Q: I am the Executor of my mother’s estate. I have paid all of the bills and filed the final income tax return and am ready to close the estate. How should I proceed?
A: In order to close the estate, you should prepare what is known as an accounting. This accounting shows the beneficiaries what you collected, what you paid and what is left to be distributed. The accounting should be detailed to show all transactions in and out of the estate account.
In the accounting you will also compute the commissions you are entitled to for your service. In New York the commissions are calculated as follows: 5% of the first $100,000, 4% of the next $200,000, 3% of the next $700,000, 2.5% of the next $4,000,000 and 2% of all sums over $5,000,000. The executor is entitled to commissions only on the assets in the probate estate.
As executor you can take the entire commission, you can waive the commission or take some amount in between. This commission is income taxable, so you should consult your tax advisor before making a decision. You cannot pay yourself the commission until your accounting has been approved by all the beneficiaries.
To have the beneficiaries approve your actions as executor you would present them with the accounting and a release. This release would essentially say that the beneficiary has reviewed your accounting, accepts it as a final accounting, approves your commissions and that beneficiary releases you from liability as executor. This release should be signed and notarized by all beneficiaries and returned to you before any checks are issued or you pay your commissions.
After you make the final distributions you must keep the records of the estate for six years. This is because fiduciary has liability for their actions for six years from the date they cease acting. The six year statute of limitations starts to run on the date of your last act as executor, not from the date of your appointment as executor by the court.
The closure of an estate is an act which should be done with the formality of an accounting and release provided by the executor to the beneficiaries. Family dynamics can change and disagreements and can arise after estate funds are distributed. It. best to have these documents prepared by an attorney experienced in estate administration matters.
-- Nancy Burner, Esq. & Kera Reed, Esq.