Episode 2: In today’s episode, Louisville probate attorney David Holton. When someone passes away, they may have appointed an executor in their Will. Did you know there are specific duties and responsibilities of the executor? David will explain some of these, so you know what you’re in for, if you’ve been appointed as an executor for someone’s estate, in Kentucky.
Testate vs. Intestate
David discusses an important distinction discussed in Episode 1. If you die with a Will, it’s called “testate.” If you die without a Will, it’s called “intestate.” Normally a Will contains language designating an executor (or executrix if that person is a female). If the person dies intestate, an administrator (or administratrix) will be appointed. For the most part, the function the same with similar duties and responsibilities.
Exercise Proper Fiduciary Responsibility to the Beneficiary or Beneficiaries
David explains that this is the most important duty of the executor or administrator. The fiduciary responsibility includes properly distributing the assets when that time comes. It means treating the beneficiaries fairly. Along with other responsibilities regarding documentation and filings related to the estate.
David is a former Probate Judge in Jefferson County, Kentucky. He’s dealt with many estates, some of them were relatively simple and some were extremely complex. The judge ultimately decides if the executor faithfully executed his/her fiduciary responsibilities, unless the parties involved can resolve any disagreements themselves.
After someone dies, a court order is required to formally appoint the executor, even if it’s stated in the Will.
Make an Inventory of the Assets of the Estate
It’s important that the assets owned by the person are inventoried. It allows the heirs and the creditors to know what’s going on. The executor is responsible for accomplishing these tasks.
The debts will also be compiled. Interestingly, the executor is not required to directly notify creditors. When you open the estate at the County Clerk’s Office, part of the filing fee goes to cover a small notice in the local newspaper. This notice serves as an opportunity for all creditors to become aware of the passing of someone who owes them money. They must decide within 180 days whether or not to pursue a claim against the estate of the decedent. All claims will be reviewed and either approved or reject the claim.
David explains that if the claim is rejected, the creditor only has 60 days to file suit against the estate to preserve their rights. If a creditor fails to submit a claim, within the first 180 days or during the 60 days following a rejected claim, they will be unable to collect.
Open a Bank Account for the Estate
David advises the executor to open an estate account at the bank. The money from the individual’s bank account(s) will be transferred into this estate checking account.
Real estate, vehicles, boats, investments and other items will need to be inventoried. Qualified accounts, those with a beneficiary designation such as a 401(k), IRA, pension, life insurance and other accounts usually pass outside of the estate and the probate process.
Protecting the Assets
It’s the executor’s responsibility to secure the assets and make sure they are protected. If a house is part of the estate, the executor must make sure the homeowner’s insurance premiums are paid. This could also apply to vehicles and other items. This also extends to making sure the property taxes are paid. The insurance premiums and taxes will be paid from the estate account, not the personal account of the executor.
If a house fire happens, or if someone drives the car and gets involved in a collision, if either asset is uninsured, the executor could be held legally and financially responsible.
Hire an Attorney to Assist the Executor
While it’s easy to get overwhelmed with the duties and responsibilities, Dave strongly recommends the executor hire an attorney to assist with the process, documentation and other activities. An attorney will understand what needs to be done, the various deadlines and can advise the executor when he/she has questions.
The executor has the right to determine if an estate sale or an estate auction would be held to get rid of items in the estate, not directly mentioned in the Will. A value will be assigned to the items. If people decide to buy some or all of the items, the proceeds will be deposited into the estate account, after any necessary fees are paid.
Note, the executor must exercise fiduciary responsibility to ensure the estate paid fairly for items. You can’t give away that Joe DiMaggio baseball card for $100, unless all of the beneficiaries were to agree. It may be helpful to have an estate sale company or auctioneer advise the executor as to the realistic value of the items.
David explains that under current Kentucky law, Class A beneficiaries typically do not pay inheritance tax. These beneficiaries include the deceased’s children, grandchildren, parents and siblings. This exclusion applies to both real estate and cash.
Federal laws do apply. Under federal law there are inheritance taxes at the $5.5 million threshold.
Filing the inheritance taxes are the responsibility of the executor or administrator. It’s not the person receiving the property or money.
David uses the example of Aunt Sue who passed away and left $10,000 to her nephew John. Because John would not qualify as a Class A beneficiary, inheritance taxes would be levied. The estate is responsible to pay the inheritance tax on the $10,000.
It’s possible for the Will to contain specific language specifying that the person receiving the inheritance be responsible for the tax. Normally, the tax would be deducted from the amount before it’s given to the beneficiary. This would eliminate the need for the estate to pay the tax.
Before we go, let’s define the term special bequest. This is made when someone specifies a certain item (i.e. a class ring) is designated and then given to a specific heir. It’s important that the executor handle these situations carefully. There are considerations, such as not giving out all of the money so that creditor claims can be satisfied. However, a special bequest can be distributed before the estate is officially closed. It’s best to consult with your attorney before you do this. You don’t want to create a problem or liability either for the estate or for the executor.
David explains how much he enjoys working people to make the process easier. Probate is not as bad as people make it out to be. Nonetheless, it’s important that it be handled properly.
Check out The Blind Judge Podcast!
Retired Probate Judge David Holton actually has 2 podcasts. In addition to this one focusing on legal matters, his other podcast will focus on community issues, sports, cooking, outdoor activities, politics, history and a variety of other topics, including information about David’s guide dog Coach.
As we conclude Episode 2, we encourage you to connect with David on his Facebook page. You’ll also be able to subscribe to this podcast on Spotify, Google Podcasts, iHeartRadio, Apple Podcasts, Amazon Music, Audible and many other podcast platforms.
David closes with this thought: “God’s been good to me. I want to give back and return the favor to his listeners and their families.” David’s entire career has been about service to our Louisville and Jefferson County community.
For more information about probate and estate planning issues, or to listen to The Blind Judge Podcast, visit www.DavidHoltonLaw.com.
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Disclaimer: This podcast is for informational purposes only. This does not establish an attorney-client relationship. Your situation is unique. Please consult an experienced attorney to discuss your situation. This is an advertisement. Principal Office located at 5226 Bardstown Rd., Louisville, KY 40291. Office phone number: (502) 933-8600.
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When I decided to attend law school, I worked for David Holton at his law practice. He is a wonderful, intelligent man. He thought me so much. He has so much patience and passion for what he does. Thank you Mr. Holton