Estate Closure and Fiduciary Liability
Once you have collected the assets of the estate, paid the expenses, debts, and taxes you are ready to begin the closure of the estate. In order to close the estate you should prepare what is known as an accounting. This accounting is meant to show the beneficiaries what you collected, what you paid, and what is left to be distributed.
Executor CommissionsIn this accounting you will also compute what you are entitled to receive in commissions for your service as executor. In New York, an executor is entitled to commissions as follows: 5% of the first $100,000, 4% of the next $200,000, 3% of the next $700,000, 2.5% of the next $4,000,000 and 2% of all sums over $5,000,000. The executor is entitled to commissions on the probate assets and not on assets that were held in a trust, jointly with another person, or that had a named beneficiary.
As executor you can take the entire commission, you can waive the commission, or take some amount in between. This commission is income taxable, so you should consult your tax advisor before making a decision. You cannot actually pay yourself the commission until your accounting has been approved by all of the beneficiaries of the estate.
Beneficiaries ApprovalIn order to have the beneficiaries approve your actions as executor you would present them with an accounting and a release. This release would essentially say that the beneficiary reviewed your accounting, accepts it as a final accounting, approves your commissions, and releases you from liability as executor. This release should be signed and notarized by all beneficiaries of the estate and returned to you before any checks are issued to the beneficiaries or to yourself as a commission.
Distribution RecordsAfter you make the final distributions you must keep the records of the estate for six years. This is because an executor has liability for their actions for six years from the date they cease acting as executor. The six year statute of limitations starts to run on the date of your last act as executor, not from the date of your appointment as executor by the court.
ConclusionThe closure of an estate is an act which should be done with the formality of an accounting and release provided by the executor to the beneficiaries. Oftentimes, it is best to have these documents prepared by an attorney experienced in estate administration matters. If these formalities are not followed, the executor does not have adequate protection if a dispute arises with a beneficiary in the six years that follows the distribution of an estate.