The Hidden Costs of Settling an Estate

Beware of these not-so-obvious expenses associated with executing a will.

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Signing Last Will and Testament
Alamy
By Geoff Williams

It seems like it should be so easy. A loved one dies, you go to the reading of the will and the closing of an estate is complete.

That's how the process is often portrayed in television and the movies. Hollywood rarely shows scenes of the executor of the will filling out reams of paperwork, making endless phone calls or driving for miles to hash things out with the relatives of the deceased.

"Most people don't realize that serving as an executor or an administrator is very time-consuming and burdensome," says Harold Bollaci, an elder law estate planning attorney in Garden City, N.Y.

He adds that it can also be expensive and full of "obvious costs" such as attorneys' fees -- which are often a percentage of the gross estate -- court filing fees and commissions paid to the executor for his or her service in settling the estate.

But there are also plenty of not-so-obvious expenses associated with closing an estate -- that is, making sure money and property go to the right heirs and taxes are paid. Whether the deceased was rich or poor, there are hidden costs the inexperienced might never dream of, and yet seem perfectly understandable once you think about it. "As the saying goes, everyone gets their piece of the pie," Bollaci quips.

So if you're going to close out an estate in the near future, here are some reasons you may be dealing with the most expensive pie you've ever encountered.

Time is money. You might be the one closing your family member's or friend's estate -- because you feel obligated, or you feel you'll have more control in carrying out the deceased's wishes or simply because you'd like to collect the commission the executor of the will receives.
Commissions vary -- some states have limits on how much commission can be charged -- but they're usually about 3 to 5 percent of the assets. (Keep in mind that the commission is income, so you'll have to pay taxes on it.)

If you are thinking of taking on the job, know that closing an estate takes time, possibly far more than you bargained for. There are papers to sign, often by multiple people, especially if there is a blended family or two involved. There's also accounting and a lot of loose ends to tie up, like selling a car or a house.

So think about what the duty might entail before you sign on as executor. You may come to realize that whatever compensation you received, you actually outspent in the time it took to close the estate.

Who the beneficiaries are can make things a snap. Or they make cause you to snap. If you have a group of like-minded, reasonable adults, your settlement paperwork costs are probably going to be "fairly simple and inexpensive because all of the beneficiaries can sign off on the accounting ... without a hearing or judicial invention," says Alyssa DiRusso, a law professor who teaches courses in estates, trusts and wills at Samford University's Cumberland School of Law in Birmingham, Ala.

But all bets are off if a beneficiary wannabe objects to being excluded from the will. "They have a right to object," Bollaci says. "Will contests can cost tens of thousands of dollars and can drag on for months and years. Frequently, accountants are called in at great expense."

The beneficiary might not be an adult. If the estate's beneficiary is a minor or considered incompetent to make his or her own decisions, the paperwork and the law gets more complicated, DiRusso says.

It doesn't have to be that way, however. A trust can be set up to manage the assets for the minor or incompetent beneficiary,
and the trustee can sign off on the paperwork. "Managing hidden costs can largely be a matter of planning ahead," DiRusso says.

The beneficiary may live in another country. In that case, "all sorts of issues arise," Bollaci says. "Foreign documents submitted to the court, for example, death certificates, must be translated by a court-certified translator. In some instances, this can cost $200 per page. If an overseas beneficiary has to have documents notarized, they have to go to a U.S. consulate or U.S. Embassy to obtain a consular stamp. Depending on the country, that is like telling someone to go from New York City to Cleveland to obtain a notary public stamp."

The deceased may have property in more than one state. Then it really gets fun. "For example, if a decedent dies a resident of Florida but owns in his or her individual name a vacation residence in North Carolina, her executor will have to open two probates -- one in Florida and one in North Carolina," says Carlos Rodriguez, a senior vice president and a regional financial planner at SunTrust Bank in Tampa, Fla., who is also an estate and tax attorney.

If you are cringing because you own a vacation home elsewhere, Rodriguez adds that "living clients can avoid this by titling the out-of-state vacation residence either in a revocable living trust or a limited liability company."

