Should I Buy a $500 Checklist to Settle My Dad’s Estate?

Introduction
Where to Get a Task List for Free
Inventory Assets
Marshal Assets
The Tricky Stuff
Summary
Free Report

Introduction:  My Dad just died. My Mom passed a few years ago. My sister and I are the only beneficiaries and we will be inheriting approximately $500,000 each, made up of a house, stock and bonds, and cash. Everything was titled in his living trust.

I want to have a smooth and quick estate settlement so I can get on with my life. I called an estate planning attorney who told me I don’t really need an attorney, that I can handle this all myself, and that she has a “task list” that she will send to me for $500. Does this sound like a good idea?

Son Wanting to Make Sure I am Doing the Right Thing

Dear Wanting to Do It Right:

Where to Get a Task List for Free:  I would assume you could get a task list off the internet, or certainly from the County Law Library (they are open to the public, at least here in San Diego, they are). But that is nothing more than a piece of paper, not really advice tailored to your specific situation. And I doubt that the attorney’s $500 piece of paper is much better.

Inventorying: The first thing you need to do is determine what your Dad owned, approximately what each asset is worth, and how title was held. Even though you said everything was titled in his Living Trust, it is worthwhile to verify that against the account statements and title documents.

Eventually, you will probably need to obtain exact values as of the date of death through an appraisal for the house and a valuation (at least via the broker) for the stocks and bonds. The cash accounts, of course, should be easy to value as of that date. This is called inventorying the assets. Once these are written down on an inventory schedule (asset name, title format, exact value as of date of death), that document becomes one you will refer back to over and over again.

Marshaling: Depending on how title was held, you will probably need some sort of document of authority to obtain control over these assets. That’s right, a death certificate is not generally sufficient by itself. I refer to this process as marshaling the assets.

The Tricky Stuff: Ok, so far so good and you could probably do the above yourself including preparing the document of authority. But now we get to the tricky stuff. Were there any debts, should they be paid, when? Should the taxing authorities (IRS, State, County) be notified and how?

In California we have county property tax controlled by Prop 13 which keeps the property tax low until there is a change of ownership. Does the inheritance by you and your sister constitute a change of ownership such that property taxes are going to increase? Further, are either you or your sister going to keep the house with the other getting everything else and how does that impact the county property tax?

And then there’s the issue of making your sister feel comfortable with what is eventually distributed to her. Or will she always wonder whether she received the appropriate amount? For example, let’s say the estate was valued as of the day of your Dad’s passing at exactly $1 million. When you work through all of the details of settling the estate, there will probably be something less than $1 million to distribute. Why? Because, even without an attorney, there are going to be expenses that need to be paid such as CPA, Funeral, Taxes, Costs of Sale of the House, etc. So let’s assume that when it’s time to distribute there is only $950,000 left. You write your sister a check for $475,000. How does she know that is the correct amount? In some families this question can linger for years. And let’s talk about the flip side of that question: how long do you have liability to her in case she thinks she should have received more because she thinks there was really more money or you screwed up?

Here is a small list of issues on which attorneys can be really helpful: how do you make her feel comfortable about how much she received in her distribution and how do you cut off that open ended liability to her? Another one is whether a death tax return should be filed with the IRS even if no tax is due. Sometimes this latter procedure can be very beneficial. (And, at least in my mind, the CPA is not the one to be able to answer that question.) Additionally, at the outset, California law requires certain notices be provided. The attorney should advise you, based on your family’s circumstances, who is to receive that notice. Failure to provide the correct notice to the appropriate people can cause significant monetary losses even years later.

Summary: There are a myriad of issues on which an attorney can be helpful in the settling of an estate and, generally, few of them can be dealt with by a $500 mass produced checklist.

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3/31/2012