Answers to Frequently Asked Beneficiary Questions

We’re often asked for answers to frequently asked beneficiary questions, particularly from high-net-worth families. Here are some common queries.

Can an Executor Withhold Money From a Beneficiary?

Generally, an executor can’t withhold money from a beneficiary. But it depends. As a fiduciaryA person or organization who manages assets for a third party, and is legally bound to act in the best interests of that third party, putting the third party’s interest before their own., an estate executorAn estate executor is responsible for administering your estate after your death, and has a fiduciary obligation to act in the best interests of your beneficiaries. Other titles for this role include estate administrator, personal representative or trustee (for trusts). must facilitate and comply with the terms identified within the deceased’s estate documents (typically a will and trustA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process.).

However, there are legal reasons for delayed inheritance payments. For example, the executor must first pay off the deceased’s outstanding debt, like credit cards, mortgages and estate taxes, before distributing assets to beneficiaries. Each state also has its own waiting period, giving creditors time to come forward and file a claim against the estate.

Another reason for delay is if a beneficiary is a minor. In this instance, the minor’s inheritance must be placed in a trust for the benefit of the minor.

At all times, the executor must abide by the state laws where the deceased resided and follow the wishes outlined in the estate documents. Beneficiaries, therefore, should be prepared to be paid last, and only if there are remaining assets.

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How Long Does the Executor Have to Pay the Beneficiaries?

The answer varies depending on the complexity of the deceased’s estate. For estates valued at less than $150,000, beneficiaries generally receive their inheritance within six months. For high-net-worth estates, however, it can take a year or longer.

8 Tasks To Be Completed by the Executor of the Estate

When estimating how long the estate executor has to pay beneficiaries, consider individual state laws and time involved for the executor to complete the following eight tasks. Each of these tasks can take weeks to complete; some could take years.

Find Original Estate Documents

Petition Probate Court for Executor Authority

Find the Deceased’s Assets (e.g., investment accounts, life insurance policies, etc.)

Identify Creditors and Pay Estate LiabilitiesLiabilities are calculated by adding up your existing debts (mortgage, car loans, student loans, credit cards, etc.). (e.g., auto and education loans, etc.)

Liquidate Assets (e.g., sell primary residence)

Prepare Estate Tax Return(s)

Facilitate Estate Final Accounting

Distribute Estate Assets to Beneficiaries

Tip: Help your estate executor bequeath your heirs’ inheritance faster. Read our complimentary special report, Estate-Planning Checklist: Must-Haves Before You Die.

For high-net-worth individuals, it’s advantageous to hire an estate planning attorney to facilitate the majority of an estate executor’s responsibility, since wealth often creates financial and legal complexities. Before naming a loved one as your beneficiary, consider family dynamics and the emotional state of loved ones upon your passing. It’s likely they’ll be grieving and, therefore, executing your estate wishes in a timely manner may be a challenge.

Tip: Experienced guidance during a time of grief. Read our complimentary special report, Settling an Estate Checklist: 17 Critical Steps at a Difficult Time.

 Who Contacts Beneficiaries of a Will?

The estate executor (trustee in the instance of a trust) or an estate attorney working on behalf of the deceased’s estate contacts the beneficiaries of a will or trust. Typically, beneficiaries are contacted after the will has been validated by the probate court. Beneficiary notification timeline requirements are state specific, although three months from filing with the court is a good rule-of-thumb. For faster estate resolution, greater control and flexibility, and less complexity, place your assets in a trust, avoiding the probate process. Learn more about the advantages of trusts.

Tip: The considerations for choosing an estate executor or trustee have a lot in common. Explore these similarities, read 4 Things to Consider When Choosing a Trustee.

In Summary

When a loved one passes, families are left with many estate and beneficiary-related questions, particularly regarding matters that must be taken care of soon after someone passes. We hope you’ve found these answers to frequently asked beneficiary questions helpful.

Our complimentary special report, Managing Responsibilities Upon the Loss of a Loved One, will answer your most pressing questions regarding settling a loved one’s affairs, including how to get ahead of estate tax requirements and avoid potential risksThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. like identify theft.

Contact Adviser Investments anytime for assistance. We pride ourselves on being The Planner You Can Talk To.