An estate trustee will usually be expected to begin looking into the nature of the estate immediately after funeral arrangements have been made and carried out. An early challenge for anyone acting as an estate trustee is to locate all of the information regarding the assets and liabilities of the estate and any other information relevant to its administration.
The traditional search in the top drawer of the deceased's dresser can go a long way. If an estate trustee is able to discover where the deceased stored important records, this is a great start to information-gathering, but it should be just that -- a start -- to a longer inquiry into the assets and liabilities of the deceased. The advisors of the deceased are a great potential source of information. If an individual consulted accountants, insurance agents, medical caregivers, and/or lawyers at any point in the estate planning process, these professionals may have access to reliable information required by the estate trustee. Caregivers and family members may also be worth reaching out to, as these individuals may have access to lists or other documentation that may prove helpful.
Difficulties can arise where the deceased has hidden assets away for safekeeping and failed to make these assets more accessible prior to death. If advisors and family members cannot be consulted to discuss the extent and location of assets, the deceased's home may need to be searched to uncover hidden assets. Hiding places tend to be more sophisticated than simply hiding money under the mattress, with online suggestions including concealment within pet food bags, cleaning supplies, and candles. More extreme ideas include hiding money in walls or burying cash or other goods in either one's backyard or in a remote location. With the increasing significance of digital assets, the deceased's computers and online accounts should also be searched, if possible.
Accountants can be of great assistance in the formulation of a distribution plan that anticipates taxation and ensures that enough assets are held back to satisfy upcoming tax liabilities. Sufficient holdback before a final distribution can protect the estate trustee against personal claims. Any time before the Final Clearance Certificate is issued, it is important to remain ready to pay unexpected estate taxes.
A search for creditors and determination of any liabilities of the estate should be done early to manage beneficiary expectations. Creditors may or may not have secured claims. Either way, however, they will likely expect timely repayment of the debts owed to them by the estate. The earlier that an estate trustee tells beneficiaries about the nature and the extent of the debts of the estate, the better off he or she will be as trustee.
The easiest way to protect against claims by creditors is to place advertisements in a local newspaper. There is no general statutory duty that an estate trustee must advertise to creditors of an estate. However, an estate trustee may wish to do so to limit personal liability with respect to claims by creditors of the estate following any distribution of estate assets. An estate trustee may otherwise remain personally liable to claims that could have been protected against by advertising for creditors. Advertising for creditors cannot always be relied on as protection from personal liability. If it is known or suspected that a specific creditor exists, efforts should be made to contact that creditor and to ensure that the debt is repaid.
Generally speaking, an estate trustee is expected to make distributions (either interim or final, depending on the complexity of the estate) by the end of the "Executor's Year." Under this common-law rule, an estate trustee will be liable for any losses resulting from unreasonable delay in determining the assets and liabilities of the estate and making distributions to beneficiaries.
If beneficiaries are left dissatisfied, an estate trustee may be personally liable for any oversights or delays in the administration of the estate. This reinforces what we wrote in our previous blog entry with respect to the importance of carefully selecting an estate trustee who is capable and willing to work diligently to administer your estate. Even experienced estate trustees may wish to obtain legal advice with respect to administering the estate in a way that manages beneficiary expectations and limits personal liability.
Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.