Estate Financials

Estate Financials Illustration

Managing estate financials is at the heart of the executor process, and involves a variety of elements: estate income and expenses, state and federal taxes, asset liquidation, debt resolution, and more.

General

The executor has a fiduciary duty to manage estate financials for the good of the estate, and to settle the estate in accordance with applicable laws and will directives.

It is important throughout this process that the executor keep excellent records, since some or all of these records may be required by the court, and because the process can otherwise become confusing and error-prone.

Using EstateExec can help organize and automate this record-keeping, with the Cashflow tab serving as the central ledger (i.e., spreadsheet) for all these activities. Even if the executor is using a lawyer and/or an accountant, EstateExec can be very helpful to all parties in organizing and tracking all this financial information.

Estate Income and Expenses

An estate typically incurs a variety of expenses:

  • Funeral and associated expenses
  • Ongoing mortgage payments, property taxes, utility bills, and other property-related services
  • Cleaning, repair, and disposal services
  • Postage and copying fees
  • Legal and financial services
  • Other expenses incurred by the executor

Many estates will also generate income during the settlement process, and this must be tracked and reported as well:

  • Interest and realized capital gains
  • Business and rental income
  • Other

When using EstateExec, you can track all of these via the Cashflow tab (see Manage Estate Cash). It might be tempting to try to record these transactions in a basic spreadsheet, but using EstateExec will greatly simplify your efforts as you begin to sell off and distribute assets, pay down debts, transfer funds, generate required reports, and more (see EstateExec Integration).

Caution: North Carolina treats real estate differently than other states, and holds that title to the property vests to heirs immediately upon death, even though in reality it will take some time to legally accomplish this transfer. As a consequence, executors may not pay for any property-related expenses using estate funds unless authorized to do so by the will or the court.

Executor Expenses

As a general rule, it's probably easiest and best to pay estate expenses directly from an estate account, which you can record via the Cashflow tab as mentioned above.

Sometimes, though, an executor may find it easier to pay out of pocket, and later get reimbursed by the estate. For example, in the early days of the executor process, before the executor has obtained an EIN for the estate and opened an estate account, it may be necessary to pay certain estate expenses (such as a utility bill). And even after you have access to an estate account, sometimes it may just be easier to pay something yourself directly (for example, cash is required, or a third party requires a type of credit card the estate doesn't have). When using EstateExec, simply record any such payments in the Executor Expense table, and then later reimburse yourself when you have access to estate funds (marking an expense reimbursed will automatically record a corresponding payment from the Cashflow account).

The executor is also eligible for reimbursement of reasonable travel expenses (which may include airfare and hotel if necessary). The executor can also claim reimbursement for miles driven in his or her own vehicle for estate business, whether driving to the decedent's home for various chores, driving to the bank, or whatever else is reasonably necessary. The Executor Expense table will automatically calculate mileage reimbursement rates for you, using government-approved rates for the relevant dates.

Debt Resolution and Asset Liquidation

Executors are responsible for resolving estate debts, potentially selling off assets as required to resolve those debts, or simply to make estate distribution more manageable (see Managing Assets).

Note that when using EstateExec, marking an asset sold will automatically record a corresponding deposit into the Cashflow account, and marking a debt paid will automatically deduct corresponding funds from the Cashflow account, simplifying the record-keeping process and keeping everything consistent.

Estate Loans and Inheritance Advances

Sometimes an estate needs cash before estate funds are available, or an heir may want access to funds before the estate is ready to make distributions.

An executor should be very careful about taking out loans in advance of estate liquidity: these loans can be costly, and there are often other ways to solve problems. Moreover, an executor should almost never take out a loan to pay an heir in advance; if such payment is desired, this should be solely the heir's responsibility.

With those caveats in mind, here are some resources that may be helpful:

Federal, State, and Local Taxes

The executor is responsible for filing and paying (using estate funds) the decedent's final income taxes, the estate's income taxes throughout the settlement period, estate taxes, property taxes, and possibly inheritance taxes. See Paying Taxes for more information about these taxes.

Financial Advice

If the estate is more complex or significantly larger than the finances with which the executor normally handles, the executor may wish to consider a financial advisor. EstateExec does not recommend specific services, but here are a couple of resources that may be helpful:

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