could include rent/mortgage, maintenance/common charges, property taxes, insurance, and utilities.
Compounding the issue, beyond housing-related expenses, are all the other routine expenses that need to be paid, such as auto loans/leases, storage units, and tuition for family members.
Avoiding a Negative Outcome
Before Death:
- Create a source of funds so bills can be paid easily after death. You can do this by opening and funding a jointly owned bank account, adding a Transfer on Death/Payable on Death designation to a bank account, or establishing a revocable trust and retitling assets.
- Identify everyone who may need to sign documents related to probating the will and get all their contact information.
- Ask if the attorney will need a list of relatives, even if they are not beneficiaries of the will.
After Death:
- If there is no access to the decedent’s bank account(s), identify who is willing to pay bills until an estate account is opened and funded, at which time they will be reimbursed.
- Contact the attorney to find out what is needed to move the probate process along as quickly as possible.
- Contact all relevant parties to get the necessary signatures on documents required by the court.
- Identify all assets. Learn more in our article about estate assets.
Periodic Expenses
Charges paid annually, such as safe deposit box rentals, technology subscriptions, cord blood storage fees, etc., may not be discovered until well into the estate administration process.
Some automatic payments may be linked to a closed or expired credit card. And, if the account is connected to an unmonitored email address, you could miss payment notices, risking the loss of important and valuable assets.
Avoiding a Negative Outcome
Before Death:
- Look over a year or two of bank and credit card statements to find periodic or annual renewal payments.
- Determine if any accounts can be closed.
For any remaining accounts, see if annual payments can be changed to monthly automatic payments, be paid manually, or if they need to continue as is.
After Death:
- Research and identify accounts that need to be paid. Contact the vendor about an alternative payment method for accounts where auto-payment is required.
- Close unneeded accounts and stop automatic payments before new charges are posted.
- Ask the attorney whether digital assets fall within the purview of the will.
Banking Issues
As you manage the estate’s finances, be prepared for the decedent’s account balances to change in ways that may be beyond your control, especially in the first month or so.
Until you stop them, automatic payments of the decedent’s bills will continue. And monthly bank fees could be assessed if account balances fall below the designated threshold.
The decedent may receive income or other payments after death. If they come in check form, you may have a banking challenge. Learn what to do with them in Part 2 of this series, “Checks Received after a Death.”
Automatic income deposits posted after the date of death may be clawed back by the issuing institution once it is notified of the death. This happens routinely with payments from Social Security and most pensions and annuities.
Occasionally, the distributing party cannot recover the funds automatically. When they request a return of those funds, you can explain that there will be a delay due to a lack of access to the bank account. The return payment can be made when you’re further along in the probate process.
Avoiding a Negative Outcome
Before Death:
- Try to organize and manage automatic payments in advance.
- If a joint owner is on the account, attempt to build up the account balance before the person’s death.
After Death:
- Monitor the bank balance regularly to identify issues as soon as they arise.
- Terminate all automatic payments and pay bills manually. Owing money is easier than recovering refunds of payments. Learn more in Part 2 of this series, “Checks Received after a Death.”
- Ask the bank to stop monthly maintenance fees and request a recovery of fees charged in the months since the death.
For many estates, there is a long and often unexpected list of financial issues to tackle. While this blog addressed some estate finance situations we have encountered while serving our clients, many more challenges could arise.
Learn more in our four-part series: “An Estate Executor’s Financial Challenges – Advice from Personal Finance Managers.”
Part 1: The Basics
Part 2: Checks Received after a Death
Part 4: Estate Assets