Shipping costs. This is another expense you probably wouldn't consider at the outset of closing an estate, Rodriguez says. The estate might have to pay to ship coins, art, jewelry or perhaps antique furniture to relatives far, far away.

Sales costs. You have a lot of assets that aren't tied to an heir, and you're planning to sell them at an auction? Fine, but expect to pay a commission for that, both Bollaci and Rodriguez warn.

Cleaning costs. Maybe your great aunt had no artwork or coins to sell, but she had a house, and you want to sell it. The estate may end up having to pay to clean it -- or the beneficiaries may have to foot the bill, since not every estate has millions to draw upon.

Housing costs in general. "There are also hidden costs in securing a home against burglaries or vandalism by changing locks and installing a security system, especially if the home still contains estate assets," Rodriguez says. "Finally, it's important to look out for carrying costs, such as mortgage, taxes, insurance and utilities for a residence while it is marketed for sale. This can be a particularly unpleasant surprise if it sits on the market for awhile."

Or you may hope to put the house up for sale in the spring but can't quite get it ready in time. "Miss the selling season, and the estate is paying taxes and expenses to maintain a vacant home," Bollaci says.

The deceased was a terrible record-keeper. Steve Smith, an attorney at the law firm Horack Talley in Charlotte, N.C., points out that if your late relative was bad at keeping track of his or her money, you'll probably spend more in fees (or your own time) trying to sort everything out. It's yet another reason to think about hiring someone else to be the executor if that's an option -- or it may be a reason to take on the job yourself, if you pity a stranger trying to decipher your late mother's handwriting.

You might also see it as a way to get to know your parents or a loved one even better. But that shouldn't be a reason to accept the role of executor of the will. There can be a lot of hassle if things get complicated, and maybe you already know the dearly departed just fine, thanks. As everyone says, your memories of your loved ones will last forever.

Which is a good thing -- because after awhile, you'll swear that closing an estate lasts almost as long.


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9 Comments

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jl194456

NEVER EVER let a sibling be the personal rep. of an estate, my wife would not listen to me & signed a paper making her sister the PR of their mother's estate. She lied to my wife before the probate was opened & during. The estate was not very big but my wife sure got a lesson. For me it's the principle of the actions her sister took to get most of the estate paid to her husband, her brother & his wife & herself. My wife says she will never speak to her again. Do not wait if you see something is not right, object to what it is right away with the probate court, I think there is usually a small fee to enter objection but well worth the money!!!!!!!

March 25 2014 at 11:46 PM Report abuse rate up rate down Reply
brennemanbelkin

When assets change hands (Liquid or chattel) there's a brief exciting moment when they're owned by nobody.
That's when the lawyers strike.
Most lawyers will leave an estate broke.
Expect nothing, you won't be disappointed.

March 25 2014 at 11:35 PM Report abuse +1 rate up rate down Reply
xanadutu

AND, what if the executer isn't adhering to the will????
The will states that the estate must be settled in SIX months -- It's been over TEN MONTHS!!

March 25 2014 at 5:06 PM Report abuse rate up rate down Reply
napachiefs

99% Shut down! So be it:

March 25 2014 at 1:51 PM Report abuse rate up rate down Reply
betbrit

Can't you keep people from contesting the Will by stating in said Will that if anyone contests it, they really don't get anything, or specifically stating why a certain person is excluded from inheriting?

I just never thought of all the costs involved until reading this article.

March 25 2014 at 1:19 PM Report abuse rate up rate down Reply
rence_reboredo

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February 25 2014 at 7:48 PM Report abuse -2 rate up rate down Reply
gramargo

We simplified things by setting up a family trust, with me getting the whole estate when my husband died, and having wills that tied in with the trust deed. There was no probate, and I paid any bills owed from the account I inherited. There are two properties involved which will go to my children, and another income source which will go to my grandchildren. My daughter will be my executor and she's very competent about financial matters, as is my son who would do the job if she couldn't.
Luckily my family members are all friends as well as siblings, and there should be no difficulties about distribution of funds. I've also already given them much of my furniture and jewelry over the years, and am asking them which of the remaining things they would like to have. My dear aunt did this and labeled everything with our names so we were given our favorite things from her home, with nobody having any complaints.
If you plan ahead, it's not going to be so difficult, though I agree it may take time. Talk to family members so they will know what to expect, and get advice from the attorney who writes up your will, and from a competent accountant. Don't wait.....you never know what may happen sooner or later.

