When You Will Get Your Inheritance

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Often times one of the first questions that a beneficiary of an estate or a trust asks is, "When will I get my inheritance?"  Unfortunately for the beneficiary, handing out the inheritance cash or checks is the very last thing that the Personal Representative of the estate or Successor Trustee of the trust will do.  

So why does it take so long for beneficiaries to receive their inheritance? Because the Personal Representative or Successor Trustee has to take the following steps before the estate can be closed or the trust can be terminated:

  • 1. Inventory the decedent's documents and assets.  Before a Personal Representative can be appointed by the probate court or a Successor Trustee can take over the administration of a trust, all of the decedent's estate planning documents and other important papers must be located.  The decedent's estate planning documents may include a Last Will and Testament, funeral, cremation, burial or memorial instructions, and/or a Revocable Living Trust.  The decedent's important papers may include bank and brokerage statements, stock and bond certificates, life insurance policies, corporate records, car and boat titles, and deeds; and information about the decedent's debts, including utility bills, credit card bills, mortgages, personal loans, medical bills and the funeral bill.
  • 2. Get appointed as Personal Representative of the probate estate or accept appointment as Successor Trustee.  Once the decedent's important documents are located, if probate is necessary then a Personal Representative will need to be appointed by the probate court, or if the decedent had a Revocable Living Trust, then the Successor Trustee will need to accept appointment.
  • 3. Value the decedent's assets.  Once the Personal Representative or Successor Trustee is in place, then the date of death value of the decedent's assets will need to be determined.  This will be important information for the beneficiaries since capital gains will be calculated using the date of death value versus the value when the inherited property is sold (resulting in a step down or a step up in basis).  In addition, the total value of the decedent's assets reduced by outstanding debt will determine if the estate or trust will be subject to state estate taxes, state inheritance taxes, and/or federal estate taxes.
  • 4. Pay the decedent's final bills and ongoing administration expenses.  Once the value of the deceased person's assets has been established, the Personal Representative or Successor Trustee will need to pay the decedent's final bills, such as cell phone bills, credit card bills and medical bills, as well as the ongoing expenses of administering the estate or trust, such as storage fees, utilities and attorney's fees.
  • 5. File applicable tax returns and pay applicable taxes.  In addition to paying the decedent's final bills and ongoing administration expenses, the Personal Representative or Successor Trustee will also need file all applicable estate tax returns and/or inheritance tax returns (state and/or federal - IRS Form 706), the decedent's final income tax return(s) (state and/or federal - IRS Form 1040), and initial and final estate or trust income tax returns (state and/or federal - IRS Form 1041).  Of course, any taxes that are due must be paid in a timely manner to avoid interest and penalties.
  • 6. Distribute what's left to the beneficiaries.  And so we come to the very last step in the process of settling an estate or trust - write the inheritance checks to the beneficiaries.  This is the very last step because if the Personal Representative or Successor Trustee fails to take care of all five of the prior steps and simply gives the beneficiaries their share of the estate or trust, then the Personal Representative or Successor Trustee will be held personally liable for all of the decedent's unpaid bills, the administrative expenses, and all unpaid taxes.

    So When Can You Expect Your Inheritance?

    As indicated above, there is quite a bit involved in settling an estate or trust.  But in general, how long does the settlement process take?  This will depend on many factors, including the types of assets the decedent owned, the value of those assets, whether the estate is taxable at the state and/or federal level, how many beneficiaries are involved, whether the beneficiaries get along, and the skills and diligence of the Personal Representative or Successor Trustee. Taking these factors into consideration, a simple estate or trust may be settled within a few months, while a complicated estate or trust may take one or more years to settle.