When a person takes on the executor role, it can be daunting. The work to be done can be overwhelming (executor.org can help – sign up for an account for a step-by-step guide through the process).
But more than the work, the expenses can seem enormous.
From necessary home upkeep, trips to the courthouse and legal fees, the money just keeps adding up. And executor fees by state vary.
The good news for an executor is that she does not have to pay these expenses out of her own pocket. Most of the expenses incurred while settling an estate are paid for by the estate, which is composed of the deceased’s savings, assets, etc.
So what can the estate pay for and what must you pay for out of your own pocket?
Expenses that can be covered by the estate include:
- Professionals hired to help specifically with the estate – The professional that likely comes to mind first when you think of the estate is the attorney for the estate. Since the attorney is representing the estate and guiding it through the probate process, it makes sense that the attorney would be paid with estate funds. But did you know that other professionals such as the estate’s accountant who prepares the estate and decedent’s tax returns is also paid for through the estate? As are the realtor who is hired to sell the house, the appraiser of the estate jewelry, etc. Even the people who mow the lawn at the decedent’s house are paid for by estate funds.
- Necessary repairs – In some cases, a home must be repaired before it can be sold. The expense of such repairs is covered by the estate. These repairs only should be done if they will increase the value of the home after you factor in repair costs. Even if this is the case, after discussion with the beneficiaries or the estate’s attorney, you may decide to not make the repairs. Another reason to undertake necessary repairs is to protect an asset from damage. If a faucet is leaking, it may increase the water bill. It also might leak out and damage a surrounding wood floor, for example. You should make these repairs as soon as possible.
- Transportation – If an executor does not live in the same place as the decedent whose estate he is administering, the executor can be reimbursed for transportation expenses when attending to the necessary business of serving as executor. This, unfortunately, is where things get tricky. The probate court can help give you an idea of what the mileage reimbursement should be if using a personal vehicle to travel. Flights and rental cars can be a bit more straightforward. You also might get push back from beneficiaries complaining that you are traveling too much, or not enough. The best advice is to try to combine necessary tasks into necessary trips. For example, if you have to make an appearance in probate court, that also might be a good time to meet with the realtor and appraiser, or oversee necessary home repairs before the sale. If you combine these tasks into fewer trips, you will be a better steward of the estate’s money.
- Funeral costs – While seeing to funeral arrangements is not officially a duty of an executor, the executor is likely to see the funeral bill when it arrives. This bill should be paid for through the estate’s funds.
- Death certificates – Death certificates are necessary for an executor to do her job. Therefore, the estate should pay for these.
- Taxes – This one might seem obvious, but the estate is responsible for paying its own taxes. Those taxes include income taxes, property taxes, estate taxes, etc.
Expenses that cannot be covered by the estate include:
- Costs incurred before death – You may know you are going to serve as the executor of an estate before the will maker dies. You may even work with the writer of the will to get things in order before her death. Together, you may do things like clean out the basement or take items to the local thrift store. The work you do before the will writer dies is not part of your executor duty, though, so you cannot be reimbursed for expenses incurred. If the will writer pays for your flight to town, that’s great. But if she does not, you are on the hook.
- Costs as a beneficiary – It is often the case that an executor is also a beneficiary. Even if you are not a beneficiary, you can share this advice if someone asks to be reimbursed for expenses as a beneficiary. The best rule of thumb is to draw a line between your duties as an executor and your role as beneficiary. For example, as a beneficiary, you may receive large pieces of furniture. You may have to travel into town and rent a truck to move the furniture out of the house to your own. That is an expense of a beneficiary, not one for which the estate is responsible. Unless the will specifically states the moving cost of the furniture is included in the bequest, these cost is yours.
An important thing to consider if you are an executor is the assets at hand. If you anticipate that the estate is not large enough to cover its debts and expenses, the executor should consult an estate attorney or the probate court before spending any money.
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