Contributor: Kristen Fricks-Roman
Company: Morgan Stanley Wealth Management
Title: Financial Advisor
Though my mother just passed away two years ago, sixteen years before that she had a health-related incident that caused her life — and the lives of her children and our families — to very suddenly change. My mother, unfortunately, lost her ability to speak and write. As hard as it was for our family, I was extremely thankful to have been her financial advisor and executor, and therefore aware of most of her financial matters.
Although talking about money with parents can be awkward or feel like an invasion of privacy for them, engaging in proactive, ongoing conversations about their finances has many benefits. Being named executor makes it even more important for you be “in the know,” because you will be responsible for many administrative and potentially emotionally challenging tasks. Here are some guidelines that can help you better understand your role and duties.
Clarity. Perhaps the most important task as an executor is to review your parents’ will now and ask questions if anything is unclear. That way, you can help guide others through their questions if they arise later on.
Will. It is critically important to go through the terms of your parents’ will to ensure they match up with their financial assets in terms of beneficiaries and other details. Review both the original will and the financial assets occasionally to make sure they reflect current life situations and are up-to-date with estate laws.
Documentation. Besides the will, locate the following documents and related items: trusts; insurance policies; wealth manager contact information; brokerage and advisory account statements; bank account information; military records; safe deposit boxes and keys; deeds; pension statements; Social Security documents; credit cards and statements; titles to homes, cars, boats and trailers; and other financial and investment information. Organizing your family’s records will be extremely beneficial in the long run.
Death certificate. As executor, you will likely need to purchase at least ten copies of the certified death certificate to show to banks, insurance companies, credit providers and others. You must also alert government agencies, such as the Social Security Administration, of a parent’s death and provide a death certificate. Usually, the funeral director or your parent’s local municipal record-keeping office can help with this.
Probate. Typically, a will must be filed with the probate court. Its process of ensuring that a will is legitimate and distributing assets to beneficiaries can take months or even years. However, if your parents transferred all their assets to a living trust or other trusts, you may be able to avoid probate. For any assets that are not held in a trust, the probate process may be necessary.
Bank account. As executor, you may need to pay bills (write checks to pay for expenses like mortgages, property taxes, utilities or credit cards) or receive funds (deposit any money owed to your parent like paychecks, personal loan paybacks, etc.), so open an account under the name of the estate. Be sure to go through checkbooks and bank statements to figure out what your parent had been paying or had received regularly.
Property inventory and maintenance. You might also need to maintain a house or other property until it can be distributed or sold. You are responsible for keeping a parent’s personal property secure, including anything in the home or a safety deposit box. You may need to provide a personal property inventory or appraisal.
Estate taxes. If the estate exceeds the applicable estate tax exclusion amount, the estate must file final income tax returns with the state and U.S. governments. Even if there is no federal estate tax due, there may be a state death tax. Estate tax returns must be filed within nine months of the date of death. Consult a tax professional for more information on how to handle them.
Asset disbursement and distribution. After all taxes, bills and other debts are paid, the estate’s assets (property, stocks, bonds, cash, etc.) will be distributed to the beneficiaries. It’s important to get a receipt from each beneficiary that indicates they have received their distribution. Then, as executor, you will need to dispose of any remaining assets.
It’s impossible to know whether your parents will be able to gradually transfer their assets and responsibilities to you over time, or if you will have to step in and take care of their affairs more suddenly due to illness or death. Either way, you don’t need to approach it alone. Speak with an attorney, accountant and/or tax advisor, along with you or your parent’s financial advisor. These professionals can help you understand and navigate this often complicated process.
Kristen Fricks-Roman CFP®, CRPS®, is a financial advisor and senior vice president at Morgan Stanley Wealth Management, Atlanta. She can be reached at [email protected].
The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney LLC and its Financial Advisors do not provide tax or legal advice. Individuals should seek advice based on their particular circumstances from an independent tax advisor. Morgan Stanley Smith Barney, LLC, member SIPC.