There are a couple of different ways that you can inherit an estate. You can be named an “heir” in the will, or you can be named an “executor.” If the deceased does not have a will, most states have an order of precedence when it comes to who gets what. If there is a spouse that is still alive, the most property will go to the spouse. If there is no spouse, then the children are next in line, followed by siblings of the decedents, then nieces and nephews (this is assuming the parents are deceased).
In some cases, you can be the heir and the executor of the will. If you are simply an heir, that means you get your fair share (or what was even outlined in the will) after the estate settles all the debts that are owed.
In the case where an executor was not named in a will, and there are multiple heirs to the estate, trust attorneys are the experts that can help. An executor of the estate will need to be named. Typically, a court proceeding will authorize the “letters of administration” naming the executor.
As an heir, you are not personally responsible for paying for any bills. Anything that you do pay for, you can recoup from the estate. For example, you pay for the cemetery because the estate is in a bit of a jumble. You can bill the estate to get the money back.
There is a myth that when you inherit an estate, it is a sort of free ride, and you just get to collect the valuables and be on your way. The fact is, inheriting an estate means that you will have to deal with the decedent’s bills before you get your fair share of the decedent’s property.
For example, if the decedent left open bills to their medical doctor, the doctor can bill the estate, and that bill will need to be paid. The “estate” of the decedent and whoever is put in charge of the estate will have to pay any outstanding debts, including paying for the burial services. There is a great deal of responsibility for being named as an executor.
A simple heir has a lot less responsibility than someone who is an heir and is also named the estate’s executor. The executor is the person that can be held liable for making errors in managing the estate.
If you have been named the executor of anyone’s estate, you absolutely want to learn about the estate insurance definition. Managing an estate is a very serious commitment. You will be bound by law to deal with everything from vascular surgeons‘ bills to how to take inventory of someone’s possessions.
It is a tremendous responsibility to inherit an estate and be put in charge of making sure that the estate is managed to the letter of the law. Once you understand the estate insurance description, you will understand why it is so important to secure this type of insurance if you are named an executor.
As an executor and heir, you will be responsible for all the deceased property. It will be your job to distribute the property according to the directions provided in the will, and you will be held responsible for carrying out your fiduciary responsibilities in the estate’s best interests.
Being an executor means that you not only inherit an estate but that you inherit all the headaches of that estate. Many people do not realize that, as an executor, you can be held personally liable if there are errors in discharging your duties.
One of the easiest ways to understand the estate insurance definition is to look at it as an insurance policy against personal liability as an executor. The errors are often genuine mistakes, but those mistakes wind up being litigated in court, leaving the executor having to pay out thousands of dollars out of their own pocket.
What are Executors’ Responsibilities?
An executor is responsible for the full management of the estate. This can include taking inventory, ensuring the property is protected (even if you have to arrange for home security), and most importantly, making sure you are making the right decisions for the estate.
The goal is to quickly administer the estate. Unfortunately, estate issues (whether preexisting or which have cropped up during administration) can slow the process down a great deal. In many cases, the estate comes under fire from an heir that is not happy with the ways things are moving along. For example, as executor, you decide to get in touch with gold buyers to sell some of the jewelry in the estate to raise funds to pay out some of the bills. An heir does not want you to sell the jewelry, and they start a court action.
Not only are you unable to sell the jewelry, but all of the distribution, sales, and other distribution will come to a halt. More importantly, you as the executor could be facing large legal bills, a judgment that can cost you some money, and potentially being removed as the executor.
Unfortunately, families often find themselves in dispute when they lose a loved one and are not happy with the way the estate is being administered. Even the obvious and simple things that need to be done to ensure that the estate is running smoothly, like the cost of commercial plumbing services that are needed to repair the property, can cause questions and accusations.
Many people who are put in charge of managing an estate are actually quite surprised by what they are accused of by other heirs. They are often questioned for the things they do and for the things they do not do.
Recently, an estate administrator was brought to court by the heirs for mismanagement of the estate. Evidently, the estate had several antique rugs included in the inventory, which the administrator of the estate (a sister to the heirs) sold “as is” at quite a loss. The executor (sister) was not aware that an antique rug repair was available that would have doubled the value of the rugs. It was an oversight on the executors’ part, but it wound up costing her plenty.
