When you’ve selected Cumberland Trust as executor or co-executor of your estate, you can be assured that your estate and your heirs will be handled with care. Here’s a general timeline of events that happen after your death.
Upon death: While we, as personal representative of the estate, have no authority to act until the will is probated, we often meet with family members soon after death to answer immediate questions. The first question may concern funeral arrangements which are made by family members or other designated persons. The charge is paid from the estate. Bank accounts and assets in the sole name of the deceased are “frozen” until the executor qualifies upon probate of the will in Probate Court. No additional checks should be written on any account in the sole name of the decedent. Any checks payable to him/her should not be deposited but should be collected and delivered to Cumberland Trust. If there are joint survivorship bank accounts, the surviving party may continue to write checks and withdraw funds.
Probate of will: The will is usually probated as soon after death as practical although there are no immediate time requirements. The will is offered for probate in Probate Court by an attorney, (generally the same attorney who drafted the will and represented the deceased). Most courts require an attorney and although Cumberland Trust has licensed attorneys on staff, as a trust company we do not engage in the practice of law.
Next there is usually a conference with the family and primary beneficiaries to explain the will and determine immediate financial needs and questions. Copies of the will are required to be furnished to the primary beneficiaries. In the case of persons receiving cash or other bequest, they are furnished a copy of that portion of the will containing the specific bequest. In both cases, it is Cumberland Trust’s responsibility to carry out the statutory requirements.
Assembly of assets: The administrative officer must determine what assets were owned by the deceased, and therefore, part of the estate, for probate or tax reasons. This property may include cash, stocks, bonds, life insurance to the estate or to named beneficiaries, real estate, business interests, household effects, trust accounts, and jointly owned cash, stock, bonds or real estate.
Any safe deposit box will be inventoried as required by Tennessee law. Cash, stocks and bonds taken into the possession of the executor; stocks transferred; dividends, interest and accounts collected; life insurance claims filed; real estate, household furnishings and collections appraised by qualified appraisers unless the size of the estate is small and there are few death tax issues; deeds examined; titles verified; insurance policies on real estate passing to the executor checked for adequate coverage; business interests valued; buy-sell arrangements for businesses carried out; inquiry letters sent to banks, savings and loan associations and brokers to locate accounts of the deceased; income and gift tax returns and other personal and business records obtained and studied. We should have copies of all personal tax returns, bank statements and canceled checks for at least the last five years preceding death.
Payment of debt: Any bills for accounts, debts and funeral expenses of the deceased should be sent to Cumberland Trust. We will cause the Notice to Creditors to be published, and notify known creditors by mail that they have four months from the date of publication to file claims against the estate. For debts of $1,000 or more, Tennessee law requires that a specific claim be filed with the Court. If the family has paid some accounts before the will is probated or before Cumberland Trust has funds, a record should be kept for reimbursement.
Inventory and cash requirements: As soon as possible, but within 60 days of the probate of the will, an inventory will be prepared and filed with the Probate Court unless the will excuses the filing of an inventory or all the necessary beneficiaries waive the filing requirement. Such a waiver will maintain the confidentiality of the estate’s make up, though complete asset information is always given to the proper beneficiaries. However this inventory lists only the taxable estate, such as life insurance to named beneficiaries, real estate and jointly owned property. At the same time, we value the entire estate and estimate the cash requirements for bequests, debts, funeral expenses, taxes and administrative expenses. The assets or investments are reviewed and considered along with the estimate of cash requirements. Many estates do not have adequate cash or insurance payable to the estate to meet the cash requirements. Therefore, stocks and bonds, or possibly business interests will be sold to provide funds. In consultation with family members, we will determine which assets should be sold and the timing of the sales. The need for cash, market conditions, investment quality of the assets, wishes of the beneficiaries and investment objectives of the beneficiaries of any trusts are considered in making the decisions. Assets are reviewed continually during the entire administration. We promptly invest all cash received or raised in temporary investments to produce maximum daily income until the funds are needed.
Records: We will keep accurate records of all receipts and disbursements, including debts, administrative expenses, taxes, bequests and sales and purchases of assets. These records are necessary for income, estate and inheritance tax purposes and for inventories and court accountings if required. Statements of transactions and assets held are furnished to beneficiaries who share in the residue of the estate either directly or as a beneficiary of a trust on a periodic basis.
