What Is Estate Administration? – NerdWallet

What is estate administration?

Estate administration is the process of cataloging a deceased person’s assets, using those assets to pay their debts and tax liabilities, and distributing the remainder to beneficiaries. When there are estate plan documents, such as a will or trust, the estate administrator works to follow the decedent’s wishes.

People who create estate plans typically can choose anyone they like as their estate administrator. Typically, it’s someone they trust. Financial savvy is also helpful, considering the estate administrator handles the decedent’s life savings, personal possessions and other assets. Some people hire a bank or similar financial institution to do the work.

What happens during estate administration?

During estate administration, an estate administrator takes charge of the deceased’s assets. These assets may include bank accounts, investments, collectibles, real estate, vehicles and more. The estate administrator also manages the distribution of the decedent’s mementos, family heirlooms and other items that may not have a market value.

These assets are typically excluded from estate administration:

• Retirement accounts such as IRAs and 401(k)s. The beneficiary named on the account usually supersedes what’s in the will or trust.

• Life insurance policies. The beneficiary named on the account usually supersedes what’s in the will or trust^[0]

Estate administrator responsibilities

An estate administrator has many duties and responsibilities. Depending on the size and complexity of the deceased’s estate, there may be different requirements, but here are the basic tasks in estate administration^[0]

• Obtain copies of official documents. Before you can act on behalf of the deceased, you’ll need copies of the death certificate. If there is a will, you will also need a letter of testamentary from the probate court, which signifies to others that you have the court’s permission to represent the deceased’s estate in an official capacity.

• Catalog all assets and determine their value. Create a list of the deceased person’s assets, including bank accounts, investments, real estate and other items. Get items appraised when they don’t have a clear value.

• Compile a list of all debts. Verify all of the person’s debts and obligations, including getting copies of the decedent’s credit reports.

• Pay off debts. Use the estate’s assets to pay the decedent’s debts.

• Identify income streams. Determine the sources of all income and whether that income will continue after death.

• Provide accounting to probate court. Share the assets, debts and income information with the probate court.

• Apply for an Employer Identification Number (EIN). Having an EIN allows you to open bank accounts and file taxes on behalf of the estate.

• Open bank accounts for the estate. Having a designated estate checking account provides a place to deposit income and assets, pay bills and distribute funds to beneficiaries.

• File tax returns. Complete and file federal and state tax returns on behalf of the decedent and the estate.

• Distribute assets to beneficiaries. After all debts have been paid, the remaining funds can be distributed to beneficiaries according to the deceased’s will, trust or other estate plan documents.

What is the difference between estate administration and an executor?

An executor is someone the decedent specifically nominated in their will to manage their estate. When someone dies without a will (and thus hasn’t named an executor), a probate court may appoint someone to oversee the estate. That person is called an estate administrator. The duties of an executor and estate administrator are essentially the same.

What is the difference between an estate administrator and a trustee?

A trustee is the administrator of a trust. When the person who creates the trust (the grantor) dies, the trustee manages the transfer of the assets in the trust to the designated beneficiaries. Depending on the type of trust, a trustee might also transfer assets while the grantor is still alive.