You can’t make this stuff up. I received a letter just this week that said, in essence “Why didn’t you tell me sooner that my aunt died – and why haven’t I received my inheritance check yet?”
I almost forwarded a reply that read, “Dear Nephew – You should be ashamed of yourself that you weren’t close enough with your aunt (who lovingly included you in her will) to know of her demise, nevertheless to send a demand for your inheritance when we are so early in the estate administration process.”
But I didn’t send it.
The nephew’s letter points out a few things that I thought worthy of mention today. When someone dies – even if there is a revocable living trust involved, the trustee of that trust has certain duties that he or she must perform before the assets of the estate are distributed to the beneficiaries. The trustee not only has a duty to the estate beneficiaries, but also to the decedent’s creditors. So before making a final distribution, the trustee needs to make sure that all of the decedent’s proper bills have been paid and that tax returns are all filed and approved.
Usually the beneficiaries of the estate learn about the death through loved ones before the estate lawyer’s office sends a notice of the administration. The beneficiaries are generally entitled to receive a copy of the will and/or trust as well as documents that would show who the trustee will be during the administrative process.
The trustee may need to sell assets. Perhaps there is a house or other properties that need to be sold. This obviously takes some time. Stocks or brokerage accounts may have to be liquidated to cash. Personal belongings need to be dealt with.
The whole process may take as little time as three months or might take a few years. This depends upon the types of assets that the decedent owned – as well as the estate plan itself. Estates heavy in real estate and closely held business interests are going to take more time to administer than would an estate that has one brokerage account and a couple of certificates of deposit.
Estates that have irrevocable life insurance trusts, charitable trusts, grantor retained annuity trusts and private foundations will obviously take longer to administer than those that have a revocable living trust with straightforward distributions.
The value of the estate matters as well. Estates that are required to file a federal or state estate tax return will also take longer since the tax return itself is filed nine months or more (depending upon whether extensions are necessary) following the decedent’s death. Where estate tax returns are required the trustee must get appraisals and date of death valuations on all of the assets. Professional appraisals take time.
Once the tax return is filed, it may take a year or longer before the IRS issues its tax clearance letter releasing the trustee from any further liability. And if there are any state death tax returns due, those offices usually don’t issue their releases until after the federal government as issued its release.
Until the trustee is released, he or she really can’t make a full and final distribution of the estate funds. Once he’s made distribution, if the IRS comes back and says that more money is owed, the trustee is personally responsible to make that payment – even if it must come out of his own money.
So we hope that most estate beneficiaries understand that an estate administration is a process that can’t be completed in just a few days. Part of this is setting expectations. The estate attorney will often communicate with the beneficiaries to advise what that estate administration timeline looks like. As an aside, if you go to my law firm’s web site you’ll find a free guide and video entitled “Legal Matters When a Loved One Dies” that offers useful information on the issues and timelines I’m addressing in this column.
Returning to the topic at hand, it’s been my experience that the farther degree of relation the beneficiary is from the decedent the more likely it is that the beneficiary is going to be demanding. The nephew writing me that letter is a classic example. Children rarely make demands before the administrative process has run its course – mostly because they understand what their parents owned and what needs to happen. The children also tend to be more emotionally attached to the decedent and that will often make a difference.
But people sometimes act oddly. Another beneficiary once wrote my office a letter asking when the estate administration was going to be completed because he just purchased a new car and needed the money to pay for it.
I wondered what he would have done had his relative not died!