Q: How can I save money as an executor?

There are few jobs more important that you’ll manage as an executor than maximizing the proceeds heirs receive from the estate. As an executor, you will have a significant impact on this, as you typically have the authority to responsibly spend money from the estate to settle it, and can also save significant money by effectively managing estate expenses.

As executor, you are responsible for protecting and managing the assets of the deceased’s estate so the beneficiaries can receive as much as possible in the final distribution. There are many steps you can take that will help you successfully accomplish this goal. We spell those out in great detail on Executor.org, and will share some here to get you started.

1.   Make Sensible Decisions Related to the Funeral. After the death of a loved one, the natural tendency is to do everything you possibly can to honor the deceased. This concept is inherently correct, but it is very easy to overspend on the funeral. As just one example, there is a very broad range of prices for caskets, with many priced in the $2,000 to $3,000 range. But there are also caskets that cost as much as $10,000 or more. As executor, it is your job to help make sure that thoughtful decisions are made in the funeral planning process.

2. Cancel Home-Related Services. There are certain home-related expenses that you should cancel as soon as possible after the death to ensure the estate is not paying unnecessary bills. Know that some services like television and internet might require you to be present to return rented equipment like DVRs or modems.

Items you can typically cancel immediately include a landline telephone, cell phone, and cable or satellite television. Before you cancel internet services, though, consider whether the deceased had an email account with the internet service provider. It may be that if the internet service is cancelled, the email account will be closed. If this is the case, you could lose important access to billing statements or accounts that are linked to that email address. You may want to contact the internet service provider to see if they will allow you to continue to access the email account if you stop service. If they will not, check to see if they have a lower cost internet plan or even a “vacation” plan you can use in the interim.

There are some home-related services you’ll want to pay for. If you will be trying to sell the house, you probably want to keep the power and water on and perhaps even hire a lawn care service. A well-kept yard not only gives the home a lived-in appearance (which can discourage break-ins) but makes it more appealing to potential buyers.

3. Cancel Memberships and Subscriptions. Many people hold memberships in a variety of organizations. Everything from AARP memberships to golf club memberships need to be canceled. Also remember that some credit cards charge annual membership fees, so cancel those too. When you call to cancel these memberships, don’t forget to ask if you can get a refund for unused portions of payments or dues.                                   

Most of us have subscription services we don’t even think about. From an automatic prescription refill service to magazines and newspapers, automation makes life easier. But it can be expensive if you don’t cancel when the service or subscription is no longer needed. With the advent of modern technology, you also want to remember to cancel online services that might not be as obvious to see as magazines or newspapers. You’ll typically find a record of these payments in their email account.

4. Know When to Ask for Help. Sometimes saving money means spending money. That may sound counterintuitive, but if you are in such a push to save, you can end up costing the estate in the long run. For example, getting the estate taxes filed correctly by an expert the first time will save costly mistakes that you might make if you are unfamiliar with the intricacies of tax codes and try to save money by figuring it out on your own. Similarly, using a real estate agent to help sell the house may mean a higher selling price or fewer days the house is on the market, saving the estate payments in everything from electricity to property tax. However, there are steps in this process, like closing a bank account, that you do not need to pay a professional to execute. If you know the requirements of the role and can do some of the work yourself, you can save a great deal of money.

5. Do Not Liquidate IRAs Without Understanding the Tax Impact. You may, as an executor, quickly sell investments to minimize the risk that the value of those investments will diminish on your watch. While selling investments is a reasonable approach, it’s very important to understand the tax implications of closing an IRA account after selling the investments within the account. The IRA-BDA is a unique investment vehicle that will defer taxes on the IRA over the expected lifetime of beneficiaries. Understand this investment vehicle before selling IRAs to potentially defer a significant tax liability.

6. Work Efficiently. For those executors who live in the same city as the deceased, this is less of a concern. But for those who do not live in the same place as the deceased, you need to make sure you are using your time in that city as efficiently as possible. It will save the estate money if you can consolidate tasks into a few trips instead of traveling to the city often. For example, if you need to meet with the accountant, real estate agent and banker, try to plan all those meetings around a required court appearance or necessary meeting with the estate attorney. The less money you have to spend traveling, the more that will go to the beneficiaries.

One other potential expense in closing an estate is executor compensation. As we’ve discussed in another article here in the Executor Adviser, this is a reasonable expense. You should not forego this compensation simply to save money in the estate if it is spelled out in the will or you feel it is appropriate to receive compensation within the legal guidelines.

Closing an estate involves a tremendous amount of work. It will take time, and you’ll definitely spend money to successfully complete the process. Work to fully understand the role, use your common sense, and make sure you’re effectively communicating with beneficiaries along the way, and you’ll cost-effectively complete your duties.