If you are a Personal Representative or Trustee, the chances are high that you will want to settle the estate and distribute the assets from the estate to the beneficiaries as quickly as possible. However, if you distribute the assets too soon, you may be held personally liable. This could result in having to pay for unpaid debts or expenses out of your own pocket, if there are not enough assets left in the Estate or Trust. Below are some of the things to consider prior to making distributions to the beneficiaries.
- Have the assets been verified and valued? – As Trustee/PR you will want to make sure that you have gathered and appraised the appropriate assets.
- Is there a beneficiary that you could foresee objecting? – This could result in unforeseen litigation expenses, attorney’s fees, postage costs, and other administration expenses.
- Have all taxes been filed? – The appropriate income and death tax returns should be filed and accepted. There are different types of income tax returns that may be necessary depending upon IRS rules and regulations. Any money owed to the government should be paid. Any money refunded to the estate should eventually be distributed to the appropriate beneficiaries. If taxes are not filed when they should be, depending upon the circumstance, the IRS may have no time frame to initiate an audit.
- Is there real estate? – There are expenses to maintain property for maintenance and upkeep. If the property is going to be sold, then there are selling expenses.
- Are there creditors known (or unknown)? – This is a bigger problem if assets are already distributed and a creditor makes a valid claim.
- Is there current or pending litigation? – Litigation costs can be unpredictable. If assets are distributed early, you may not have enough to cover this expense.
- Is Probate open? – Probate should be closed before distributing the assets.
These are just a few of the things that should be completed prior to distributing assets after the death of a loved one. While it is important to complete all tasks before distributing assets, it is equally important for the fiduciary (a Trustee or Personal Representative) to see that the estate is being administered in a timely manner.