You are named as executor in the decedent’s last will (so far as we know). You have several options:
1. One is to do nothing and wait for the five-year statute of limitations to expire. This would involve risking the opening of an estate by a creditor who could force you to disgorge assets that you received from the decedent that were not paid to a priority creditor. Priority creditors are the expenses of administration of the estate (including any taxes owed and your court-approved fees), expenses of funeral and last illness, and any unsecured debts the decedent left behind (in that order).
2. Iowa law permits you to distribute an estate by affidavit that is less than $25,000 and does not include real estate (excepting real estate held in joint tenancy) without opening a probate estate. You are still obligated to pay any potential claims against the estate in the order set forth above and can be held personally liable if you distribute funds to the wrong creditor for the amount that should have been paid to the higher priority claim. If you choose this route, I recommend that you file the will with the clerk of court to verify your authority and for safe-keeping of the will in the event litigation follows.
3. You may file a petition for probate of will without present administration. This route encompasses all the factors set forth in No. 2 above, but includes publication of notice to creditors in a local paper for two consecutive weeks and mailed notice to known creditors, heirs at law, and beneficiaries under the will. This action starts the clock on the compressed statute of limitations on a decedent’s estate (4 months from second published notice or 30 days from mailed notice). However, with this option, you should be prepared for the possibility that a creditor will want an administered estate to be opened. At that point you would need to decide if you wanted to continue to serve as executor.
4. The third option would be for you to open a full probate estate. This would result in your obtaining letters of appointment from the district court which would give you the judicial machinery to compel discovery and marshal assets. You would become the personal representative of the estate and would have the following duties:
As Personal Representative of the Estate, your responsibilities include the collection and valuation of the Decedent’s assets, the payment of debts, expenses of administration and taxes, and the distribution of the remaining assets to the persons entitled to receive them.
Your first task is to identify and value all property in which the Decedent had an interest. Each item of property, together with its value, will be included in an estate inventory. By law the inventory must be completed and filed within 90 days after the date of your appointment. The probate inventory includes assets that pass outside of this will, such as joint tenancy property, life insurance proceeds, retirement accounts, transfer on death accounts, and annuity contracts. The probate code requires this to fulfill the orderly transfer of assets at death function of the probate process.
As soon as practicable following the admission of the Will to probate, notice of the admission of the Will to probate must be given by ordinary mail addressed to each heir of the decedent, and each devisee under the Will, and the creditors of the estate whose identities are reasonably ascertainable. This notice must be mailed to such person’s last known address.
Complete records must be kept of all cash and investment transactions. All receipts should be deposited to and all disbursements should be made by a check drawn on an estate checking account.
An Iowa Inheritance Tax Return would have to be filed, not later than the last day of the ninth month after death, but no tax would be due because the gross value of the estate assets are less than $25,000.00. Because the estate is less than two million dollars, no federal estate tax return is required.
The decedent’s final income tax returns covering the period through the date of death must be filed and any tax paid. You must obtain a federal tax identification number for the estate.
It may also be necessary to file federal and state fiduciary income tax returns for the estate. The number of returns filed and the filing deadlines will depend upon the income of the estate, the length of time the estate remains open and the fiscal year selected for the estate. It is to your advantage for the estate to generate at least enough income to offset the administrative expenses of the estate, including fees, if possible.
After all known debts, administration expenses, and taxes have been paid or provided for, a Final Report and accounting will be prepared. Depending on the length of the period of administration, it may be necessary to prepare one or more intermediate reports and accountings. Copies of the reports must be given to all persons interested in the estate. When the estate is closed, the Final Report will be filed with court. Normally, final distribution of the assets will await the closing of the estate, although as I said, many of the financial assets are being transferred directly into the residuary trust. However, depending on such factors as the size of the estate, the needs of the beneficiaries, tax considerations; earlier partial distributions may be in order.
