Wills: When someone passes and they have a will, it may (or may not) have to go through a process known as probate. Probate involves the validation and administration of the will, in which the executor will have to pay off any outstanding liabilities of the decedent’s estate, collect their assets, and distribute them to any beneficiaries listed in the will. Partnering with an accountant can be a huge help to those going through the probate process, as accountants can aid you in collecting up-to-date financial records, helping you manage and pay any outstanding debts, and maintaining legal compliance.
Accountants often play a helpful role in the probate process, which can be overwhelming to executors. Consider the following tasks:
Obtaining and Filing Receipts: One key component of the probate process is to accurately and thoroughly compile financial records. This includes but is not limited to bank statements, receipts, and invoices of the deceased.
Giving Notice to Involved Parties: Executors are expected to identify and give notice of the approaching probate hearing to any involved parties. This includes any beneficiaries, creditors, and other interested parties such as those named in former versions of a will or anyone who may contest its validity. In certain states, such as Florida and Ohio, executors are required to publish probate notices to the local newspaper as well. Providing proper notice allows all parties to assess the accounting and dispute it if warranted.
Inventorying Assets & Conducting Appraisals: A comprehensive inventory of the decedent’s assets is also required for the probate process and accounting. In some cases, certain assets may need to undergo appraisal to ensure accurate value is recorded. Assets include but are not limited to any and all bank accounts, stocks and/or bonds, real estate, retirement accounts, and personal effects owned by the estate. It’s crucial that these assets are properly accounted for as it will ensure that the beneficiaries can claim their fair distribution of the estate.
Preparing the Formal Accounting & Filing With the Court: The formal accounting is a detailed report of any and all financial transactions having to do with the decedent’s estate. It should provide a comprehensive and accurate breakdown of any assets, expenses, distributions, and fees. Upon completion, the formal accounting should be filed with the probate court for examination and review. If the accounting is approved, the court will sign off on moving forward with the distribution of estate assets to beneficiaries.
With so many moving parts in the probate process, it can be difficult to ensure that you cover all of your bases. Some of the most common mistakes executors make in the probate process can include a failure to maintain and provide accurate financial records, providing incorrect valuations of estate assets, failing to provide proper notice to involved parties, or missing deadlines.
Trusts: Alternately, you may wish to consider setting up a revocable trust. This is a method of transferring property and assets so that, upon the grantor’s death, ownership of these assets passes to the beneficiaries of the trust. Two things of importance to note about revocable trusts are: (1) the trust can be revoked, amended, or terminated at any time by the grantor and (2) the trust does not prevent the grantor’s creditors from making claims to the trust’s assets. However, the simple fact is that the existence of a trust prior to the grantor’s death can save executors and beneficiaries alike from the grueling process of going through probate. Further yet, you may also wish to consider setting up a non-revocable trust, also referred to as an irrevocable trust. One key difference between revocable and irrevocable trusts are that you can cancel a revocable trust at any time prior to the grantor’s death, whereas irrevocable trusts are permanent and may not be changed unless otherwise approved by the trust’s beneficiaries. Additionally, irrevocable trusts are generally not subject to estate taxes, as ownership of assets within the trust is moved from you to the trust. Overall, non-revocable trusts offer less flexibility, but greater asset protection.
By partnering with an accountant, they can help you avoid these potentially costly mistakes by taking on much of the burden. If you have any questions, are looking for an accountant to help you through probate, or have interest in establishing a trust, contact us at info@thecpa.com or 215-350-2250.
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