Settling an estate costs money.
An obvious statement, but many people don't know what they're getting into when they so graciously agree to stand as executor.
First, there's the funeral/cremation/burial expense, which can easily cost thousands.
There will also be numerous small expenses along the way, plus legal fees, probate fees, accounting, income tax, debt repayment, fees to any professional for assistance settling the estate...
this list goes on and on.
So where does the money come from? If the deceased had sufficient funds in their bank account, the bank will usually pay the funeral expense.
Let's stop here for a second, because many of you may be wondering, "But I thought the accounts get frozen".
Yes, the bank accounts do get frozen after the bank is informed of the death, but the bank may still be willing to cover some or all of the estate's expenses.
In my experience, banks are more likely to cover expenses if there's a will and if the executor is a family member.
And, even then, it helps to be as friendly and cooperative as possible.
Don't be surprised if the bank is selective in which expenses they cover.
Regardless of the bank's level of cooperation prior to probate being granted, you will receive signing authority on estate accounts after probate has been granted, meaning the bank no longer controls which expenses get paid.
So, in the meantime, if the bank refuses to cover some of your expenses, where does the money come from?I often suggest opening a personal line of credit.
It provides money for the estate's expenses, keeps your personal money separated from the estate's money, and the interest cost can be covered by the estate.
The other alternative is to cover the expenses with your own personal money, and then get reimbursed later.
This option may or may not be appealing to you, but from a practical perspective, it's easy.
In most jurisdictions, when someone dies without the necessary funds for a funeral, and if other responsible persons cannot afford the expense, a funeral supplement may be available from the provincial/state government.
Any funeral expenses paid by the government are a debt owed back to government and may be recovered by the government.
If the deceased was a military veteran then another source of funds may the federal government.
Under certain circumstances, a non-repayable grant may be available to the spouse or family of a deceased veteran toward funeral and burial or cremation costs when the estate cannot afford to pay.
Probate fees were mentioned earlier.
All states/provinces have a fee schedule, ranging from $0 (for very small estates) to thousands of dollars for large estates, and is usually calculated based on the value of the assets.
In addition, just to add insult to injury, many jurisdictions charge a court filing fee.
Bookkeeping is an important part of settling an estate.
No matter where you receive funds from to pay expenses, it's imperative that you carefully track all of the income and expenses of the estate.
I also suggest tracking all bank transactions in order to help ensure transparency.
This information will be provided to the accountant to prepare any T3 Trust Income Tax Returns, and will be reviewed by the beneficiaries when passing the accounts.
Also, keep track of all invoices and receipts in case you need to refer to them later or if you have to provide copies to the beneficiaries.
I like to scan all documents into the computer and store them as PDFs.
In summary, settling an estate is usually quite expensive.
Get the bank's cooperation right at the start, but if that doesn't work and if you don't have available funds of your own, you might want to consider whether you're the right person for the job.
An obvious statement, but many people don't know what they're getting into when they so graciously agree to stand as executor.
First, there's the funeral/cremation/burial expense, which can easily cost thousands.
There will also be numerous small expenses along the way, plus legal fees, probate fees, accounting, income tax, debt repayment, fees to any professional for assistance settling the estate...
this list goes on and on.
So where does the money come from? If the deceased had sufficient funds in their bank account, the bank will usually pay the funeral expense.
Let's stop here for a second, because many of you may be wondering, "But I thought the accounts get frozen".
Yes, the bank accounts do get frozen after the bank is informed of the death, but the bank may still be willing to cover some or all of the estate's expenses.
In my experience, banks are more likely to cover expenses if there's a will and if the executor is a family member.
And, even then, it helps to be as friendly and cooperative as possible.
Don't be surprised if the bank is selective in which expenses they cover.
Regardless of the bank's level of cooperation prior to probate being granted, you will receive signing authority on estate accounts after probate has been granted, meaning the bank no longer controls which expenses get paid.
So, in the meantime, if the bank refuses to cover some of your expenses, where does the money come from?I often suggest opening a personal line of credit.
It provides money for the estate's expenses, keeps your personal money separated from the estate's money, and the interest cost can be covered by the estate.
The other alternative is to cover the expenses with your own personal money, and then get reimbursed later.
This option may or may not be appealing to you, but from a practical perspective, it's easy.
In most jurisdictions, when someone dies without the necessary funds for a funeral, and if other responsible persons cannot afford the expense, a funeral supplement may be available from the provincial/state government.
Any funeral expenses paid by the government are a debt owed back to government and may be recovered by the government.
If the deceased was a military veteran then another source of funds may the federal government.
Under certain circumstances, a non-repayable grant may be available to the spouse or family of a deceased veteran toward funeral and burial or cremation costs when the estate cannot afford to pay.
Probate fees were mentioned earlier.
All states/provinces have a fee schedule, ranging from $0 (for very small estates) to thousands of dollars for large estates, and is usually calculated based on the value of the assets.
In addition, just to add insult to injury, many jurisdictions charge a court filing fee.
Bookkeeping is an important part of settling an estate.
No matter where you receive funds from to pay expenses, it's imperative that you carefully track all of the income and expenses of the estate.
I also suggest tracking all bank transactions in order to help ensure transparency.
This information will be provided to the accountant to prepare any T3 Trust Income Tax Returns, and will be reviewed by the beneficiaries when passing the accounts.
Also, keep track of all invoices and receipts in case you need to refer to them later or if you have to provide copies to the beneficiaries.
I like to scan all documents into the computer and store them as PDFs.
In summary, settling an estate is usually quite expensive.
Get the bank's cooperation right at the start, but if that doesn't work and if you don't have available funds of your own, you might want to consider whether you're the right person for the job.
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