When you appoint someone as a personal representative or an executor, it is their responsibility to complete a variety of different tasks before distributing any remaining assets. Many estate executors, however, may be unfamiliar with this process and might instead focus on estate taxes.
Assets cannot be given to loved ones immediately after a person passes away unless it’s on a joint deed or joint account where the sole other owner immediately takes over that property/account or unless the item in question transfers outside of probate (such as a retirement account.) Some executors might want to transfer probate assets quickly.
This can be a very expensive mistake. An estate must file an income tax return for every calendar year it is open for at least part of the year, which is separate from the estate tax return. The estate tax return, for example is based on the value of the property inside the estate but the income tax return reports the income received and deductible expenses paid out during that year.
Many executors attempt to distribute income to beneficiaries of the state as it is received, but it is far better to receive all income, hold that income, manage other remaining assets and pay out debts and creditors. This can cause problems down the road in the event that there are not enough assets inside the estate to cover all taxes and creditors.
Going back to beneficiaries to get those funds or assets back can be problematic, and it is likely that they have liquidated them by that point. An executor who fails to fulfill their ethical obligations can also be held personally liable. For more information about how to instruct your executor properly, schedule a consultation with an experienced lawyer.
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