Answers to Frequently Asked Beneficiary Questions

Answers to Frequently Asked Beneficiary Questions

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 fiduciary, an estate executor must facilitate and comply with the terms identified within the deceased’s estate documents (typically a will and trust).

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 Liabilities (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.

Can an Executor of a Will Be a Beneficiary?

Yes, the executor of a will can be a beneficiary. In fact, it’s common. For example, the oldest adult child is often the estate executor and a beneficiary of their parents’ estate.

Before deciding if a beneficiary should also be an executor, ask yourself two key questions:

  1. Do they possess the needed character traits (e.g., are they reliable and responsive)?

  2. Do they have the ability to facilitate the role (e.g., are they available)?

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 risks like identify theft.

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

Tax and legal information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice. Always consult a licensed attorney or tax professional regarding your specific legal or tax situation.
Our statements and opinions are subject to change without notice. All investments carry risk of loss and there is no guarantee that investment objectives will be achieved.

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