E342 Thank You to Our Listeners!
Anthony S. Park
Based on feedback from you, the audience, we're pausing these episodes and will focus on writing instead: Our blog: Our books on Reviews always appreciated! Thank you for sharing all your amazing questions and stories, and thank you for listening!
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E341 How Long to Transfer Real Estate After Death
Anthony S. Park
There is no legal time limit to transfer real estate after death. It could happen quickly, or it could take years. We’ve seen cases where the real estate doesn’t get transferred until generations later. A fast sale is ideal, because problems can emerge in the meantime. There is a lag between the date of death and when the executor gets legal authority to handle the property. So, even “fast” isn’t very fast. How long does it take to get preliminary letters? The executor does not have full authority over the estate until he gets letters testamentary (or letters of administration) from...
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E340 Reasons Not to Make a Loved One the Executor
Anthony S. Park
We’ve talked before about not making a loved one your executor. I recently read an article titled, “.” Here, we’ll add our own perspective for why it’s not a great idea. Being executor can be emotionally difficult It is a duty that begins almost immediately after the death of your loved one. You are grieving the loss while facing a list of daunting tasks. Even normal probate is a lot of work and can be tough while grieving. In a somewhat difficult probate, you . If you are also family and friends with these people, it can be awkward. They will continually ask you when they will...
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E339 Why Sharing Your Seed Phrase is a Bad Bitcoin Inheritance Plan
Anthony S. Park
In this episode, we will talk about self-custodied bitcoiners (not those who have their coin on an exchange or with a third party). Some bitcoiners share their seed phrase with their spouse or adult children. Or perhaps they share their cloned wallet with those trusted individuals. It’s temptingly easy, essentially . But, as we’ll discuss, it can be insecure for reasons you may not think of. Sharing your seed phrase can be dangerously . Relationships change One reason that this plan is not flexible is because relationships change. Married couples can become divorced or...
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E338 Should I Sell My Home Before I Die?
Anthony S. Park
This is a very common question that we get from Solo Agers. We’ll review the pros and cons of making that decision. Reasons to sell your home before you die The biggest reason Solo Agers want to sell their home before they die is because they don’t want to leave a mess for their loved ones. Otherwise, there may be a lot of cleaning, maintenance, and packing for the heirs to do. Additionally, the before it is in sellable condition. Another reason is that Solo Agers may want to downsize anyway. Downsizing is a different topic, so we won’t focus on that here. Reasons to...
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E337 Who Owns a House During Probate?
Anthony S. Park
When someone dies, many folks are confused about who owns the house during probate, right after the death. Technically, the heirs own it immediately upon death, subject to debts and taxes of the estate. But, sometimes is not clear who the heirs are. The probate process decides who exactly are the heirs and places an executor in charge to sort out all those debts and taxes. So, the heirs own the house, but if it is not clear who the heirs are, then you kind of need to wait to see who really owns it. Understandably, this is a bit confusing. We’ll cover common questions on who owns the property...
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E336 Risks of Being an Executor
Anthony S. Park
What are the risks of being an executor? An executor has a lot of power and responsibility during probate, but is correspondingly accountable for everything that happens within the estate. We’ll cover how an executor has risk of even personal liability, how long that risk lasts, and how an executor can protect himself from these risks. Executor personally liable for debts and taxes The executor has personal liability for debts, taxes, and anything wrong with the estate. If an executor makes an error, the court’s first reaction is to deny payment of the executor's commission. If the...
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E335 Why a Letter of Instruction for Bitcoin Inheritance Will Fail
Anthony S. Park
A letter of instruction will likely fail for your bitcoin inheritance plan and should have only a marginal role in your plan, if any. Search for “bitcoin inheritance” and you will probably find lots of people advising you to write a letter of instruction for your heirs. We talked about this and even provided a . Now, having spent a bit more time delving into different approaches to bitcoin inheritance, we’re de-emphasizing a letter of instruction. Note: this applies to self-custodied bitcoin, not held through a third-party. Educate your heirs A letter of instruction is a subcategory the...
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E334 Why Hire a Professional Trustee?
