Administering an estate can be a daunting task.  Where the decedent leaves a will, the person(s) named as executor(s) must probate the will and fulfill the duties of the estate personal representative.   Where there is no will, the Surrogate’s Court appoints an administrator to fulfill these obligations.  Either way, the executor/administrator must settle the decedent’s debts and obligations, safeguard income and assets, file required tax returns, address guardianships/trusts for minors and beneficiaries with special needs, and distribute the estate according to law.  It can be a lot of work– even more so if trusts are involved.

Although New Jersey has some of the country’s most user friendly will and estate laws, the process is anything but intuitive.  For instance, an executor/administrator can have personal liability if he distributes before the creditor claim limitation period runs and even, thereafter, if distributions aren’t wholly correct.

New Jersey law requires an executor/administrator to obtain and file a refunding bond before distributing.  The executor/administrator also must obtain a qualifying child support judgment search and resolve any child support judgments that turn up.  An executor/administrator who ignores these obligations risks substantial personal liability.  In addition, to foreclose claims down the road, the executor/administrator should obtain releases from beneficiaries or settle an account in court.

Depending on estate beneficiaries, assets, income, deductions, and tax deposits, the executor/administrator of an estate may be liable to pay tax and file estate tax returns and/or inheritance tax returns as well as final income tax returns for year in which decedent died and fiduciary income tax return thereafter.  As estate attorneys, we normally prepare our clients’ estate tax returns and inheritance tax returns and determine tax. Where appropriate, we can suggest strategies [such as disclaimers] that can reduce tax.

Federal tax laws require IRAs and many other retirement plans [401(k), pension, profit sharing, SEP. government plans, and other benefit arrangements] to distribute required minimum distributions (RMD) once an individual reaches age 70.5 and thereafter. Thus, unless a decedent has taken the full RMD, an estate may have to take RMDs for the year in which a decedent dies. Beneficiaries may face RMDs thereafter. When RMDs aren’t made, expensive tax penalties can arise.

While I could go on and on about tasks that must be performed to administer an estate properly, the point of this article is to show that what may first appear to be a simple task carries with it many less obvious obligations.  At FriedmanLaw, we apply our years of experience in trust and estate law to guide executors/administrators through the steps needed to settle an estate.  We also take obligations (such tax compliance) off our clients’ hands.

In short, if you may become an executor/administrator, we would look forward to working with you to settle the estate correctly and limit your workload.