Inheritance and estate taxes: The Tennessee Inheritance Tax and Federal Estate Tax returns are due, and any taxes payable, within nine months after death. Barring unforeseen matters, we file all the required returns by the filing date. Each residuary beneficiary will be provided a copy.
There is a Federal Estate Tax exemption, which is called a Unified Tax Credit. This credit may be used against taxes on both lifetime transfers by gift and transfers at death and is determined by a schedule that is part of the tax code. Any credit used against taxable gifts made during life will reduce the exemption available against the Estate Tax at death. Tennessee Inheritance tax laws now allow the same credit and exemption for beneficiaries.
In addition to the exemptions and credits, there may also be an exemption from Federal and Tennessee tax for property passing to, or for the benefit of, the surviving spouse. If the will is so drawn, it may be possible to defer all Estate Taxes and Inheritance Taxes until the death of the surviving spouse.
Income taxes: Federal and Tennessee Income Tax returns may be required. This will include final personal income returns for the year of death and fiduciary returns during the administration of the estate. In consultation with the family accountant or estate attorney, we will determine whether to report the estate’s income on a calendar or fiscal year basis. If distributions of income are made to beneficiaries during estate administration, this income will generally be includable on their personal federal tax return, therefore income tax information will be furnished to each beneficiary in a timely manner.
Executor’s charges for administration: Cumberland Trust’s fee for the administration of an estate is a percentage of the gross estate value as finally determined for death tax purposes. We may charge an additional fee for extraordinary services such as litigation, retaining and operating a business or farm, and their sales or liquidations.
Settlement of estate: Few estates can be closed in nine months after death as some believe. If estate and inheritance tax returns are required, often six to 12 additional months following the filing of the returns are required for audit and tax clearances by the respective authorities. A Tennessee inheritance tax return is required on all estates, even though no tax may be payable. Proper tax clearance letters are needed before the estate can be closed by the court and fully distributed. The issuance of these tax clearances is determined by the taxing authorities and is not within our control. We desire to make distributions as soon as possible and some partial distributions may be made prior to receiving clearances. However, no partial distributions will be made prior to the expiration of the statutory period during which creditors of the deceased may file their claim with the Probate Clerk, unless the distributee shall have first satisfied the refunding bond requirements set out in Tennessee Code Annotated 30-2-704.
Post mortem considerations and elections: There are numerous post death opportunities, known as post Mortem Elections and Equitable Adjustments, that must be reviewed during the months leading up to the filing of death tax returns. Cumberland Trust will consult with the family accountant or estate attorney as to whether each selection may be available to the estate and its advantage or disadvantage. Due consideration will be given to the allocation of the available Generation Skipping Tax exemption; Qualified Terminal Interest Property (QTIP); the use of Qualified Disclaimers and the statutory right of a surviving spouse to take an Elective Share against the will.
Final accounting: Unless waived by the will or beneficiaries, Tennessee laws require that a final accounting be filed with the Probate Court, and possible interim accountings after 15 months, showing all receipts, disbursements and distributions. Since most people prefer privacy, filing of an Affidavit and Release in lieu of the detailed accounting is allowed. This method is less costly and allows us to close the estate sooner.
Trust under the will: If the will provides for Cumberland Trust to serve as trustee, we will be acting both as executor and trustee until final distribution is made to us as trustee. This means that monthly or quarterly benefits, as provided by the will, may begin early in the estate and continue without interruption.
Co-fiduciaries: Occasionally a will may name another person as co-executor or co-trustee to act with us. We will perform the same duties, including the accounting and disbursing of funds, although we must obtain the approval of the co-fiduciary on purchases, sales, or discretionary decisions. Many co-fiduciaries who serve with Cumberland Trust delegate part or all of their responsibilities and authority to us—both to relieve themselves of the burden and to prevent delays in decision making.
Your will: A will should be reviewed periodically and possibly revised. Often the death of a family member or friend, with or without inheritance from that person, may make a current will inadequate or make a will more essential than before. We are happy to work with your attorney who should prepare your will.