Anthony S. Park
I do serve as a professional trustee, not just executor, or our Solo Ager clients. We’ll cover why our Solo Ager clients are looking for a professional trustee, why they don’t use banks, and how much it costs to hire a professional trustee. Disputes between trustee and beneficiary Why are our Solo Ager clients looking for a professional trustee? The main reason is because of potential disputes between the trustee and the beneficiaries. Unfortunately, this kind of conflict is very common, even more so than between heirs and executors. A trust creates a much longer relationship: an estate...
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E333 Seller Credit When Selling Probate Real Estate
Anthony S. Park
This happens when the buyer agrees to a higher contract price, but the seller also agrees to credit back a set amount to the buyer, so the net purchase price is lower. For example, if the buyer wants the house for $250,000, they would set the contract price at $300,000 with a side agreement that the seller would credit $50,000 on the closing statement, effectively making the price $250,000. Why not just a price reduction? Co-ops (and sometimes condos and homeowners’ associations) want the closing price to be (artificially) higher to maintain their average price per square foot. They don’t...
info_outlineWhat are the risks of being an executor? An executor has a lot of power and responsibility during probate, but is correspondingly accountable for everything that happens within the estate.
We’ll cover how an executor has risk of even personal liability, how long that risk lasts, and how an executor can protect himself from these risks.
Executor personally liable for debts and taxes
The executor has personal liability for debts, taxes, and anything wrong with the estate. If an executor makes an error, the court’s first reaction is to deny payment of the executor's commission. If the commission is not enough to cover the court-determined error, the executor’s PERSONAL assets (home, bank accounts, etc.) are legally at risk if court rules that the executor screwed up.
When someone chooses an executor and that person accepts the role, it's very possible that neither party is aware of the risks. The risks can be more than the executor forgetting to pay a tax bill and becoming personally liable for it. Some scenarios are a bit more nuanced. For example, the executor sells the real estate, but at the closing a few months later, the heirs dispute the sale price. The heirs might seek the difference in the price from the executor's commission or from him personally. Another example is when the executor fails to pay a “knowable” debt or tax or fails to take the steps to find out if debts exist.
How long is an executor liable for debts?
Theoretically, the executor can be liable forever. There are some limits, but practically an aggressive lawsuit can get around those limits
Many states have laws that give creditors 7 months (or similar time limit) to submit verified claims. There is a specific legal procedure to become an official creditor or else the executor is not personally liable for that debt. However, even in absence of a formal claim, the executor can be held to have constructively known about the debt, or even should have known!
The best practice when closing an estate is to ask heirs to sign a receipt and release, which says the heirs accept their check as full and final settlement, and agree not to try to sue the executor later. Theoretically, the release is iron-clad protection for the executor. But practically, the heirs can get around it. An heir could claim that she signed the receipt and release because the executor failed to disclose information, otherwise she wouldn’t have signed it, etc.
How executors can protect themselves
The good news is that there are ways to protect yourself if you are an executor.
First, get the tax clearance. Don’t distribute estate funds until the IRS and state have confirmed you’re good to go. Although painfully slow, they have procedures to formally release an executor from personal liability. If you fail to get the tax clearance (or even fail to search for tax that is owed), the taxing authorities have and will slap you with large and completely unexpected tax bills.
Second, when closing an estate, do a full accounting with receipt and releases. The accounting is composed of the books and records of the estate in court-approved format. It provides full disclosure to the heirs and gives heirs/creditors less wiggle room to argue that the executor failed to inform them.
Next, keep a reserve. Hang on to a small percentage of the estate funds to pay those surprise debts or taxes, just in case.
Of course, the reserve will be paid out to the heirs eventually. But, give yourself some time to make extra sure that the estate doesn’t owe any debts or taxes. No matter how good an executor is and even though the estate is closed, things tend to come up down the road. If you have a decent reserve, then you won’t have to hunt down the heirs asking them to pay back the debt. And believe me, the heirs will not return your calls and you’ll be out of luck.
Lastly, you can protect yourself by not being an executor: hire a professional! Even with a good probate lawyer, amateur executors are prone to making poor decisions that leave them open to risk. Why not have an experienced professional making those risk cost-benefit decisions, instead? Even a small mistake could leave an executor open to risks.
For those of you who are considering being executors or for those who are thinking about who to name as your executor, it is useful to know what an executor has to go through. To learn more, check out my book, “How to Hire an Executor.”
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