February 23 2014 at 3:20 PM Report abuse +2 rate up rate down Reply
gkruth

What a lot of drivel in this article! The writer is obviously an attorney, or some wonk that sucks up to an indsustry of preying on the dead.
I served as executor to both my parents estates (they were seperated, and affairs were individualized). Sure it took some time, but the amount of compensation to the attorney and executor are outrageous. One attorney once told me, "Estate fees are berttter than stealing money." You can negotiate fees with attorneys and executors, a fact they don't want you to know.
Oh, about my fees, my brothers asked me to forgoe them as a gesture. Despite hours of running around, I did -- only to later find out they stole money from me by denying loans to our parents. So take that into consideration too, when Mom or Dad passes.

February 23 2014 at 11:21 AM Report abuse rate up rate down Reply
RMS

Never mind the costs involved, what about the time waiting and waiting? I had two relatives who passed away about six months ago. Both had wills and their affairs in order. We are still waiting for the probate process to be completed with the county courts. In the meantime, we are paying the monthly expenses to maintain a co op apartment until we have permission to sell it. This is costing the estate every month that goes by.

February 23 2014 at 10:00 AM Report abuse rate up rate down Reply
1 reply to RMS's comment
dollibug

My guess is the attorneys *WILL GET the majority of what is left*.....they have *WAYS* to do this legally.....I took care of my dear aunt and she had put me on her banking account.....the attorneys tried to get me to turn over the account to them.....BUT THAT DID NOT HAPPEN.....the attorneys ended up getting everything this woman had.....EXCEPT what money was left in the account. IT IS SAD that there is CORRUPTION AND COVER UP EVERYWHERE....and attorneys know how to SCREW PEOPLE LEGALLY....

February 23 2014 at 10:11 AM Report abuse +3 rate up rate down Reply
alfredschrader

Here's a tip that can save you a fortune. I know this from experience.
It's always a tragedy when a loved one passes on. In the case of a grand parent, parent, aunt, uncle, etc. never, and I mean never throw any of their papers, shoeboxes, artwork, collectibles, etc. into the trash. If you sell the house, trailer, mansion, apartment, whatever, move all of the furniture, shoeboxes, papers, paintings, vases, everything into storage until you can sort through it piece by piece at a later time.
My mom was the last living beneficiary in a long line of relatives going all the way back to Yorkshire England and Bavaria Germany. In the haste to clean out her apartment my brother-in-law threw out all of her papers, etc. without even knowing what he was looking at.
It wasn't until 7 years later that some of it began showing up with the state that I had discovered what had happened. Basically he threw away millions of dollars.
None of the banks or investment firms will help me find the accounts or security deposit boxes because I don't have any account info or keys. So millions are just sitting there collecting dust.

February 23 2014 at 9:40 AM Report abuse +1 rate up rate down Reply
2 replies to alfredschrader's comment
dollibug

So Alfred.....just how do you know that *so millions are just sitting there collecting dust*?

Have you found any yet?

You are so right that NO ONE WILL HELP you find anything. Attorneys will certainly be glad to do the work and charge you an arm and a leg for doing it. BE CAREFUL THOUGH.....there is a lot of CORRUPTION AND COVER UP in our world today....and attorneys have ways to *abuse the system and get by with stealing your fortune*....SAD, BUT TRUE.

February 23 2014 at 10:09 AM Report abuse +2 rate up rate down Reply
reppertpv

Try contacting your state controller's office for unclaimed property. You could also try unclaimed.org or missingmoney.com. I have a friend that was able to reclaim her late fathers property that was in a safe deposit box and she did not have the key. At some point the bank turned the items over to the state when the fees were no longer being paid.

February 23 2014 at 1:45 PM Report abuse +2 rate up rate down Reply