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4 important steps for estate accounting

On Behalf of | Jan 9, 2019 | Estate Administration |

When a loved one passes away and leaves you in charge of their estate, you need to start with a general accounting process that focuses specifically on all of the little details. Every penny matters. You need to know where it went, how it got used and why it got used that way. Leave nothing out.

The key is to match up the estate plan with the actual estate. If it says that a bank account contains $100,000 to get split between the heirs, you need to confirm that it actually has $100,000. Never assume that the plan is accurate. Always double-check. Things change and many disputes happen because it’s unclear where the money went. Keeping track helps you determine how to move forward and follow the plan as well as possible.

To help you, here are a few key steps to take:

1. Take inventory of the estate

First and foremost, you need to go over the estate and match it up with the plan, as noted above. You cannot begin administering the estate properly until you know exactly what it contains. Look at everything from bank accounts to investment funds to retirement funds to physical assets. Make a list of all of the assets that the person owned at the time of their death. This can help you find mistakes in the plan or missing assets.

2. Pay off the taxes

While the heirs may be interested in getting the money that the deceased left for them, they do not come first. You must ensure that the estate has the money to pay off the taxes. These could include final income tax returns or property taxes. If you distribute the money to the heirs and then lack the money to pay the taxes, it’s a serious problem.

3. Pay off other debts

Similarly, the estate may come with other debts that you need to take care of. Think of the money you owe — mortgage payments, credit card payments, car payments. If the deceased had any of the same debts, you need to take care of them in some fashion.

4. Cover the costs of estate administration

Dealing with the rest of the estate can also lead to some extra costs, which you need to cover. For instance, perhaps you want to sell the family home and divide the money. The buyer asks you to cover the closing costs. That money needs to come out of the earnings before they get divided.

All told, you just need to focus on the details, understand the legal process and know exactly what steps to take. If you work your way through the process carefully, you can divide the estate with minimal conflict.