What can you do to protect yourself? First, understand your duties fully. Second, learn about the estate insurance definition. Third, keep good records, and finally, always move in the best interest of the estate.
Understand What is Expected of You
The biggest mistake that is seen in estate litigation cases is ignorance. Understanding exactly what fiduciary responsibilities to the estate are is a good place to start. Most people are not familiar with the term “fiduciary responsibility.”
When you are overseeing someone’s interest in property or finances, your “fiduciary responsibility” is to ensure that decisions are based on the best possible outcome. For example, let us say that part of the estate inventory includes real property. It is agreed that the property will be sold. You get two offers for the property. A friend offers to buy the property at a lower price than a stranger does. You cannot sell that property to your friend at the cut-rate.
What if you make the mistake of selling the property at cost savings to someone you know? If one of the other heirs takes offense to it, you may wind up in court and have to deal with costly litigation.
In a nutshell, this is what is typically expected of anyone put in charge of an estate that they have inherited:
- It is your responsibility to preserve the property. It will be up to you to ensure that all the property stays in good condition. If your uncle had expensive HAM radio equipment, it would be up to you to secure the professional antenna repair that is needed to keep the equipment in good shape before you sell it.
- You will need to keep a full inventory. Every piece of property that the decedent had in their possession at the time of their death will need to be accounted for. You will need to keep a detailed list of all of the property, how it was disposed of, and its value.
- You will need to keep impeccable records. An estate account will be set up to pay bills, and you will need to reconcile that account every month and keep records of what you paid and why it had to be paid.
There are a lot of working parts to managing an estate, and a lot of responsibility.
Estate Insurance Definition
One of the easiest ways to protect yourself from liability is with estate insurance. Executor liability insurance helps to reduce the risk that you will have to absorb the costs of litigation in estate matters.
Estates can be really messy. There is a wide range of problems that can crop up when someone passes away that have never been planned for. For example, while the estate is in probate, the executor may have to pay outstanding expenses. The executor is entitled to be reimbursed with interest, but many times, the other beneficiaries oppose it.
There is a litany of things that can crop up while you are administering an estate that can wind up being hammered out in court:
- Unclear or contested wills. When people make changes to their wills late in life, they are often contested by the beneficiaries (heirs). As the executor, you will have to answer on behalf of the decedent.
- Family members that have been excluded from the estate can be a big problem. Feelings often get hurt when a family member is excluded from the estate. Those feelings often develop into lengthy, expensive court matters.
- Money owed to the estate. Estate problems are not just about what is owed to other people; and they can also be about what is owed to the estate. Loans that are not properly documented can be difficult to collect on both ends and can wind up in court.
Hyper vigilante beneficiaries are often looking for a reason to drag the executor into court. They pick apart every action that the executor takes. If the executor makes a mistake, it can get very expensive. Dealing with the stress of having to go to court is not the biggest problem an executor faces. You could be facing restitution if the judge feels that you acted in error. Whether the error was an oversight or a mistake becomes moot. You will still need to pay out of pocket to settle the problem.
Estate insurance can protect the executor from a wide range of personal liability. The simplest estate insurance definition is that it is an insurance policy to ensure you as the executor do not wind up paying out of pocket for legal representation or restitution orders.
When Should You Apply For Estate Insurance?
If you look up the estate insurance definition, you will find the same answer about when you should become familiar with it and when you should secure it. The closer to the person’s death, the better. If you know that you are going to be named an executor before the person dies, the sooner you secure this insurance, the better.
There is an application process involved, and if a great deal of time has elapsed since the deceased passed, you may not qualify. If there is ongoing litigation, you may not qualify. The best way to ensure that you have the protection that you need is to secure this type of insurance very early on in the process.
Learn more about the estate insurance definition, the protection it can provide, and the application process by connecting with an insurance agent that offers this type of coverage. Not every insurance company carries estate insurance. Get started today on finding the protection you need.